Spirit AeroSystems Holdings, Inc. (Form: 10-K, Received: 02/28/2020 12:36:30)

false--12-31FY20190001364885P1Y100000120000080000021000000.010020000000000105461817010488237900.800.800.140.500.080.070.800.500.120.200.060.00The Company’s federal audit is effectively complete under the CAP program for the 2018 tax year. The Company will continue to participate in the CAP program for the 2019 and 2020 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...The Company continues to operate under a tax holiday in Malaysia effective through September 2024. In 2014, the Company received formal approval of the tax holiday from the Malaysian tax authorities, with conditional renewals once every five years beginning in September 2014. The Company expects to meet the requirements for the conditional renewals. The Company’s 2019 income tax expense reflects $5.7 of Malaysia tax holiday benefit for the year ended December 31, 2019. 2023-06-242025-12-07200000600000012700000219000000.011000000000P10YP20YP7YP20YP2YP5YP3YP3YP45YP20YThe HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas4071943841523470 0001364885 2019-01-01 2019-12-31 0001364885 2019-06-27 0001364885 2020-02-24 0001364885 2017-01-01 2017-12-31 0001364885 2018-01-01 2018-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0001364885 2018-12-31 0001364885 2019-12-31 0001364885 us-gaap:CommonClassAMember 2018-12-31 0001364885 us-gaap:CommonClassAMember 2019-12-31 0001364885 us-gaap:CommonClassBMember 2018-12-31 0001364885 us-gaap:CommonClassBMember 2019-12-31 0001364885 us-gaap:CommonStockMember 2019-01-01 2019-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2019-01-01 2019-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001364885 us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2018-01-01 2018-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2017-01-01 2017-12-31 0001364885 us-gaap:RetainedEarningsMember 2017-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001364885 2016-12-31 0001364885 us-gaap:CommonStockMember 2016-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2018-12-31 0001364885 us-gaap:CommonStockMember 2017-12-31 0001364885 us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2019-01-01 2019-12-31 0001364885 2017-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2017-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2018-01-01 2018-12-31 0001364885 us-gaap:RetainedEarningsMember 2018-12-31 0001364885 us-gaap:RetainedEarningsMember 2019-12-31 0001364885 us-gaap:RetainedEarningsMember 2016-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2019-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2017-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2017-01-01 2017-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001364885 us-gaap:CommonStockMember 2019-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001364885 us-gaap:CommonStockMember 2018-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2019-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2016-12-31 0001364885 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001364885 us-gaap:StockholdersEquityTotalMember 2016-12-31 0001364885 us-gaap:TreasuryStockCommonMember 2018-12-31 0001364885 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 2017-12-31 0001364885 us-gaap:AccountingStandardsUpdate201802Member 2019-03-28 0001364885 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001364885 us-gaap:LandAndLandImprovementsMember 2019-01-01 2019-12-31 0001364885 srt:MinimumMember us-gaap:MachineryAndEquipmentMember 2019-01-01 2019-12-31 0001364885 srt:MinimumMember us-gaap:ComputerSoftwareIntangibleAssetMember 2019-01-01 2019-12-31 0001364885 srt:MaximumMember us-gaap:ComputerSoftwareIntangibleAssetMember 2019-01-01 2019-12-31 0001364885 srt:MinimumMember spr:ToolingAirplaneProgramB787RollsRoyceMember 2019-01-01 2019-12-31 0001364885 srt:MaximumMember us-gaap:MachineryAndEquipmentMember 2019-01-01 2019-12-31 0001364885 srt:MaximumMember spr:ToolingAirplaneProgramAllOthersMember 2019-01-01 2019-12-31 0001364885 srt:MinimumMember spr:ToolingAirplaneProgramAllOthersMember 2019-01-01 2019-12-31 0001364885 srt:MaximumMember spr:ToolingAirplaneProgramB787RollsRoyceMember 2019-01-01 2019-12-31 0001364885 us-gaap:BuildingMember 2019-01-01 2019-12-31 0001364885 spr:Airbus350XWBMember spr:ForwardLossMember 2019-01-01 2019-12-31 0001364885 spr:InventoryTypeB787Member spr:ForwardLossMember 2019-03-29 2019-06-27 0001364885 spr:InventoryTypeB787Member spr:ChangeinEstimateonLossProgramMember 2019-01-01 2019-12-31 0001364885 spr:CumulativecatchupadjustmentMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:FuselageSystemsMember 2018-01-01 2018-12-31 0001364885 spr:FuselageSystemsMember 2019-01-01 2019-12-31 0001364885 spr:FuselageSystemsMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:WingSystemsMember 2018-01-01 2018-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:PropulsionSystemsMember 2019-01-01 2019-12-31 0001364885 spr:WingSystemsMember 2019-01-01 2019-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:PropulsionSystemsMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:FuselageSystemsMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:WingSystemsMember 2019-01-01 2019-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:WingSystemsMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember 2018-01-01 2018-12-31 0001364885 spr:CumulativecatchupadjustmentMember 2019-01-01 2019-12-31 0001364885 spr:PropulsionSystemsMember 2019-01-01 2019-12-31 0001364885 spr:PropulsionSystemsMember 2017-01-01 2017-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:FuselageSystemsMember 2019-01-01 2019-12-31 0001364885 spr:CumulativecatchupadjustmentMember spr:PropulsionSystemsMember 2018-01-01 2018-12-31 0001364885 spr:ForwardLossMember spr:WingSystemsMember 2018-01-01 2018-12-31 0001364885 spr:PropulsionSystemsMember 2018-01-01 2018-12-31 0001364885 spr:FuselageSystemsMember 2018-01-01 2018-12-31 0001364885 spr:ForwardLossMember spr:WingSystemsMember 2017-01-01 2017-12-31 0001364885 2018-01-01 0001364885 us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-12-31 0001364885 us-gaap:TransferredOverTimeMember 2018-01-01 2018-12-31 0001364885 us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-12-31 0001364885 us-gaap:TransferredOverTimeMember 2019-01-01 2019-12-31 0001364885 spr:AirbusMember 2019-01-01 2019-12-31 0001364885 us-gaap:OtherCustomerMember 2019-01-01 2019-12-31 0001364885 us-gaap:OtherCustomerMember 2018-01-01 2018-12-31 0001364885 spr:BoeingallprogramsMember 2019-01-01 2019-12-31 0001364885 spr:AirbusMember 2018-01-01 2018-12-31 0001364885 spr:BoeingallprogramsMember 2018-01-01 2018-12-31 0001364885 spr:Expectedtobesatisfiedinyear2022andthereafterMember 2019-12-31 0001364885 spr:Expectedtobesatisfiedinyear2019Member 2019-12-31 0001364885 spr:Expectedtobesatisfiedinyear2021Member 2019-12-31 0001364885 spr:Expectedtobesatisfiedinyear2020Member 2019-12-31 0001364885 spr:LocationUnitedStatesMember 2018-01-01 2018-12-31 0001364885 spr:DisaggregationofrevenuetotalinternationallocationsMember 2019-01-01 2019-12-31 0001364885 spr:DisaggregationofrevenuetotalinternationallocationsMember 2018-01-01 2018-12-31 0001364885 spr:OtherCountriesMember 2018-01-01 2018-12-31 0001364885 spr:OtherCountriesMember 2019-01-01 2019-12-31 0001364885 spr:LocationUnitedKingdomMember 2019-01-01 2019-12-31 0001364885 spr:LocationUnitedStatesMember 2019-01-01 2019-12-31 0001364885 spr:LocationUnitedKingdomMember 2018-01-01 2018-12-31 0001364885 us-gaap:PatentsMember 2018-12-31 0001364885 spr:FavorableLeaseholdInterestsMember 2018-12-31 0001364885 spr:FavorableLeaseholdInterestsMember 2019-12-31 0001364885 us-gaap:PatentsMember 2019-12-31 0001364885 spr:InventoryTypeOneMember 2019-01-01 2019-12-31 0001364885 spr:A2018RevolverMember 2018-12-31 0001364885 spr:A2018RevolverMember 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2023Domain 2018-12-31 0001364885 spr:SecuredDebtTermAMember 2018-12-31 0001364885 spr:SecuredDebtTermAMember 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2028Member 2018-12-31 0001364885 spr:SeniorUnsecuredNotesDue2026Member 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2021MemberDomain 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2026Member 2018-12-31 0001364885 spr:SeniorUnsecuredNotesDue2023Domain 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2021MemberDomain 2018-12-31 0001364885 spr:SeniorUnsecuredNotesDue2028Member 2019-12-31 0001364885 us-gaap:ForeignExchangeForwardMember 2019-06-27 0001364885 us-gaap:ForeignExchangeForwardMember 2018-09-27 0001364885 us-gaap:InterestRateSwapMember 2019-12-31 0001364885 us-gaap:ForeignExchangeForwardMember 2019-03-28 0001364885 us-gaap:ForeignExchangeForwardMember 2018-06-28 0001364885 us-gaap:CashFlowHedgingMember 2019-12-31 0001364885 us-gaap:ForeignExchangeForwardMember 2019-01-01 2019-12-31 0001364885 us-gaap:InterestRateSwapMember 2019-01-01 2019-12-31 0001364885 spr:SeniorunsecuredtermloanAMember 2019-12-31 0001364885 spr:SeniorunsecuredtermloanAMember 2018-12-31 0001364885 spr:SeniorUnsecuredNotes2026MemberDomain 2019-12-31 0001364885 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2023Domain 2016-06-06 0001364885 spr:A2018TermLoanAMember 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2022Member 2019-01-01 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2022Member 2019-12-31 0001364885 spr:A2018Revolver2018TermLoanDelayedTermLoanMember 2019-01-01 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2023Domain 2019-01-01 2019-12-31 0001364885 spr:SeniorunsecuredtermloanAMember 2019-01-01 2019-12-31 0001364885 spr:A2018AmendedRestatedCreditAgreementMember 2019-12-31 0001364885 spr:DelayedDrawTermLoanMember 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2021MemberDomain 2019-01-01 2019-12-31 0001364885 spr:SeniorUnsecuredNotesDue2028Member 2019-01-01 2019-12-31 0001364885 spr:SeniorUnsecuredNotesdue2023and2028Member 2019-01-01 2019-12-31 0001364885 spr:AmendedandRestatedCreditAgreementDue2021Member 2019-01-01 2019-12-31 0001364885 us-gaap:EquitySecuritiesMember country:GB 2019-12-31 0001364885 us-gaap:RealEstateMember country:GB 2019-12-31 0001364885 us-gaap:DebtSecuritiesMember country:GB 2019-12-31 0001364885 country:GB 2018-12-31 0001364885 us-gaap:DebtSecuritiesMember country:GB 2018-12-31 0001364885 us-gaap:EquitySecuritiesMember country:GB 2018-12-31 0001364885 country:GB 2019-12-31 0001364885 us-gaap:RealEstateMember country:GB 2018-12-31 0001364885 country:US us-gaap:PensionPlansDefinedBenefitMember 2018-12-31 0001364885 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2017-12-31 0001364885 country:US 2018-01-01 2018-12-31 0001364885 country:US us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-12-31 0001364885 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-12-31 0001364885 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 country:US 2019-01-01 2019-12-31 0001364885 country:US us-gaap:PensionPlansDefinedBenefitMember 2017-12-31 0001364885 country:GB us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember 2019-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0001364885 spr:TotalMember 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001364885 spr:TemporaryCashInvestmentsMember 2019-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0001364885 spr:CommingledEquityBondFundsMember 2019-12-31 0001364885 country:GB us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 country:GB us-gaap:PensionPlansDefinedBenefitMember 2018-12-31 0001364885 country:GB us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 country:GB us-gaap:PensionPlansDefinedBenefitMember 2017-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2017-01-01 2017-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2017-01-01 2017-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2018-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2017-12-31 0001364885 spr:AnnualExpenseMember country:US us-gaap:PensionPlansDefinedBenefitMember 2017-12-31 0001364885 us-gaap:DebtSecuritiesMember country:US 2019-12-31 0001364885 us-gaap:DefinedBenefitPlanEquitySecuritiesUsMember country:US 2019-12-31 0001364885 country:US 2019-12-31 0001364885 us-gaap:DebtSecuritiesMember country:US 2018-12-31 0001364885 us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMember country:US 2018-12-31 0001364885 us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMember country:US 2019-12-31 0001364885 us-gaap:RealEstateMember country:US 2018-12-31 0001364885 country:US 2018-12-31 0001364885 us-gaap:DefinedBenefitPlanEquitySecuritiesUsMember country:US 2018-12-31 0001364885 us-gaap:RealEstateMember country:US 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel3Member 2018-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel3Member 2017-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel3Member 2017-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel3Member 2018-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel3Member 2018-01-01 2018-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel3Member 2018-01-01 2018-12-31 0001364885 spr:A2019Member 2019-01-01 2019-12-31 0001364885 2006-03-31 2006-04-01 0001364885 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 spr:UsMember 2017-01-01 2017-12-31 0001364885 spr:UsMember 2018-01-01 2018-12-31 0001364885 spr:UsMember 2019-01-01 2019-12-31 0001364885 spr:A2020Member 2019-01-01 2019-12-31 0001364885 spr:UkMember 2017-01-01 2017-12-31 0001364885 spr:UkMember 2018-01-01 2018-12-31 0001364885 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-12-31 0001364885 spr:UkMember 2019-01-01 2019-12-31 0001364885 us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2017-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2018-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2017-01-01 2017-12-31 0001364885 spr:AnnualExpenseMember country:GB us-gaap:PensionPlansDefinedBenefitMember 2018-01-01 2018-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel2Member 2018-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel3Member 2018-12-31 0001364885 spr:CommingledEquityBondFundsMember 2018-12-31 0001364885 spr:CollectiveInvestmentTrustsMember 2018-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel2Member 2018-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel3Member 2018-12-31 0001364885 spr:TotalMember us-gaap:FairValueInputsLevel1Member 2018-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel2Member 2018-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel2Member 2018-12-31 0001364885 spr:TemporaryCashInvestmentsMember 2018-12-31 0001364885 spr:CommingledEquityBondFundsMember us-gaap:FairValueInputsLevel1Member 2018-12-31 0001364885 spr:CollectiveInvestmentTrustsMember us-gaap:FairValueInputsLevel1Member 2018-12-31 0001364885 spr:TotalMember 2018-12-31 0001364885 spr:TemporaryCashInvestmentsMember us-gaap:FairValueInputsLevel1Member 2018-12-31 0001364885 srt:MaximumMember us-gaap:EquitySecuritiesMember country:GB 2019-12-31 0001364885 srt:MinimumMember us-gaap:EquitySecuritiesMember country:US 2019-12-31 0001364885 srt:MaximumMember us-gaap:DebtSecuritiesMember country:US 2019-12-31 0001364885 srt:MinimumMember us-gaap:RealEstateMember country:US 2019-12-31 0001364885 srt:MaximumMember us-gaap:RealEstateMember country:GB 2019-12-31 0001364885 srt:MinimumMember us-gaap:EquitySecuritiesMember country:GB 2019-12-31 0001364885 srt:MaximumMember us-gaap:DebtSecuritiesMember country:GB 2019-12-31 0001364885 srt:MaximumMember us-gaap:RealEstateMember country:US 2019-12-31 0001364885 srt:MinimumMember us-gaap:RealEstateMember country:GB 2019-12-31 0001364885 srt:MaximumMember us-gaap:EquitySecuritiesMember country:US 2019-12-31 0001364885 srt:MinimumMember us-gaap:DebtSecuritiesMember country:GB 2019-12-31 0001364885 srt:MinimumMember us-gaap:DebtSecuritiesMember country:US 2019-12-31 0001364885 spr:IamMember 2019-01-01 2019-12-31 0001364885 spr:UawMember 2019-01-01 2019-12-31 0001364885 us-gaap:CommonClassAMember 2019-01-01 2019-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2018-01-01 2018-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2019-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2017-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2017-01-01 2017-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2019-01-01 2019-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2018-12-31 0001364885 spr:LongTermIncentivePlanMember us-gaap:CommonClassAMember 2016-12-31 0001364885 spr:DirectorStockPlanMember 2019-01-01 2019-12-31 0001364885 spr:DirectorStockPlanMember 2018-12-31 0001364885 spr:DirectorStockPlanMember 2018-01-01 2018-12-31 0001364885 spr:DirectorStockPlanMember 2017-01-01 2017-12-31 0001364885 spr:DirectorStockPlanMember 2019-12-31 0001364885 spr:DirectorStockPlanMember 2016-12-31 0001364885 spr:DirectorStockPlanMember 2017-12-31 0001364885 spr:MarketBasedLTIAMember us-gaap:CommonClassAMember 2019-01-01 2019-12-31 0001364885 spr:MarketBasedLTIAMember us-gaap:CommonClassAMember 2017-01-01 2017-12-31 0001364885 spr:ServiceBasedLTIAMember us-gaap:CommonClassAMember 2017-01-01 2017-12-31 0001364885 spr:MarketBasedLTIAMember us-gaap:CommonClassAMember 2018-01-01 2018-12-31 0001364885 spr:LongTermIncentivePlanMember 2019-12-31 0001364885 spr:ServiceBasedLTIAMember us-gaap:CommonClassAMember 2019-01-01 2019-12-31 0001364885 spr:ServiceBasedLTIAMember us-gaap:CommonClassAMember 2018-01-01 2018-12-31 0001364885 spr:LongTermIncentivePlanMember 2019-01-01 2019-12-31 0001364885 spr:A2033Member 2019-12-31 0001364885 spr:A2030Member 2019-12-31 0001364885 spr:A2032Member 2019-12-31 0001364885 spr:KansasResearchDevelopmentCreditRdMember 2019-12-31 0001364885 spr:A2035Member 2019-12-31 0001364885 spr:A2029Member 2019-12-31 0001364885 us-gaap:ForeignCountryMember 2019-01-01 2019-12-31 0001364885 spr:A2031Member 2019-12-31 0001364885 spr:KansasHighPerformanceIncentiveProgramHpipCreditMember 2019-12-31 0001364885 spr:KansasStateIncomeTaxCreditMember 2019-12-31 0001364885 spr:A2034Member 2019-12-31 0001364885 spr:ComplianceAssuranceProcessMember 2019-01-01 2019-12-31 0001364885 spr:KansasHighPerformanceIncentiveProgramHpipCreditMember 2019-01-01 2019-12-31 0001364885 spr:A2017ShareRepurchaseProgramMemberMember 2016-11-01 0001364885 2019-09-27 2019-12-31 0001364885 spr:A2016ShareRepurchaseProgramMember 2018-01-01 2018-12-31 0001364885 spr:A2015ShareRepurchaseProgramMember 2018-01-01 2018-12-31 0001364885 spr:A2017ShareRepurchaseProgramMemberMember 2018-01-24 0001364885 spr:A2016ShareRepurchaseProgramMember 2019-12-31 0001364885 spr:A2017ShareRepurchaseProgramMemberMember 2017-07-25 0001364885 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0001364885 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-31 0001364885 spr:AccumulatedSerpAndRetireeMedicalMember 2019-12-31 0001364885 spr:AccumulatedInterestRateSwapsMember 2019-12-31 0001364885 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-31 0001364885 spr:AccumulatedSerpAndRetireeMedicalMember 2018-12-31 0001364885 spr:AccumulatedNetFxGainLossOnLtIntercoLoanUnrealizedMember 2019-12-31 0001364885 spr:AccumulatedNetFxGainLossOnLtIntercoLoanUnrealizedMember 2018-12-31 0001364885 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0001364885 spr:LeaseInterestMember 2019-12-31 0001364885 spr:PresentValueLeasesMember 2019-12-31 0001364885 spr:IndustrialRevenueBondMember 2018-01-01 2018-12-31 0001364885 spr:IndustrialRevenueBondMember 2019-01-01 2019-12-31 0001364885 us-gaap:DomesticDestinationMember 2019-12-31 0001364885 spr:RevenueMember spr:AirbusMember 2018-01-01 2018-12-31 0001364885 spr:MalaysiaMember 2019-12-31 0001364885 spr:UkMember 2019-12-31 0001364885 country:FR 2019-12-31 0001364885 spr:RevenueMember spr:AirbusMember 2019-01-01 2019-12-31 0001364885 us-gaap:AccountsReceivableMember spr:AirbusMember 2018-01-01 2018-12-31 0001364885 spr:RevenueMember spr:AirbusMember 2017-01-01 2017-12-31 0001364885 us-gaap:AccountsReceivableMember spr:AirbusMember 2019-01-01 2019-12-31 0001364885 us-gaap:AccountsReceivableMember spr:CompanyOneMember 2017-01-01 2017-12-31 0001364885 spr:RevenueMember spr:CompanyOneMember 2019-01-01 2019-12-31 0001364885 us-gaap:AccountsReceivableMember spr:AirbusMember 2017-01-01 2017-12-31 0001364885 spr:RevenueMember spr:CompanyOneMember 2018-01-01 2018-12-31 0001364885 spr:RevenueMember spr:CompanyOneMember 2017-01-01 2017-12-31 0001364885 us-gaap:AccountsReceivableMember spr:CompanyOneMember 2018-01-01 2018-12-31 0001364885 us-gaap:AccountsReceivableMember spr:CompanyOneMember 2019-01-01 2019-12-31 0001364885 spr:OtherCountriesMember 2017-01-01 2017-12-31 0001364885 country:US 2017-01-01 2017-12-31 0001364885 country:GB 2018-01-01 2018-12-31 0001364885 country:GB 2017-01-01 2017-12-31 0001364885 country:US 2019-01-01 2019-12-31 0001364885 country:US 2018-01-01 2018-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2017-01-01 2017-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2019-01-01 2019-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2018-01-01 2018-12-31 0001364885 country:GB 2019-01-01 2019-12-31 0001364885 country:GB 2019-12-31 0001364885 country:US 2018-12-31 0001364885 country:GB 2017-12-31 0001364885 country:GB 2018-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2017-12-31 0001364885 spr:OtherCountriesMember 2017-12-31 0001364885 country:US 2017-12-31 0001364885 country:US 2019-12-31 0001364885 spr:OtherCountriesMember 2019-12-31 0001364885 spr:OtherCountriesMember 2018-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2018-12-31 0001364885 spr:SegmentGeographicalGroupsOfCountriesGroupThreeMember 2019-12-31 0001364885 spr:OtherSystemsMember 2018-01-01 2018-12-31 0001364885 spr:WingSystemsMember 2017-01-01 2017-12-31 0001364885 spr:OtherSystemsMember 2019-01-01 2019-12-31 0001364885 spr:OtherSystemsMember 2017-01-01 2017-12-31 0001364885 spr:WingSystemsMember 2018-01-01 2018-12-31 0001364885 spr:Impactof201707Member spr:WingSystemsMember 2018-01-01 2018-12-31 0001364885 spr:Impactof201707Member spr:FuselageSystemsMember 2018-01-01 2018-12-31 0001364885 spr:Impactof201707Member spr:PropulsionSystemsMember 2018-01-01 2018-12-31 0001364885 2018-01-01 2018-03-29 0001364885 2018-06-29 2018-09-27 0001364885 2018-03-30 2018-06-28 0001364885 2018-09-28 2018-12-31 0001364885 2019-06-28 2019-09-26 0001364885 2019-03-29 2019-06-27 0001364885 2019-01-01 2019-03-28 0001364885 srt:ConsolidationEliminationsMember 2018-01-01 2018-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2018-01-01 2018-12-31 0001364885 srt:ParentCompanyMember 2018-01-01 2018-12-31 0001364885 srt:SubsidiaryIssuerMember 2018-01-01 2018-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2019-01-01 2019-12-31 0001364885 srt:ParentCompanyMember 2019-01-01 2019-12-31 0001364885 srt:SubsidiaryIssuerMember 2019-01-01 2019-12-31 0001364885 srt:ConsolidationEliminationsMember 2019-01-01 2019-12-31 0001364885 srt:ParentCompanyMember 2018-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2019-12-31 0001364885 srt:ConsolidationEliminationsMember 2019-12-31 0001364885 srt:ConsolidationEliminationsMember 2018-12-31 0001364885 srt:ParentCompanyMember 2019-12-31 0001364885 srt:SubsidiaryIssuerMember 2018-12-31 0001364885 srt:SubsidiaryIssuerMember 2019-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2018-12-31 0001364885 srt:ConsolidationEliminationsMember 2017-01-01 2017-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2017-01-01 2017-12-31 0001364885 srt:ParentCompanyMember 2017-01-01 2017-12-31 0001364885 srt:SubsidiaryIssuerMember 2017-01-01 2017-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2017-12-31 0001364885 srt:ParentCompanyMember 2016-12-31 0001364885 srt:ConsolidationEliminationsMember 2017-12-31 0001364885 srt:SubsidiaryIssuerMember 2017-12-31 0001364885 srt:ConsolidationEliminationsMember 2016-12-31 0001364885 srt:ParentCompanyMember 2017-12-31 0001364885 srt:NonGuarantorSubsidiariesMember 2016-12-31 0001364885 srt:SubsidiaryIssuerMember 2016-12-31 xbrli:pure iso4217:USD iso4217:USD spr:ship_set xbrli:shares iso4217:USD xbrli:shares spr:vote spr:share iso4217:USD spr:hour spr:customer

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-K

(Mark One)



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

For the fiscal year ended December 31, 2019



☐	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

Securities registered pursuant to Section 12(g) of the Act: None. Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of each exchange on which registered
Class A common stock, par value $0.01 per share	SPR	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

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 ☒ No ☐

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	Accelerated filer	Non-accelerated filer	Smaller reporting company	Emerging Growth Company
☒	☐	☐	☐	☐

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. ☐

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

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of the class A common stock on June 27, 2019, as reported on the New York Stock Exchange was approximately $8,226,337,100.

As of February 24, 2020, the registrant had outstanding 104,777,766 shares of class A common stock, $0.01 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed not later than 120 day after the end of the fiscal year covered by this Report are incorporated herein by reference in Part III of this Annual Report on Form 10-K.

Table of Contents

TABLE OF CONTENTS



		Page
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	29
	Executive Officers of the Registrant	29

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	35
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	118
Item 9A.	Controls and Procedures	118
Item 9B.	Other Information	122

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	123
Item 11.	Executive Compensation	123
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	123
Item 13.	Certain Relationships and Related Transactions and Director Independence	123
Item 14.	Principal Accountant Fees and Services	123

PART IV
Item 15.	Exhibits, Financial Statement Schedules	124
Signatures		133

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report includes “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “goal,” “forecast,” “intend,” “may,” “might,” “objective,” “outlook,” “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. 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)	the timing and conditions surrounding the return to service of the B737 MAX, the B737 MAX production rates under the 2020 MOA and other agreements with Boeing, future demand for the aircraft, and any residual impacts of the grounding on production rates for the aircraft;


2)	our reliance on Boeing for a significant portion of our revenues;


3)	our ability to continue to grow our business and execute our growth strategy including our ability to enter into profitable supply arrangements with additional customers;


4)	the business condition and liquidity of Boeing and Airbus and their ability to satisfy their contractual obligations to the Company;


5)	demand for our products and services and the effect of economic and geopolitical conditions in the industries and markets in which we operate in the U.S. and globally;


6)	the certainty of our backlog, including the ability of customers to cancel or delay orders prior to shipment;


7)	our ability to accurately estimate and manage performance, cost, margins, and revenue under our contracts, and the potential for additional forward losses on new and maturing programs;


8)	our ability and our suppliers’ ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft;


9)	competitive conditions in the markets in which we operate, including in-sourcing by commercial aerospace original equipment manufacturers;


10)	our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing, Airbus and other customers;

11)

the success and timely execution of key milestones, such as the receipt of necessary regulatory approvals and satisfaction of closing conditions, in our announced acquisitions of Asco and select Bombardier assets, and our ability to effectively assess, manage, close, and integrate such acquisitions along with others that we pursue, and generate synergies and other cost savings therefrom, while avoiding unexpected costs, charges, expenses, and adverse changes to business relationships and business disruptions;


12)	the possibility that our cash flows may not be adequate for our additional capital needs;


13)	our ability to avoid or recover from cyber-based or other security attacks and other operations disruptions;


14)	legislative or regulatory actions, both domestic and foreign, impacting our operations;


15)	the effect of changes in tax laws and the Company's ability to accurately calculate and estimate the effect of such changes;


16)	any reduction in our credit ratings;


17)	our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components;


18)	our ability to recruit and retain a critical mass of highly skilled employees;


19)	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;


20)	spending by the U.S. and other governments on defense;


21)	pension plan assumptions and future contributions;


22)	the effectiveness of our internal control over financial reporting; and any difficulties or delays that could affect the Company's ability to effectively implement the remediation plan, in whole or in part, to address the material weakness identified in the Company's internal control over financial reporting, as described in Item 9A. "Controls and Procedures";


23)	the outcome or impact of ongoing or future litigation, claims, and regulatory actions, including our exposure to potential product liability and warranty claims;


24)	our ability to continue selling certain receivables through our supplier financing programs;


25)	our ability to access the capital markets to fund our liquidity needs, and the costs and terms of any additional financing;


26)	any regulatory or legal action arising from the review of our accounting processes; and


27)	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.

Table of Contents

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 this Annual Report for a more complete discussion of these and other factors that may affect our business.

Table of Contents

PART I

Item 1. Business

Our Company

Unless the context otherwise indicates or requires, as used in this Annual Report, references to “we,” “us,” “our,” and the “Company” refer to Spirit AeroSystems Holdings, Inc. and its consolidated subsidiaries. References to “Spirit” refer only to our subsidiary, Spirit AeroSystems, Inc., and references to “Spirit Holdings” or “Holdings” refer only to Spirit AeroSystems Holdings, Inc.

The Company, with its headquarters in Wichita, Kansas, is one of the largest independent non-Original Equipment Manufacturer (“OEM”) commercial aerostructures designers and manufacturers in the world. We design, engineer, and manufacture large, complex, and highly engineered commercial aerostructures such as fuselages, nacelles (including thrust reversers), struts/pylons, wing structures, and flight control surfaces. In addition to supplying commercial aircraft structures, we also design, engineer, and manufacture structural components for military aircraft and other applications. A portion of our defense business is classified by the U.S. Government and cannot be specifically described; however, it is included in our consolidated financial statements. We are a critical partner to our commercial and defense customers due to the broad range of products we currently supply to them and our leading design and manufacturing capabilities using both metallic and composite materials. For the twelve months ended December 31, 2019, we generated net revenues of $7,863.1 million and had net income of $530.1 million.

Operating Segments and Products

We operate in three principal segments: Fuselage Systems, Propulsion Systems, and Wing Systems. Our largest customer, The Boeing Company (“Boeing”), represents a substantial portion of our revenues in all segments. Further, our second largest customer, Airbus S.A.S., a division of Airbus Group SE (“Airbus”), represents a substantial portion of revenues in the Wing Systems segment. We serve customers in addition to Boeing and Airbus across our three principal segments; however, these customers currently do not represent a significant portion of our revenues and are not expected to in the near future. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas.



Segment	Percentage of Net Revenues for the Twelve Months Ended December 31, 2019	Locations	Commercial Programs	Non-Classified Defense Programs
Fuselage Systems	54%	McAlester, Oklahoma; Wichita, KS; Kinston, NC; San Antonio, TX; St.-Nazaire, France; Subang, Malaysia	B737, B747, B767, B777, B787, A350 XWB	Sikorsky CH-53K
Propulsion Systems	26%	Wichita, KS; San Antonio, TX	B737, B747, B767, B777, B787, Rolls-Royce BR725 Engine, Mitsubishi Regional Jet, A220 (formerly Bombardier CSeries)
Wing Systems	20%	Tulsa and McAlester, Oklahoma; Prestwick, Scotland; San Antonio, TX; Subang, Malaysia; Kinston, North Carolina	B737, B747, B767, B777, B787, A320 family, A330, A350 XWB	Various

Fuselage Systems. The Fuselage Systems segment includes development, production, and marketing of the following:


•	The forward section of the aerostructure, which houses the flight deck, passenger cabin, and cargo area;


•	The mid and rear fuselage sections;


•	Other structure components of the fuselage, including floor beams; and


•	Related spares and maintenance, repair, and overhaul (“MRO”) services.

Table of Contents

Net revenue in the Fuselage Systems Segment amounted to $4,206.2 million, $4,000.8 million, and $3,730.8 million in 2019, 2018, and 2017, respectively.

Propulsion Systems. The Propulsion Systems Segment includes development, production, and marketing of the following:


•	Nacelles (including thrust reversers) - aerodynamic structure surrounding engines;


•	Struts/pylons - structure that connects the engine to the wing;


•	Other structural engine components; and


•	Related spares and MRO services.

Net revenue in the Propulsion Systems Segment amounted to $2,057.8 million, $1,702.5 million, and $1,666.2 million in 2019, 2018, and 2017, respectively.

Wing Systems. The Wing Systems Segment includes development, production, and marketing of the following:


•	Flaps and slats - flight control surfaces;


•	Wing structures - framework that consists mainly of spars, ribs, fixed leading edge, stringers, trailing edges, and flap track beams; and


•	Related spares and MRO services.

Net revenue in the Wing Systems Segment amounted to $1,588.3 million, $1,513.0 million, and $1,578.8 million in 2019, 2018, and 2017, respectively.

Our Manufacturing, Engineering, and Support Services

Manufacturing

Our expertise is in designing, engineering, and manufacturing large-scale, complex aerostructures. As of December 31, 2019, we maintain eight state-of-the-art manufacturing facilities in Wichita, Kansas; Tulsa, Oklahoma; McAlester, Oklahoma; Kinston, North Carolina; San Antonio, Texas; Prestwick, Scotland; Saint-Nazaire, France; and Subang, Malaysia.

Our core manufacturing competencies include:

•composites design and manufacturing processes;

•leading mechanized and automated assembly and fastening techniques;

•large-scale skin fabrication using both metallic and composite materials;

•chemical etching and metal bonding expertise;

•monolithic structures technology; and

•precision metal forming producing complex contoured shapes in sheet metal and extruded aluminum.

Our manufacturing expertise is supported by our state-of-the-art equipment. We have thousands of major pieces of equipment installed in our customized manufacturing facilities. For example, for the manufacture of the B787 composite forward fuselage and Defense, we installed two of the largest autoclaves in the world in our Wichita, KS facility. An autoclave is an enclosure device used in the manufacture of composite structures that generates controlled internal heat and pressure conditions used to cure and bond certain resins. We installed two autoclaves as well as other specialized machines in Kinston, North Carolina to support our work on the A350 XWB. We intend to continue to make the appropriate investments in our facilities to support and maintain our industry-leading manufacturing expertise.

Engineering

The Company is an industry leader in aerospace engineering with access to talent across the globe. The purpose of the engineering organization is to provide continuous support for new and ongoing designs, technology innovation, development for customer advancements, and production-related process improvements. We possess a broad base of engineering skills for design, analysis, test, certification, tooling, and support of major fuselage, wing, and propulsion assemblies using both metallic and composite materials. In addition, our regulatory certification expertise helps ensure associated designs and design changes are compliant with applicable regulations.

Our industry-leading engineering capabilities are key strategic factors differentiating us from our competitors.

Table of Contents

Global Customer Support & Services (“GCS&S”)

Through GCS&S, we provide rotable assets, components, repair solutions, and engineering services. Our inventory of rotable assets is available for lease, exchange, and purchase. Additionally, our global repair stations are staffed with technicians specializing in advanced composite repair techniques. We provide MRO services for both metallic and composite components, either on site or at certified MRO stations. We are equipped with original production manufacturing tooling and specialize in service bulletin maintenance for Spirit nacelle components.



Product	Description	Aircraft Program
MRO	Certified repair stations that provide complete on-site repair and overhaul; maintains global partnerships to support MRO services	B737, B747, B767, B777, B787 and Rolls-Royce BR725
Rotable Assets	Maintain a pool of rotable assets for sale, exchange, and/or lease	B737, B747, B767, B777
Engineering Services	Engineering, tooling, and measurement services. On-call field service representatives.	Multiple programs

Business Development

The Company’s core products include fuselages, struts/pylons, nacelles, and wing components, and we continue to focus on business growth through the application of key strengths, including design for manufacturability, materials utilization expertise, targeted automation, advanced tooling and testing concepts, and determinate assembly to enable cost-effective, highly efficient production. We invest in new technology to bring the most advanced techniques, manufacturing, and automation to our customers.

The Company applies extensive experience in advanced material systems, manufacturing technologies, and prototyping to continually invent and patent new technologies that improve quality, lower costs, and increase production capabilities. Our business growth is focused on application of these strengths to expand into new addressable commercial and defense markets and customers.

Defense Business Growth

In addition to providing aerostructures for commercial aircraft, we also design, engineer and manufacture structural components for military aircraft. We have been awarded a significant amount of work for Boeing’s P-8, C40, and KC-46 Tanker. The Boeing P-8, C40, and KC-46 Tanker are commercial aircraft modified for military use. Other military programs for which we provide products include the development of the Sikorsky CH-53K, and B-21 Raider. A portion of our defense business is classified by the U.S. Government, including the B-21 Raider program, and cannot be specifically described. The operating results of these classified contracts are included in our consolidated financial statements. The business risks associated with classified contracts historically have not differed materially from those of our other U.S. Government contracts. Our internal controls addressing the financial reporting of classified contracts are consistent with our internal controls for our non-classified contracts.

The following table summarizes by product and military program the major non-classified military programs that we currently have under contract.



Product	Applicable Segment	Description	Military Program
Low Observables	Wing Systems	Radar absorbent and translucent materials	Various
Rotorcraft	Fuselage Systems	Forward cockpit and cabin, fuselage	Sikorsky CH-53K
Other Military	Wing Systems	Fabrication, bonding, assembly, testing, tooling, processing, engineering analysis, and training	Various

Fabrication Business Growth

Table of Contents

The Company offers customers a wide range of solutions including machining, skin and sheet metal fabrication, and chemical processing. These capabilities are utilized for both internal and external sourcing and include the following:



Fabrication		Description
Machine Fabrication		5-axis machining capabilities: high-speed aluminum fabrication up to 23 feet, seat track machining, and extensive hard metal capabilities 3- and 4-axis machining capabilities: range of hard metal capabilities, multi-spindle machines, and manufactured parts
Sheet Metal Fabrication		Includes stretch and hydro forming, roll, hammer, profiling, gauge reduction of extrusions and aluminum heat treat, as well as subassemblies
Chemical Processing		Includes a range of hard and soft metals with one of the largest automated lines in the industry
Skin Fabrication		Include skin stretch forming up to 1,500 tons, laser scribe, trim and drill, and chemical milling

Our Customers

Our revenues are substantially dependent on Boeing and Airbus. The loss of either of these customers would have a material adverse effect on the Company. For the twelve months ended December 31, 2019 and December 31, 2018, approximately 79% and 16% of our net revenues were generated from sales to Boeing and Airbus, respectively. We are currently the sole-source supplier for nearly all of the products we sell to Boeing and Airbus.

Boeing

We are the largest independent supplier of aerostructures to Boeing and manufacture aerostructures for every Boeing commercial aircraft currently in production, including the majority of the airframe content for the Boeing B737, and the Boeing B787, Boeing’s next generation twin aisle composite aircraft. We supply these products through long-term supply agreements that cover the life of these programs, including any commercial derivative models. These supply agreements are described in more detail under “Our Relationship with Boeing” below. We believe our relationship with Boeing will allow us to continue to be an integral partner with Boeing in the designing, engineering, and manufacturing of complex aerostructures.

Airbus

We originally became a supplier to Airbus in April 2006 through the acquisition of BAE Aerostructures (the “BAE Acquisition”) and subsequently won additional work packages with Airbus. We are one of the largest content suppliers of wing systems for the Airbus A320 family and a significant supplier for the Airbus A350 XWB. Under our supply agreement with Airbus for the A320 and A330, we supply products for the life of the aircraft program. For the A350 XWB program, we have long-term requirement contracts with Airbus. We believe we can leverage our relationship with Airbus and our history of delivering high-quality products to further increase our sales to Airbus and continue to partner with Airbus on new programs going forward. Upon the closure of the Asco Acquisition and Bombardier Acquisition (as such terms are defined below), we will have additional work packages with Airbus, including the A220 wing and A320 thrust reverser.

Other Customers

Other customers include Lockheed Martin, Northrop Grumman, Sikorsky, Rolls-Royce, and Mitsubishi Aircraft Corporation.

U.S. and International Customer Mix

Although most of our revenues are obtained from sales inside the U.S., we generated $1,296.8 million, $1,254.9 million, and $1,260.1 million in sales to international customers for the twelve months ended December 31, 2019, 2018, and 2017, respectively, primarily to Airbus. The international revenue is included primarily in the Wing Systems segment. All other segment revenues are primarily from U.S. sales. Approximately 5% of our long-lived assets based on book value are located in the U.K. with approximately another 3% of our long-lived assets located in countries outside the U.S. and the U.K.

Our Relationship with Boeing

A significant portion of Spirit’s operations related to Boeing aerostructures was owned and controlled by Boeing until 2005. On February 7, 2005, Spirit Holdings became a standalone Delaware company, and commenced operations on June 17, 2005 through the acquisition of Boeing’s operations in Wichita, Kansas, Tulsa, Oklahoma, and McAlester, Oklahoma (the “Boeing Acquisition”) by an investor group led by Onex Partners LP and Onex Corporation (together with its affiliates, “Onex”). As of

Table of Contents

August 2014, Onex no longer held any investment in the Company. Boeing’s commercial aerostructures manufacturing operations in Wichita, Kansas and Tulsa and McAlester, Oklahoma, are referred to in this Report as “Boeing Wichita.”

In connection with the Boeing Acquisition, we entered into long-term supply agreements under which we are Boeing’s exclusive supplier for substantially all of the products and services provided by Boeing Wichita to Boeing prior to the Boeing acquisition. These supply agreements include products for Boeing’s B737, B747, B767, and B777 commercial aircraft programs, as well as for certain products for Boeing’s B787 program. These supply agreements cover the life of these programs, including any commercial derivative models.

Supply Agreement with Boeing for B737, B747, B767, and B777 Programs ("Sustaining Programs")

Overview. Two documents effectively comprise the Sustaining Programs’ supply contract: (1) the Special Business Provisions (“Sustaining SBP”), which sets forth the specific terms of the Sustaining Programs’ supply arrangement, and (2) the General Terms Agreement (“Sustaining GTA,” and, together with the Sustaining SBP (and any related purchase order or contract), as amended, the “Sustaining Agreement”), which sets forth other general contractual provisions, including provisions relating to termination, events of default, assignment, ordering procedures, inspections, and quality controls.

The Sustaining Agreement is a requirements contract that covers certain products, including fuselages, struts/pylons, and nacelles (including thrust reversers), wings and wing components, as well as tooling, for the Sustaining Programs for the life of these programs, including any commercial derivative models. During the term of the Sustaining Agreement, and absent default by Spirit, Boeing is obligated to purchase from Spirit all of its requirements for products covered by the Sustaining Agreement. Although Boeing is not required to maintain a minimum production rate, Boeing is subject to a maximum production rate above which it must negotiate with us regarding responsibility for recurring and non-recurring expenditures related to a capacity increase. Boeing owns substantially all of the tooling used in production or inspection of products covered by the Sustaining Agreement.

Pricing. On September 22, 2017, Boeing and Spirit entered into Amendment 30 to the Sustaining SBP (“Sustaining Amendment #30”). Sustaining Amendment #30 generally established pricing terms for the Sustaining Program models (excluding the B777X) through December 31, 2022 (with certain limited exceptions) and provided that Boeing and Spirit would negotiate follow-on pricing for periods beyond January 1, 2023 beginning 24 months prior to January 1, 2023. In addition, Sustaining Amendment #30 provided that the parties would make certain investments for rate increases on the B737 program and implemented industry standard payment terms.

On December 21, 2018, Boeing and Spirit executed a Collective Resolution 2.0 Memorandum of Agreement (the “2018 MOA”). The 2018 MOA established, among other items, pricing for certain programs through December 31, 2030, including the B737NG (including the P8), B737 MAX, B767 (but excluding 767-2C for which pricing is separately established), and the B777 freighters and 777-9 (pricing for the B777 300ER and 200LR was previously established and pricing for the B777-8 is subject to future negotiation). In addition, the 2018 MOA established B737 pricing based on production rates above and below current production levels, investments for tooling and capital for certain B737 rate increases, a joint cost reduction program for the B777X (a joint cost reduction program for the B737 is separately established), and the release of certain liabilities and claims asserted by both parties, including the B737 disruption activity claim. The parties further agreed to reconvene in 2028 to negotiate pricing beyond 2030. Consistent with the 2018 MOA, on January 30, 2019, Boeing and Spirit executed SBP Amendment #40 (“Sustaining Amendment #40”) to implement the December 2018 MOA terms and conditions applicable to the Sustaining Programs.

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. As a result of Boeing's announcement, on April 12, 2019, Boeing and Spirit executed a Memorandum of Agreement (the “2019 MOA”) relating to Spirit’s production of aircraft with respect to the B737 MAX program. Under the 2019 MOA, Spirit was to maintain its delivery rate of 52 shipsets per month with respect to the B737 MAX program following Boeing’s announced temporary adjustment in the production rate from 52 to 42 aircraft per month. The 2019 MOA established that all B737 MAX shipsets produced in excess of Boeing’s production rate (collectively, the “excess shipsets”) would be deemed to be delivered to Boeing “FOB” at Spirit’s facilities, which would trigger Boeing’s payment obligations for the excess shipsets. Pursuant to the 2019 MOA, if requested by Boeing and if Spirit had available storage space, Spirit would maintain the excess shipsets at Spirit’s facilities; however, title to and risk of any loss of or damage to the excess shipsets would be transferred to Boeing except to the extent loss or damage results from Spirit’s fault or negligence. Pursuant to the 2019 MOA, Spirit agreed to be responsible for any incremental costs associated with storage of the excess shipsets.

On December 19, 2019, Boeing directed Spirit to stop all B737 MAX deliveries to Boeing effective January 1, 2020, due to Boeing’s announced temporary suspension of B737 MAX production. Accordingly, Spirit suspended all B737 MAX production beginning on January 1, 2020. On February 6, 2020, Boeing and Spirit entered into a Memorandum of Agreement (the “2020 MOA”) superseding the 2019 MOA between the parties (except for Sections 15 and 16). The 2020 MOA provides for Spirit to deliver to Boeing 216 B737 MAX shipsets in 2020. The production rate agreed for 2020 represents less than half of Spirit’s B737

Table of Contents

MAX annualized production rate in 2019. The Company currently does not expect to be back at a production rate of 52 aircraft per month until late 2022. The 2020 MOA also extended B737 MAX pricing terms through 2033 (previously, the pricing was through December 31, 2030).

Advances on the B737 Program. Under the 2019 MOA, the Company received an advance payment from Boeing in the amount of $123.0 million during the third quarter of 2019. The 2020 MOA provided that the $123.0 million advance would be repaid by offset against the purchase price for year 2022 shipset deliveries. In addition, the 2020 MOA provided that Boeing will pay $225 million to Spirit in the first quarter of 2020, consisting of (i) $70 million in support of Spirit’s inventory and production stabilization, of which $10 million will be repaid by Spirit in 2021, and (ii) $155 million as an incremental pre-payment for costs and shipset deliveries over the next two years.

Termination of Airplane Program. If Boeing decides not to initiate or continue production of a Sustaining Program model or commercial derivative because it determines there is insufficient business basis for proceeding, Boeing may terminate such model or derivative, including any order therefore, by written notice to Spirit. In the event of such a termination, Boeing will be liable to Spirit for any orders issued prior to the date of the termination notice and may also be liable for certain termination costs.

Events of Default and Remedies. Events of default under the Sustaining Agreement include Spirit’s failure to deliver products when and as required, and failure to maintain a required system of quality assurance, among other things. Certain events of default may allow Boeing to cancel orders under or terminate the Sustaining Agreement.

Intellectual Property. All technical work product and works of authorship produced by or for Spirit with respect to any work performed by or for Spirit pursuant to the Sustaining Agreement are the exclusive property of Boeing. All inventions conceived by or for Spirit with respect to any work performed by or for Spirit pursuant to the Sustaining Agreement and any patents claiming such inventions are the exclusive property of Spirit, except that Boeing will own any such inventions that Boeing reasonably believes are applicable to the B787 Program, and Boeing may seek patent protection for such B787 inventions or hold them as trade secrets, provided that, if Boeing does not seek patent protection, Spirit may do so.

B787 Supply Agreement with Boeing (“B787 Program”)

Overview. Two documents effectively comprise the B787 Program supply contract: (1) the Special Business Provisions (“787 SBP”), which sets forth the specific terms of the B787 Program’s supply arrangement and (2) the General Terms Agreement (“787 GTA,” and, together with 787 SBP and (any related purchase order or contract), as amended, the “B787 Agreement”), which sets forth other general contractual provisions, including provisions relating to termination, events of default, assignment, ordering procedures, inspections, and quality controls. The B787 Agreement is a requirements contract pursuant to which Spirit is Boeing’s exclusive supplier for the forward fuselage, fixed, and movable leading wing edges, engine pylons, and related tooling for the B787.

Pricing. On September 22, 2017, Boeing and Spirit entered into Amendment #25 to the B787 Agreement (the “787 Amendment #25”). 787 Amendment #25 established pricing terms for the B787-8, -9, and -10 models through line unit 1405 and provided that Boeing and Spirit would negotiate follow-on pricing for line units 1406 and beyond beginning 24 months prior to the scheduled delivery date for line unit 1405. 787 Amendment #25 also implemented industry standard payment terms and required the Company to repay Boeing $236.0 million less certain adjustments, as a retroactive adjustment for payments that were based on interim pricing. This amount was repaid in October 2017.

On December 21, 2018, Boeing and Spirit executed the 2018 MOA, which also established, among other things, pricing for the B787 for line unit 1004 through line unit 2205, and established a joint cost reduction program for the B787. Consistent with the 2018 MOA, on January 30, 2019, Boeing and Spirit executed Amendment #28 to the B787 Agreement (the “787 Amendment #28”) to implement the 2018 MOA terms and conditions applicable to the B787 Program.

Advance Payments. Boeing has made advance payments to Spirit under the B787 Agreement, which 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, except that pursuant to an amendment to the B787 Agreement entered into in April 2014, advance repayments were suspended from April 1, 2014 through March 31, 2015, and any repayments that otherwise would have become due during such 12-month period will be made by offset against the purchase price for shipset 1,001 through 1,120. Repayments resumed in 2015. The 2018 MOA also provided for the suspension of advance repayments with respect to the B787 beginning with line number 818; to 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 Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million due on December 15th of each year until the advance payments have been fully recovered by Boeing. Accordingly, portions of the advance

Table of Contents

repayment liability are included as current and long-term liabilities in our balance sheet. As of December 31, 2019, the amount of advance payments received by us from Boeing not yet repaid was $231.9 million.

Termination of Airplane Program. If Boeing decides not to continue production of the B787 Program because it determines, after consultation with Spirit, that there is an insufficient business basis for proceeding, Boeing may terminate the B787 Program, including any orders, by written notice to Spirit. In the event of such a termination, Boeing will be liable to Spirit for costs incurred in connection with any orders issued prior to the date of the termination notice and may also be liable for certain termination costs and for compensation for any tools, raw materials or work-in-process requested by Boeing in connection with the termination.

Events of Default and Remedies. Events of default under the B787 Agreement include Spirit’s failure to deliver products when and as required, and failure to maintain a required system of quality assurance, among other things. Certain events of default may allow Boeing to cancel orders under or terminate the B787 Agreement.

Intellectual Property. The B787 Agreement established three classifications for patented invention and proprietary information: (1) intellectual property developed by Spirit during activity under the B787 Agreement (“Spirit IP”); (2) intellectual property developed jointly by Boeing and Spirit during that activity (“Joint IP”); and (3) all other intellectual property developed during activity under the B787 Agreement (“Boeing IP”).

Boeing may use Spirit IP for work on the B787 Program and Spirit may license it to third parties for work on such program. Each party is free to use Joint IP in connection with work on the B787 Program and other Boeing programs, but each must obtain the consent of the other to use it for other purposes. Spirit is entitled to use Boeing IP for the B787 Program, and may require Boeing to license it to subcontractors for the same purpose.

The foregoing descriptions of the various agreements between Spirit and Boeing do not purport to be complete and are qualified in their entirety by reference to the full text of each agreement as filed with the Securities and Exchange Commission (the “SEC”), subject to certain omissions of confidential portions pursuant to requests for confidential treatment filed separately with the SEC. The full text of the 2020 MOA will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2020, subject to certain omissions of confidential portions.

Intellectual Property

We have several patents pertaining to our processes and products. While our patents, in the aggregate, are of material importance to our business, no individual patent or group of patents is of material importance. We also rely on trade secrets, confidentiality agreements, unpatented knowledge, creative products development, and continuing technological advancement to maintain our competitive position.

Competition

Although we are one of the largest independent non-OEM aerostructures suppliers based on annual revenues, with an estimated 20% share of the global non-OEM aerostructures market, this market remains highly competitive and fragmented. Our primary competition currently comes from either work performed internally by OEMs or other tier-one suppliers, and direct competition continues to grow.

Our principal competitors among OEMs include Boeing, Airbus (including its wholly-owned subsidiaries Stelia Aerospace and Premium Aerotec GmbH), Embraer Brazilian Aviation Co., Leonardo, and United Technologies Corporation. Our principal competitors among non-OEM tier-1 aerostructures suppliers include Aernnova, GKN Aerospace, Kawasaki Heavy Industries, Inc., Mitsubishi Heavy Industries, Safran Nacelles, Sonaca, Subaru Corporation, Triumph Group, Inc. (“Triumph”), and Latecoere S.A.

Expected Backlog

As of December 31, 2019, our expected backlog associated with large commercial aircraft, business and regional jets, and military equipment deliveries through 2023, calculated based on contractual and historical product prices and expected delivery volumes, was approximately $42.5 billion. This is a decrease of $5.9 billion from our corresponding estimate as of the end of 2018. The B737 MAX backlog is approximately 60% of our total backlog. Backlog is calculated based on the number of units Spirit is under contract to produce on our fixed quantity contracts, and Boeing’s and Airbus’ announced backlog on our supply agreements (which are based on orders from customers). The number of units may be subject to cancellation or delay by the customer prior to shipment, depending on contract terms. For example, on December 19, 2019, Boeing directed Spirit to stop all B737 MAX deliveries to Boeing effective January 1, 2020, due to Boeing’s announced temporary suspension of B737 MAX production. The level of unfilled orders at any given date during the year may be materially affected by the timing of our receipt

Table of Contents

of firm orders and additional airplane orders, and the speed with which those orders are filled. Accordingly, our expected backlog as of December 31, 2019 may not necessarily represent the actual amount of deliveries or sales for any future period.

Suppliers and Materials

The principal raw materials used in our manufacturing operations are aluminum, titanium, steel, and carbon fiber. We also purchase metallic parts, non-metallic parts, and machined components. In addition, we procure subassemblies from various manufacturers that are used in the final aerostructure assembly. From time to time, we also review our make versus buy strategy to determine whether it would be beneficial to us to outsource work that we currently produce in-house or vice versa.

We have long-standing relationships with hundreds of manufacturing suppliers. Our strategy is to enter into long-term contracts with suppliers to secure competitive pricing. Our exposure to rising costs of raw material is limited to some extent through leveraging relationships with our OEM customers’ high-volume contracts.

We continue to seek and develop sourcing opportunities in North America, Europe, and Asia to achieve a competitive global cost structure. Over 25 countries are represented in our international network of suppliers.

Research and Development

We believe that a world-class research and development focus helps maintain our position as an advanced partner to our OEM customers’ new product development teams. As a result, our research and development spend is $54.5 million for the year ended December 31, 2019, $42.5 million for the year ended December 31, 2018, and $31.2 million for the year ended December 31, 2017. Through our research, we strive to develop unique intellectual property and technologies that will improve our products and our customers' products and, at the same time, position us to win work on new products. Our development effort primarily focuses on preparing for the initial production of new products and improving manufacturing processes on our current work. It also serves as an ongoing process that helps develop ways to reduce production costs and streamline manufacturing processes.

Our research and development is geared toward the architectural design of and manufacturing processes for our principal products: fuselage systems, propulsion systems, and wing systems. We are currently focused on research in areas such as advanced metallic joining, low-cost composites, acoustic attenuation, efficient structures, systems integration, advanced design and analysis methods, and new material systems. Other items that are expensed relate to research and development that is not funded by the customer. We collaborate with universities, research facilities, and technology partners in our research and development.

Regulatory Matters

Environmental. Our operations and facilities are subject to various environmental, health, and safety laws and regulations, including federal, state, local, and foreign government requirements governing, among other matters, the emission, discharge, handling, and disposal of regulated materials, the investigation and remediation of contaminated sites, and permits required in connection with our operations. We continually monitor our operations and facilities to ensure compliance with these laws and regulations; however, management cannot provide assurance that future changes in such laws or their enforcement, or the nature of our operations will not require us to make significant additional expenditures to ensure continued compliance. Further, we could incur substantial costs, including costs to reduce air emissions, clean-up costs, fines and sanctions, and third-party property damage, or personal injury claims as a result of violations of or liabilities under environmental laws, relevant common law or the environmental permits required for our operations. It is reasonably possible that costs incurred to ensure continued environmental compliance could have a material impact on our results of operations, financial condition, or cash flows if additional work requirements or more stringent clean-up standards are imposed by regulators, new areas of soil, air, and groundwater contamination are discovered, and/or expansions of work scope are prompted by the results of investigations.

Government Contracts. Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, either directly or by subcontract, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally terminate existing contracts, suspend, or debar us from receiving new prime contracts or subcontracts, reduce the value of existing contracts, audit our contract-related costs and fees, including allocated indirect costs, and control and potentially prohibit the export of our products, among other things. If a contract was terminated for convenience, we could recover the costs we have incurred or committed, settlement expenses, and profit on the work completed prior to termination. However, if the termination is a result of our failure to perform, we may be liable for excess costs incurred by the prime contractor in procuring undelivered items from another source. In addition, failure to follow the requirements of the National Industrial Security Program Operating Manual (“NISPOM”) or any other applicable U.S. Government industrial security regulations could, among other things, result in termination of Spirit’s facility clearance, which in turn would preclude us from being awarded classified contracts or, under certain circumstances, performing on our existing classified contracts.

Table of Contents

Commercial Aircraft. The commercial aircraft component industry is highly regulated by the FAA, the European Aviation Safety Agency (“EASA”), and other agencies throughout the world. The military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in some cases, by individual OEMs, to engineer and service parts and components used in specific aircraft models. In addition, the FAA requires that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services.

Export Control. The technical data and components used in the design and production of our products, as well as many of the products and technical data we export, either as individual items or as components incorporated into aircraft, are subject to compliance with U.S. export control laws. Collaborative agreements that we may have with foreign persons, including manufacturers or suppliers, are also subject to U.S. export control laws.

Health and Safety. Our operations are also subject to a variety of worker and community safety laws. The Occupational Safety and Health Act (“OSHA”) mandates general requirements for safe workplaces for all employees. In addition, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. Our management believes that our operations are in material compliance with OSHA’s health and safety requirements.

Employees

At December 31, 2019, we had approximately 18,200 employees: 15,900 located in our four U.S. facilities, 1,100 located at our U.K. facility, 1,100 located in our Malaysia facility and 100 in our France facility. The Company has announced that it will be reducing its workforce in connection with the B737 MAX production suspension and future production rate uncertainty.

The numbers reflected for December 31, 2019, do not reflect the work force actions the Company took beginning in January 2020 related to B737 MAX production.

Our principal U.S. collective bargaining agreements were with the following unions as of December 31, 2019:



Union	Percent of our U.S. Employees Represented	Status of the Agreements with Major Union
The International Association of Machinists and Aerospace Workers (IAM)	62%	We have two major agreements - one expires in June 2023 and one expires in December 2024.
The Society of Professional Engineering Employees in Aerospace (SPEEA)	17%	We have two major agreements - one expires in December 2024 and one expires in January 2026.
The International Union, Automobile, Aerospace and Agricultural Implement Workers of America (UAW)	9%	We have one major agreement expiring in December 2025.
The International Brotherhood of Electrical Workers (IBEW)	1%	We have one major agreement expiring in September 2020.

As noted above, one of the IAM agreements was set to expire in June 2020. In January 2020, the IAM and Spirit agreed to a three-year extension of the contract expiring on June 24, 2023.

Approximately 64% of our U.K. employees are represented by one union, Unite (Amicus Section). In 2013, the Company negotiated two separate ten-year pay agreements with the Manual Staff bargaining and the Monthly Staff bargaining groups of the Unite union. These agreements fundamentally cover basic pay and variable at risk pay, while other employee terms and conditions generally remain the same from year to year until both parties agree to change them. The current pay agreements expire December 31, 2022.

In France, our employees are represented by CFTC (“Confédération Française des Travailleurs Chrétiens or French Confederation of Christian Workers”) and FO (“Force Ouvrière or Labor Force”). The Company negotiates yearly on compensation and once every four years on issues related to gender equality and work-life balance. The next election to determine union representation will occur in July 2023.

None of our Malaysia employees are currently represented by a union.

We consider our relationships with our employees to be satisfactory.

Available Information

Table of Contents

Our Internet address is http://www.spiritaero.com. The content on our website is available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report.

We make available through our Internet website, under the heading “Investors,” our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to those reports after we electronically file such materials with the SEC. Copies of our key corporate governance documents, including our Bylaws. Corporate Governance Guidelines, Code of Business Conduct, Transactions with Related Persons Policy, Finance Code of Professional Conduct, and charters for our Audit Committee, Risk Committee, Compensation Committee, and Corporate Governance and Nominating Committee are also available on our website.

The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy information statement, and other information regarding issuers that file electronically with the SEC. Our filed Annual and Quarterly Reports, Current Reports, Proxy Statement and other reports previously filed with the SEC are available through the SEC's website.

Item 1A. Risk Factors

An investment in our securities involves risks and uncertainties. The risks and uncertainties set forth below are those that we currently believe may materially and adversely affect us, our future business or results of operations, our industry, or investments in our securities. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also materially and adversely affect us, our future business or results of operations, or investments in our securities.

Our business depends, in large part, on sales of components for a single aircraft program, the B737 MAX. A continued grounding of the B737 MAX fleet and related suspensions or reductions in the B737 MAX production rate may have a material adverse impact on Spirit's business, financial condition, results of operations, and cash flows. Furthermore, the low rate of production creates financial and disruption risks for Spirit’s suppliers on the B737 MAX program, which, may in turn, affect Spirit’s ability to comply with contractual obligations.

For the twelve months ended December 31, 2019, approximately 53% of our net revenues were generated from sales of components to Boeing for the B737 aircraft. While we have entered into long-term supply agreements with Boeing to continue to provide components for the B737 for the life of the aircraft program, including commercial and the military P-8 derivatives, Boeing does not have any obligation to purchase components from us for any replacement for the B737 that is not a commercial derivative model as defined by the Sustaining Agreement. The contract is a requirements contract and Boeing can reduce the purchase volume at any time.

On February 6, 2020, Boeing and Spirit entered into the 2020 MOA superseding the 2019 MOA between the parties (except for Sections 15 and 16). The 2020 MOA provides for Spirit to deliver to Boeing 216 B737 MAX shipsets in 2020. The production rate agreed for 2020 represents less than half of Spirit’s B737 MAX annualized production rate in 2019. The Company does not expect to be back at a production rate of 52 aircraft per month until late 2022.

Table of Contents

to take into account changes in production schedules or to accommodate a ramp-up in production, Spirit’s liquidity position may worsen absent Spirit’s ability to procure additional financing, Spirit may trigger an event of default under its credit facilities, and Spirit’s business, financial condition, results of operations and cash flows could be materially adversely impacted. The need to fund the Asco Acquisition and the Bombardier Acquisition and related expenses could also adversely affect our liquidity.

Furthermore, due to the production suspension and cost pressures, Spirit’s suppliers may encounter financial difficulty and, absent financial support, may not be able to continue meeting commitments under their agreements with Spirit. If any of such suppliers supply critical parts to Spirit and Spirit is not able to secure timely and adequate replacement parts, Spirit may breach its obligations to Boeing under the Sustaining Agreement. In the event of a significant breach, Boeing has the ability to terminate the Sustaining Agreement and, in such an event, Spirit’s business, financial condition, results of operations and cash flows could be materially adversely impacted.

Based on Boeing’s public statements, we have assumed that regulatory approval will enable B737 MAX deliveries to resume no earlier than mid-2020. In the event of delays to this timeline and corresponding changes to our production rate, the Company may be required to take actions with longer-term impact, such as further changes to our production plans, employment reductions and/or the expenditure of significant resources to support our supply chain and/or Boeing. In addition, a delay to that timeline and corresponding changes to our production rate may cause us to default under our credit agreement.

We have made significant assumptions with respect to the B737 program regarding the number of units to be delivered in 2020 (216 units), the period during which those units are likely to be produced, and the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs. In addition, we have made assumptions regarding estimated costs expected to be incurred until resuming a normal production rate consistent with 2019 production levels to determine which costs should be (i) included in program inventory and (ii) expensed when incurred as abnormal production costs. Any changes in these estimates and/or assumptions with respect to the B737 program could have a material adverse impact on our financial position, results of operations, and/or cash flows.

Because we depend on Boeing and, to a lesser extent, Airbus, as our largest customers, our sales, cash flows from operations, and results of operations will be negatively affected if either Boeing or Airbus reduces the number of products it purchases from us or if either experiences business difficulties or breaches its obligations to us.

Currently, Boeing is our largest customer and Airbus is our second-largest customer. For the twelve months ended December 31, 2019 and December 31, 2018, approximately 79% and 16% of our net revenues were generated from sales to Boeing and Airbus, respectively. Although our strategy is, in part, to diversify our customer base by entering into supply arrangements with additional customers, we cannot give any assurance that we will be successful in doing so. Even if we are successful in obtaining and retaining new customers, we expect that Boeing and, to a lesser extent, Airbus, will continue to account for a substantial portion of our sales for the foreseeable future. If either of these customers reduces the requirements under our agreements (as Boeing did in December 2019 when it directed Spirit to stop all B737 MAX deliveries to Boeing effective January 1, 2020), terminates or breaches our agreements, experiences a major disruption in its business, such as a strike, work stoppage, slowdown, or a supply chain problem, or experiences a deterioration in its business, financial condition, or liquidity, our business, financial condition, and results of operations could be materially adversely affected.

Requirement contracts with Airbus and Boeing generally do not require specific minimum purchase volumes and Boeing or Airbus, as applicable, can reduce the purchase volume at any time. In addition, if we breach or are unable to perform certain obligations under these supply agreements, Boeing or Airbus may terminate such agreements and/or seek damages from us, which could materially adversely affect our business. Boeing and Airbus also have the contractual right to cancel their supply agreements with us for convenience, which could include the termination of one or more aircraft models or programs for which we supply products. Although Boeing and Airbus would be required to reimburse us for certain expenses, there can be no assurance these payments would adequately cover our expenses or lost profits resulting from the termination. In addition, we have agreed to a limitation on recoverable damages if Boeing wrongfully terminates our main supply agreement with respect to any model or program. If this occurs, we may not be able to recover the full amount of our actual damages.

Our business depends, in part, on securing work for replacement programs.

While we have entered into long-term supply agreements with respect to the Sustaining Programs, Boeing does not have any obligation to purchase components from us for any subsequent variant of these aircraft that is not a commercial derivative as defined by the Sustaining Agreement. If we are unable to obtain significant aerostructures supply business for any aircraft program for which we provide significant content, such as the B737 MAX, our business, financial condition, and results of operations could be materially adversely affected.

We operate in a very competitive business environment.

Table of Contents

As Spirit seeks to further diversify its program portfolio and product offerings and expand its customer base, we face substantial competition from both OEMs and non-OEM aerostructures suppliers. OEMs may choose not to outsource production of aerostructures due to, among other things, their own direct labor and other overhead considerations and capacity utilization at their own facilities. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce a part in-house or to outsource.

Further, some of our non-OEM competitors have greater resources than we do and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Providers of aerostructures have traditionally competed on the basis of cost, technology, quality, and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply-chain management, and sales and marketing, and we may not have enough resources to make such investments.

Further, it is very difficult for new aerostructures suppliers to compete against incumbent suppliers for work under an existing contract. Once a contract is awarded, the OEM and the supplier are typically required to spend significant amounts of time and capital on design, manufacture, testing, and certification of tooling and other equipment. A supplier change would require further testing and certification and the expensive movement of existing tooling or the development of new tooling, and would likely result in production delays and additional costs to both the OEM and the new supplier. These high switching costs may make it more difficult for us to bid competitively against existing suppliers and less likely that an OEM will be willing to switch suppliers during the life of an aircraft program, which could materially adversely affect our ability to obtain new work on existing aircraft programs.

For these reasons, we may not be able to compete successfully in this market or against our competitors, which could have a material adverse effect on our business, financial condition and results of operations.

Our business depends on our ability to maintain a healthy supply chain, meet production rate requirements, and timely deliver products that meet or exceed stringent quality standards.

Our business depends on our ability to maintain a healthy supply chain, achieve planned production rate targets, and meet or exceed stringent performance and reliability standards. The supply chain for large commercial aerostructures is complex and involves hundreds of suppliers and their technical employees from all over the world.

Operational issues, including delays or defects in supplier components, could result in significant out-of-sequence work and increased production costs, as well as delayed deliveries to customers. Our suppliers’ failure to provide parts that meet our technical specifications could materially adversely affect production schedules and contract profitability. We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs for us and possible forward losses on certain contracts. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business and might lead to termination of our supply agreements with our customers.

In order for us to keep the supply chain healthy, we must minimize disruption and production changes. The B737 MAX program has experienced significant disruption due to the production suspension. Many suppliers are distressed. If these suppliers cannot timely deliver components to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/or the financial performance of the B737 MAX program may suffer.

The Company's ability to meet production rate increases is dependent upon several factors, including without limitation, expansion and alignment of its production facilities, tooling, and equipment; improved efficiencies in its production line; on-time delivery of component parts from the Company's suppliers; adequate supply of skilled labor; and implementation of customer customizations upon demand. If the Company fails to meet the quality or delivery expectations or requirements of its customers, disruptions in manufacturing lines could result, which could have a material adverse impact on the Company's ability to meet commitments to its customers and on its future financial results.

In some cases, in order to meet these increases in production rates, we will need to make significant capital expenditures to expand our capacity and improve our performance or find alternative solutions such as outsourcing some of our existing work to free up additional capacity. While some of these expenditures will be reimbursed by our customers, we could be required to bear a significant portion of the costs. In addition, the increases in production rates could cause disruptions in our manufacturing lines, which could materially adversely impact our ability to meet our commitments to our customers, and have a resulting adverse effect on our financial condition and results of operations.

Table of Contents

Interruptions in deliveries of components or raw materials, or increased prices for components or raw materials used in our products could delay production and/or materially adversely affect our financial performance, profitability, margins, and revenues.

We are highly dependent on the availability of essential materials and purchased components from our suppliers, some of which are available only from a sole source or limited sources. Our dependency upon regular deliveries from particular suppliers of components and raw materials means that interruptions or stoppages in such deliveries could materially adversely affect our operations until arrangements with alternate suppliers, to the extent alternate suppliers exist, could be made. If any of our suppliers were unable or were to refuse to deliver materials to us for an extended period of time, or if we were unable to negotiate acceptable terms for the supply of materials with these or alternative suppliers, our business could suffer and be materially affected.

Our continued supply of materials is subject to a number of risks including:


•	the destruction of or damage to our suppliers’ facilities or their distribution infrastructure;


•	embargoes, force majeure events, domestic or international acts of hostility, terrorism, or other events impacting our suppliers’ ability to perform;


•	a work stoppage or strike by our suppliers’ employees;


•	the failure of our suppliers to provide materials of the requisite quality or in compliance with specifications;


•	the failure of essential equipment at our suppliers’ plants;


•	the failure of our suppliers to satisfy U.S. and international import and export control laws for goods that we purchase from such suppliers;


•	the failure of our suppliers to meet regulatory standards;


•	the failure, shortage. or delay in the delivery of raw materials to our suppliers;


•	imposition of tariffs and similar import limitations on us or our suppliers;


•	contractual amendments and disputes with our suppliers; and


•	the inability of our suppliers to perform as a result of global economic conditions or otherwise.

In addition, our profitability is affected by the prices of the components and raw materials, such as titanium, aluminum, steel, and carbon fiber, used in the manufacturing of our products. These prices may fluctuate based on a number of factors beyond our control, including world oil prices, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and, in some cases, government regulation. Although our supply agreements with Boeing and Airbus allow us to pass on to our customers certain unusual increases in component and raw material costs in limited situations, we may not be fully compensated by the customers for the entirety of any such increased costs.

Our operations depend on our ability to maintain continuing, uninterrupted production at our manufacturing facilities and our suppliers’ facilities. Our production facilities and our suppliers’ facilities are subject to physical and other risks that could disrupt production.

Our manufacturing facilities or our suppliers’ manufacturing facilities could be damaged or disrupted by a natural disaster, war, terrorist activity, interruption of utilities, public health crises, or sustained mechanical failure. Although we have obtained property damage and business interruption insurance where appropriate, a sustained mechanical failure of a key piece of equipment, major catastrophe (such as a fire, flood, tornado, hurricane, major snow storm, or other natural disaster), war, or terrorist activities in any of the areas where we or our suppliers conduct operations could result in a prolonged interruption of all or a substantial portion of our business. Any disruption resulting from these events could cause significant delays in shipments of products and the loss of sales and customers and we may not have insurance to adequately compensate us for any of these events. A large portion of our operations takes place at one facility in Wichita, Kansas and any significant damage or disruption to this facility in particular would materially adversely affect our ability to service our customers.

The Company maintains broad insurance coverage for both property damage and business interruption where appropriate. While the Company expects the insurance proceeds would be sufficient to cover most of the business interruption expenses, certain deductibles and limitations will apply and no assurance can be made that all recovery costs will be covered.

Our commercial business is cyclical and sensitive to commercial airlines’ profitability.

We compete in the aerostructures segment of the aerospace industry. Our customers’ business, and therefore our own, is directly affected by the financial condition of commercial airlines and other economic factors, including global economic conditions and geopolitical considerations that affect the demand for air transportation. Specifically, our commercial business is dependent on the demand from passenger airlines and cargo carriers for the production of new aircraft. Accordingly, demand for our commercial products is tied to the worldwide airline industry’s ability to finance the purchase of new aircraft and the industry’s forecasted demand for seats, flights, routes, and cargo capacity. Availability of financing to non-U.S. customers depends in part on the continued operations of the U.S. Export-Import Bank. Additionally, the size and age of the worldwide commercial aircraft fleet affects the demand for new aircraft and, consequently, for our products. Such factors, in conjunction with evolving economic

Table of Contents

conditions, cause the market in which we operate to be cyclical to varying degrees, thereby affecting our business and operating results.

Legal or regulatory proceedings related to the review of accounting process compliance may result in significant costs and expenses and divert resources from our operations and therefore could have a material adverse effect on our business, financial condition, results of operations or cash flows.

On January 30, 2020, the Company issued a press release regarding an independent review by our audit committee of our accounting process compliance (the “Accounting Review”). As a result of the Accounting Review, the Company determined that it did not comply with its established accounting processes with respect to certain potential contingent liabilities received by the Company after the end of the third quarter of 2019. The Accounting Review is now substantially complete.

After conducting the appropriate accounting processes with respect to the potential contingent liabilities, the Company concluded that it should have recorded an incremental contingent liability of less than $8.0 million for the three month period ending September 26, 2019. We do not believe this amount is material, either quantitatively or qualitatively, to our consolidated financial statements as of and for the three-month period ending September 26, 2019. Although this matter did not result in a material misstatement of the Company’s third quarter 2019 consolidated financial statements or any other previously issued financial statements, the non-compliance led us to conclude that a material weakness in our internal control existed as of December 31, 2019. Additional information on this material weakness is described under Item 9A “Controls and Procedures” of this Annual Report on Form 10-K.

Prior to the Company’s January 30, 2020 announcement, the Company voluntarily reported the Accounting Review to the SEC. The Company has communicated to the SEC that the Accounting Review is substantially complete. In the event the SEC commences an investigation with respect to these matters, the Company intends to cooperate fully.

Two private securities class action lawsuits relating to these matters were filed against the Company, its Chief Executive Officer and former officers in February 2020. There may be additional lawsuits filed, including shareholder derivative actions, purportedly in the name and for the benefit of the Company. The Company intends to vigorously defend the existing lawsuits, and any other related litigation against the Company.

As a result of any legal or regulatory proceedings related to the Accounting Review, we may incur significant professional fees and other costs. If we are unsuccessful in any action related to this matter, we may be required to pay a significant amount of monetary damages that may be in excess of our insurance coverage. The SEC also could impose other sanctions against us or our directors and officers, including injunctions, a cease and desist order, fines and other equitable remedies. In addition, our Board of Directors, management and employees may expend a substantial amount of time on these legal and regulatory proceedings and investigations, diverting resources and attention that would otherwise be directed toward our operations and implementation of our business strategy. Any of these events could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our management has concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2019, and that we have a material weakness in our internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in a material misstatement in our financial statements or a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

In connection with the Accounting Review discussed herein, the Company concluded that a material weakness existed in its internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. See Item 9A “Controls and Procedures” of this Annual Report on Form 10-K.

Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and the related SEC rules requires management to assess the effectiveness of the design and operation of our disclosure controls and procedures and to include in this Annual Report on Form 10-K a management report on that assessment. An evaluation was performed under the supervision and with the participation of our audit committee and management, including our President and Chief Executive Officer (principal executive officer) and Senior Vice-President and Chief Financial Officer (principal financial officer), on the design and operating effectiveness of our disclosure controls and procedures, and based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2019, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of a material weakness we identified with respect to our internal control over financial reporting.

Table of Contents

As a result, we have taken steps to improve our internal control over financial reporting and our disclosure controls and procedures, including through (i) management changes, (ii) enhanced training, and , and (iii) validation regarding the application of existing policies and procedures, including direct and timely confirmation and consideration of outstanding claims by key customers. Although we have taken such steps, there can be no assurance that we will be successful in making the improvements necessary to remediate our material weakness or disclosure control and procedure ineffectiveness, that we will do so in a timely manner, or that we will not identify additional control deficiencies or material weaknesses in the future. We expect the remediation plan to extend over multiple financial reporting periods in 2020. If we are not successful in making the improvements, or if we have additional control deficiencies, we may not be able to report our financial results accurately, prevent fraud, or file our periodic reports with the SEC in a timely manner, which may expose us to legal and regulatory liabilities and may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our common stock. In addition, implementing any appropriate changes to our internal controls may distract our officers and employees and/or entail substantial costs.

The Company's results could be adversely affected by economic and geopolitical considerations.

The commercial airline industry is impacted by the strength of the global economy and the geopolitical events around the world. Possible exogenous shocks such as expanding conflicts or political unrest in the Middle East or Asia, renewed terrorist attacks against the industry, or pandemic health crises (such as the Coronavirus or viruses similar to SARs and MERS) have the potential to cause precipitous declines in air traffic. Any protracted economic slump, adverse credit market conditions, future terrorist attacks, war, or health concerns could cause airlines to cancel or delay the purchase of additional new aircraft, which could result in a deterioration of commercial airplane backlogs. If demand for new aircraft decreases, there would likely be a decrease in demand for our commercial aircraft products, and our business, financial condition, and results of operations could be materially adversely affected.

Changes in the United Kingdom’s economic and other relationships with the European Union could adversely affect the Company. There continues to be substantial uncertainty regarding the economic impact of the United Kingdom's departure from the European Union ("EU") on January 31, 2020 (referred to as "Brexit"). The UK and EU are currently in a transition (implementation) period that is due to end on December 31, 2020. The ultimate effects of Brexit on the Company (currently, and as expanded upon completion of the Bombardier Acquisition) are difficult to predict, but because the Company currently operates and conducts business in the United Kingdom and in Europe, potential adverse consequences of Brexit such as global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between the UK and other countries and increased regulatory complexities could have a negative impact on our business, financial condition, and results of operations. Adverse economic conditions may decrease our customers' demand for our products and services or impair the ability of our customers to pay for products and services they have purchased. As a result, our sales could decrease and reserves for our credit losses and write-offs of receivables may increase. In addition, Brexit could result in legal uncertainty and potentially divergent national laws and regulations as new legal relationships between the United Kingdom and the European Union are established. The ultimate effects of Brexit on the Company will also depend on the terms of any agreements the United Kingdom and the European Union make to retain access to each other’s respective markets either during a transitional period or more permanently.

We are pursuing growth opportunities in a number of newly developed and emerging markets. These investments may expose us to heightened risks of economic, geopolitical, or other events, including governmental takeover (i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange or import controls, disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of hostilities, and acts of terrorism, each of which could have a substantial adverse effect on our financial condition and results of operations. Further, the U.S. government, other governments, and international organizations could impose additional sanctions that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates.

We face risks as we work to successfully execute on new or maturing programs.

New or maturing programs with new technologies typically carry risks associated with design responsibility, development of new production tools, hiring and training of qualified personnel, increased capital and funding commitments, ability to meet customer specifications, delivery schedules, and unique contractual requirements, supplier performance, ability of the customer to meet its contractual obligations to us, and our ability to accurately estimate costs associated with such programs. In addition, any new or maturing aircraft program may not generate sufficient demand or may experience technological problems or significant delays in the regulatory certification or manufacturing and delivery schedule. If we were unable to perform our obligations under new or maturing programs to the customer’s satisfaction or manufacture products at our estimated costs, if we were to experience unexpected fluctuations in raw material prices or supplier problems leading to cost overruns, if we were unable to successfully perform under revised design and manufacturing plans or successfully resolve claims and assertions, or if a new or maturing program in which we had made a significant investment was terminated or experienced weak demand, delays or technological problems could result and our business, financial condition, and results of operations could be materially adversely affected. Some of these risks have affected our maturing programs to the extent that we have recorded significant forward losses and maintain

Table of Contents

certain of our maturing programs at zero or low margins due to our inability to overcome the effects of these risks. We continue to face similar risks as well as the potential for default, quality problems, or inability to meet weight requirements and these could result in continued zero or low margins or additional forward losses, and the risk of having to write-off additional inventory if it were deemed to be unrecoverable over the life of the program. In addition, beginning new work on existing programs also carries risks associated with the transfer of technology, knowledge, and tooling.

In order to perform on new or maturing programs we may be required to construct or acquire new facilities requiring additional up-front investment costs. In the case of significant program delays and/or program cancellations, we could be required to bear certain unrecoverable construction and maintenance costs and incur potential impairment charges for the new facilities. Also, we may need to expend additional resources to determine an alternate revenue-generating use for the facilities. Likewise, significant delays in the construction or acquisition of a plant site could impact production schedules.

We use estimates in accounting for revenue and cost for our contracts. Changes in our estimates could adversely affect our future financial performance.

The Company recognizes revenue using the principles of Accounting Standards Codification Topic 606 and estimates revenue and cost for contracts that span a period of multiple years. This method of accounting requires judgment on a number of underlying assumptions to develop our estimates such as favorable trends in volume, learning curve efficiencies, and future pricing from suppliers that reduce our production costs. However, several factors may cause the costs we incur in fulfilling these contracts to vary substantially from our original estimates such as technical problems, delivery reductions, materials shortages, supplier difficulties, and multiple other events. Other than certain increases in raw material costs that can generally be passed on to our customers, in most instances we must fully absorb cost overruns. Due to the significant length of time over which some revenue streams are generated, the variability of future period estimated revenue and cost may be adversely affected if circumstances or underlying assumptions change. If our estimated costs exceed our estimated revenues under a fixed-price contract, we will be required to recognize a forward loss on the affected program, which could have a material adverse effect on our results of operations. The risk particularly applies to products such as the B787 and A350, in that our performance at the contracted price depends on our being able to achieve production cost reductions as we gain production experience.

Further, some of our long-term supply agreements, such as the Sustaining Agreement and the B787 Agreement, provide for the re-negotiation of established pricing terms at specified times in the future. If such negotiations result in costs that exceed our revenue under a fixed-price contract, or operating margins that our lower than our current margins, we may need to recognize a forward loss on the affected program, which could have a material adverse effect on our results of operations.

Additionally, variability of future period estimated revenue and cost may result in recording additional valuation allowances against future deferred tax assets, which could adversely affect our future financial performance.

Prolonged periods of inflation where we do not have adequate inflation protections in our customer contracts could have a material adverse effect on our results of operations.

A majority of our sales are conducted pursuant to long-term contracts that set fixed unit prices. Certain, but not all, of these contracts provide for price adjustments for inflation or abnormal escalation. Although we have attempted to minimize the effect of inflation on our business through contractual protections, the presence of longer pricing periods within our contracts increases the likelihood that there will be sustained or higher than anticipated increases in costs of labor or material. Furthermore, if one of the raw materials on which we are dependent (e.g. aluminum, titanium, or composite material) were to experience an isolated price increase without inflationary impacts on the broader economy, we may not be entitled to inflation protection under certain of our contracts. If our contractual protections do not adequately protect us in the context of substantial cost increases, it could have a material adverse effect on our results of operations.

Our business could be materially adversely affected by product warranty obligations or defective product claims.

We are exposed to liabilities that are unique to the products and services we provide. Our operations expose us to potential liabilities for warranty or other claims with respect to aircraft components that have been designed, manufactured, or serviced by us or our suppliers. We maintain insurance for certain risks. The amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs. Material obligations in excess of our insurance coverage (or other third party indemnification) could have a material adverse effect on our business, financial condition, and results of operations.

In addition, if our products are found to be defective and lacking in quality, or if one of our products causes an accident, our reputation could be damaged and our ability to retain and attract customers could be materially adversely affected.

In order to be successful, we must attract, retain, train, motivate, develop and transition key employees, and failure to do so could harm our business.

Table of Contents

In order to be successful, we must attract, retain, train, motivate, develop, and transition qualified executives and other key employees, including those in managerial, manufacturing, and engineering positions. Competition for experienced employees in the aerospace industry, and in particular in Wichita, Kansas, where the majority of our manufacturing and executive offices are located, is intense. The failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. Further, changes in our management team may be disruptive to our business and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations.

Further, in January 2020, the Company announced significant workforce reductions to assist with alleviating costs relating to B737 MAX production. The Company’s ability to ramp up in rate on the B737 MAX program after re-certification will depend, in part, on the Company’s ability to hire key employees to fill any gaps left by the workforce reductions. If the Company is unable to hire such key employees, B737 MAX production could be adversely impacted.

In addition, the Company’s operations and strategy require that we employ a critical mass of highly skilled employees with industry experience and engineering, technical, or mechanical skills. As the Company experiences an increase in retirements, the level of skill replacing our experienced workers is being impacted due to the availability of skilled labor in the market and low unemployment rates. Talent is being replaced with less experienced talent and the organization is having to develop internal resources to meet the talent gap. We continue to work with learning institutions to develop programs to attract and train new talent. Our inability to attract and retain skilled employees may adversely impact our ability to meet our customers’ expectations, the cost and schedule of development projects, and the cost and efficiency of existing operations.

The profitability of certain programs depends significantly on the assumptions surrounding satisfactory settlement of customer claims and assertions.

For certain of our programs, we regularly commence work or incorporate customer requested changes prior to negotiating pricing terms for engineering work or the product that has been modified. We typically have the contractual right to negotiate pricing for customer directed changes. In those cases, we assert to our customers our contractual rights to obtain the additional revenue or cost reimbursement we expect to receive upon finalizing pricing terms. An expected recovery value of these assertions is incorporated into our contract profitability estimates. Our inability to recover these expected values, among other factors, could result in the recognition of a forward loss on these programs and could have a material adverse effect on our results of operations.

The Company’s proposed and future acquisitions expose us to risks, including the risk that we may not be able to successfully integrate these businesses or achieve expected operating synergies.

The Company is currently pursuing the following acquisitions: (i) on May 1, 2018, the Company and its wholly-owned subsidiary Spirit AeroSystems Belgium Holdings BVBA (“Spirit Belgium”) entered into a definitive 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”), subject to certain customary closing adjustments, for cash consideration (as amended) of $420 million (the “Asco Acquisition”); and (ii) on October 31, 2019, Spirit and Spirit AeroSystems Global Holdings Limited (“Spirit UK”), wholly owned subsidiaries of the Company, entered into a definitive agreement with Bombardier Inc., Bombardier Aerospace UK Limited, Bombardier Finance Inc., and Bombardier Services Corporation pursuant to which, subject to the satisfaction or waiver of certain conditions, Spirit UK will acquire the outstanding equity of Short Brothers plc and Bombardier Aerospace North Africa SAS, and Spirit will acquire substantially all the assets of the maintenance, repair and overhaul business in Dallas, Texas (collectively, the “Bombardier Acquired Businesses”) for cash consideration of $500 million (the “Bombardier Acquisition”).

The Asco Acquisition, the Bombardier Acquisition, and any future acquisitions are subject to numerous risks and uncertainties, including, but not limited to, the following:


•	we may not obtain required regulatory approvals or receipt of regulatory approvals may take longer than expected, regulators may impose conditions to the proposed acquisitions that are not presently anticipated or cannot be met;


•	conditions precedent to the proposed acquisitions may not be fulfilled in a timely manner or at all; and


•	unforeseen events and events beyond our control.

We have incurred and expect to incur transaction and acquisition-related costs associated with these acquisitions. These, as well as other unanticipated costs and expenses, could have an impact on our financial condition and operating results. Combining our businesses may be more difficult, costly, or time consuming than expected. In addition, events outside of our control, including changes in regulation and laws as well as economic trends, could adversely affect our ability to realize the expected benefits from the acquisition. Further, the Asco Acquisition and the Bombardier Acquisition are not subject to financing contingencies. To the extent the Company is unable to raise additional financing to fund the acquisitions, or negotiate alternative arrangements, the Company's ability to consummate the acquisitions could be hindered. In addition, the need to fund these acquisitions and related expenses may adversely affect our liquidity.

Table of Contents

The success of the proposed acquisitions will depend on, among other things, our ability to realize the anticipated benefits and cost savings from combining our and Asco's and Bombardier's businesses in a manner that facilitates growth opportunities and realizes anticipated synergies and cost savings. These anticipated benefits and cost savings may not be realized fully or at all, or may take longer to realize than expected or could have other adverse effects that we do not currently foresee. Further, the integration of these companies involves a number of risks, including, but not limited to the diversion of management’s attention from the management of daily operations to the integration of operations, difficulties in the assimilation of different cultures and practices, as well as in the assimilation of geographically dispersed operations and personnel, who may speak different languages, difficulties in the integration of departments, systems (including accounting, production, ERP, and IT systems), technologies, books and records and procedures, as well as in maintaining uniform standards, controls (including internal accounting controls), procedures, and policies and compliance with the Foreign Corrupt Practices Act, the U.K. Bribery Act and other applicable anti-bribery laws.

As part of the Bombardier Acquisition, the Company has agreed to assume net pension liabilities of approximately $300 million as reflected at the date of the Purchase Agreement. The downgrades to the Company’s credit ratings and liquidity pressures referenced herein may result in the pension liabilities being recalculated prior to the closing of the Bombardier Acquisition. If the liabilities are recalculated, the assumed liability amount could increase.

We do not own most of the intellectual property and tooling used in our business.

Our business depends on using certain intellectual property and tooling that we have rights to use under license grants from our customers. If these licenses are terminated due to a default or otherwise, our business may be materially affected. In addition, we license some of the intellectual property needed for performance under some of our supply contracts from our customers under those supply agreements. We must honor our contractual commitments to our customers related to intellectual property and comply with infringement laws governing our use of intellectual property. In the event we obtain new business from new or existing customers, we will need to pay particular attention to these contractual commitments and any other restrictions on our use of intellectual property to make sure that we will not be using intellectual property improperly in the performance of such new business. In the event we use any such intellectual property improperly, we could be subject to an infringement or misappropriation claim by the owner or licensee of such intellectual property.

In the future, our entry into new markets may require obtaining additional license grants from our customers. If we are unable to negotiate additional license rights on acceptable terms (or at all) from these customers, our ability to enter new markets may be restricted. In addition, we may be subject to restrictions in future licenses granted to us that may materially restrict our use of third party intellectual property.

Our success depends in part on the success of our research and development initiatives.

In order for us to remain competitive, we will need to expend significant capital to research and develop technologies, purchase new equipment and machines, or to train our employees in the new methods of production and service. We spent $54.5 million on research and development during the twelve months ended December 31, 2019. Our expenditures on our research and development efforts may not create any new sales opportunities or increases in productivity that are commensurate with the level of resources invested.

We are in the process of developing specific technologies and capabilities in pursuit of new business and in anticipation of customers going forward with new programs. If any such programs do not go forward or are not successful, or if we are unable to generate sufficient new business, we may be unable to recover the costs incurred in anticipation of such programs or business and our profitability and revenues may be materially adversely affected.

While the Company intends to continue committing financial resources and effort to the development of innovative new technologies, any strain on the Company’s liquidity, such as the strain caused by the B737 MAX production suspension and lower 2020 production rate, will reduce the Company’s ability to expend capital to develop such technologies.

We could be required to make future contributions to our defined benefit pension and post-retirement benefit plans as a result of adverse changes in interest rates and the capital markets.

Our estimates of liabilities and expenses for pensions and other post-retirement benefits incorporate significant assumptions including the rate used to discount the future estimated liability, the long-term rate of return on plan assets, and several assumptions relating to the employee workforce (salary increases, medical costs, retirement age, and mortality). A dramatic decrease in the fair value of our plan assets resulting from movements in the financial markets or a decrease in discount rates may cause the status of our plans to go from an over-funded status to an under-funded status and result in cash funding requirements to meet any minimum required funding levels. Our results of operations, liquidity, or shareholders’ equity in a particular period could be affected by a decline in the rate of return on plan assets, the rate used to discount the future estimated liability, or changes in employee workforce assumptions.

Table of Contents

We derive a significant portion of our net revenues from direct and indirect sales outside the U.S. and are subject to the risks of doing business in foreign countries.

We derive a significant portion of our revenues from sales by Boeing and Airbus to customers outside the U.S. In addition, for the twelve months ended December 31, 2019, direct sales to our non-U.S. customers accounted for approximately 16% of our net revenues. We expect that our and our customers’ international sales will continue to account for a significant portion of our net revenues for the foreseeable future. As a result, we are subject to risks of doing business internationally, including:


•	changes in regulatory requirements;


•	domestic and foreign government policies, including requirements to expend a portion of program funds locally and governmental industrial cooperation requirements;


•	fluctuations in foreign currency exchange rates;


•	compliance with foreign labor laws, which generally provide for increased notice, severance and consultation requirements compared to U.S. laws;


•	difficulties enforcing intellectual property and contractual rights in certain jurisdictions;


•	the complexity and necessity of using foreign representatives and consultants;


•	uncertainties and restrictions concerning the availability of funding credit or guarantees;


•	tariffs (imposed or threatened) on imports, including tariffs imposed in a retaliatory manner on U.S. exports, embargoes, export controls, and other trade restrictions or barriers;


•	potential or actual withdrawal or modification of international trade agreements;


•	modifications to sanctions imposed on other countries;


•	changes to immigration policies that may present risks to companies that rely on foreign employees or contractors;


•	compliance with antitrust and competition regulations;


•	differences in business practices;


•	the difficulty of management and operation of an enterprise spread over various countries;


•	compliance with a variety of foreign laws, as well as U.S. laws affecting the activities of U.S. companies abroad, including the Foreign Corrupt Practices Act, the U.K. Bribery Act and other applicable anti-bribery laws; and


•	economic and geopolitical developments and conditions, including domestic or international hostilities, acts of terrorism and governmental reactions, inflation, trade relationships, and military and political alliances.

While these factors and the effect of these factors are difficult to predict, adverse developments in one or more of these areas could materially adversely affect our business, financial condition, and results of operations in the future.

The outcome of litigation and of government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could have a material effect on our financial position and results of operations.

We are involved in a number of litigation matters. These claims may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits could have a material impact on our financial position and results of operations. In addition, we are sometimes subject to government inquiries and investigations of our business due, among other things, to the heavily regulated nature of our industry and our participation on government programs. Any such inquiry or investigation could potentially result in an adverse ruling against us, which could have a material impact on our financial position and operating results.

Increases in labor costs, potential labor disputes, and work stoppages at our facilities or the facilities of our suppliers or customers could materially adversely affect our financial performance.

Our financial performance is affected by the availability of qualified personnel and the cost of labor. A majority of our workforce is represented by unions. If our workers were to engage in a strike, work stoppage, or other slowdown, we could experience a significant disruption of our operations, which could cause us to be unable to deliver products to our customers on a timely basis and could result in a breach of our supply agreements. This could result in a loss of business and an increase in our operating expenses, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, our non-unionized labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.

Due to the receipt of occasional government incentives, we have certain commitments to keep our programs in their current locations. This may prevent us from being able to offer our products at prices that are competitive in the marketplace and could have a material adverse effect on our ability to generate new business.

Table of Contents

In addition, many aircraft manufacturers, airlines, and aerospace suppliers have unionized work forces. Any strikes, work stoppages, or slowdowns experienced by aircraft manufacturers, airlines, or aerospace suppliers could reduce our customers’ demand for additional aircraft structures or prevent us from completing production of our aircraft structures.

The U.S. Government is a significant customer of certain of our customers and we and they are subject to specific U.S. Government contracting rules and regulations.

We provide aerostructures to defense aircraft manufacturers ("defense customers"). Our defense customers' businesses, and by extension, our business, is affected by the U.S. Government's continued commitment to programs under contract with our customers. Contracts with the U.S. Government generally permit the government to terminate contracts partially or completely, with or without cause, at any time. An unexpected termination of a significant government contract, a reduction in expenditures by the U.S. Government for aircraft using our products, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts awarded to us, or substantial cost overruns could materially reduce our cash flow and results of operations. We bear the potential risk that the U.S. Government may unilaterally suspend our defense customers or us from new contracts pending the resolution of alleged violations of procurement laws or regulations.

A decline in the U.S. defense budget or change of funding priorities may reduce demand for our defense customers' aircraft and reduce our sales of defense products. The U.S. defense budget has fluctuated in recent years, at times resulting in reduced demand for new aircraft. Changes in military strategy and priorities, or reductions in defense spending, may affect current and future funding of these programs and could reduce the demand for our defense customers' products, and thereby reduce sales of our defense products, which could adversely affect our financial position, results of operations, and cash flows.

Our business may be materially adversely affected if we lose our government, regulatory or industry approvals, if we lose our facility security clearances, if more stringent government regulations are enacted, or if industry oversight is increased.

The FAA prescribes standards and qualification requirements for aerostructures, including virtually all commercial airline and general aviation products, and licenses component repair stations within the U.S. comparable agencies, such as the EASA in Europe, regulate these matters in other countries. If we fail to qualify for or obtain a required license for one of our products or services or lose a qualification or license previously granted, the sale of the subject product or service would be prohibited by law until such license is obtained or renewed and our business, financial condition, and results of operations could be materially adversely affected. In addition, designing new products to meet existing regulatory requirements and retrofitting installed products to comply with new regulatory requirements can be expensive and time consuming.

A facility security clearance (“FCL”) is required for a company to be awarded and perform on classified contracts for the Department of Defense (“DOD”) and certain other agencies of the U.S. Government. If we were to violate the terms and requirements of the NISPOM or any other applicable U.S. Government industrial security regulations, we could lose our FCLs. We cannot give any assurance that we will be able to maintain our FCLs. If for some reason our FCLs is invalidated or terminated, we may not be able to continue to perform under our classified contracts in effect at that time, and we would not be able to enter into new classified contracts, which could adversely affect our revenues.

From time to time, government agencies propose new regulations or changes to existing regulations. These changes or new regulations generally increase the costs of compliance. To the extent the agencies implement regulatory changes, we may incur significant additional costs to achieve compliance.

In addition, certain aircraft repair activities we intend to engage in may require the approval of the aircraft’s OEM. Our inability to obtain OEM approval could materially restrict our ability to perform such aircraft repair activities.

Our business is subject to regulation in the U.S. and internationally.

The manufacturing of our products is subject to numerous federal, state, and foreign governmental regulations. The number of laws and regulations that are being enacted or proposed by various governmental bodies and authorities are increasing. Compliance with these regulations is difficult and expensive. If we fail to adhere, or are alleged to have failed to adhere, to any applicable federal, state, or foreign laws or regulations, or if such laws or regulations negatively affect sales of our products, our business, prospects, results of operations, financial condition, or cash flows may be adversely affected. In addition, our future results could be adversely affected by changes in applicable federal, state, and foreign laws and regulations, or the interpretation or enforcement thereof, including those relating to manufacturing processes, product liability, government contracts, trade rules and customs regulations, intellectual property, consumer laws, privacy laws, as well as accounting standards and taxation requirements (including tax-rate changes, new tax laws, or revised tax law interpretations).

Table of Contents

We are subject to environmental, health, and safety regulations and our ongoing operations may expose us to related liabilities.

Our operations are subject to extensive regulation under environmental, health, and safety laws and regulations in the U.S. and other countries in which we operate. We may be subject to potentially significant fines or penalties, including criminal sanctions, if we fail to comply with these requirements. We have made, and will continue to make, significant capital and other expenditures to comply with these laws and regulations. We cannot predict with certainty what environmental legislation will be enacted in the future or how existing laws will be administered or interpreted. Our operations involve the use of large amounts of hazardous substances and regulated materials and generate many types of wastes, including emissions of hexavalent chromium and volatile organic compounds, and greenhouse gases such as carbon dioxide. Spills and releases of these materials may subject us to clean-up liability for remediation and claims of alleged personal injury, property damage, and damage to natural resources, and we may become obligated to reduce our emissions of hexavalent chromium, volatile organic compounds and/or greenhouse gases. We cannot give any assurance that the aggregate amount of future remediation costs and other environmental liabilities will not be material.

In connection with prior acquisitions, we are indemnified or insured, subject to certain contractual limitations and conditions, for certain clean-up costs and other losses, liabilities, expenses, and claims related to existing environmental conditions on the acquired properties. If indemnification or insurance is not sufficient to cover any potential environmental liability, we may be required to make material expenditures.

In the future, contamination may be discovered at or emanating from our facilities or at off-site locations where we send waste. The remediation of such newly discovered contamination, related claims for personal injury or damages, or the enactment of new laws or a stricter interpretation of existing laws, may require us to make additional expenditures, some of which could be material. See “Business - Regulatory Matters.”

In addition, increased concern over climate change has led to new and proposed legislative and regulatory initiatives. New or revised laws and regulations in this area could directly and indirectly affect the Company, its customers, or its suppliers by increasing production costs or otherwise impacting operations. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by the Company and could have an adverse effect our business, financial condition, and results of operations.

We are subject to regulation of our technical data and goods under U.S. export control laws.

As a manufacturer and exporter of defense and dual-use technical data and commodities, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to, the International Traffic in Arms Regulations, administered by the U.S. Department of State, and the Export Administration Regulations, administered by the U.S. Department of Commerce. Collaborative agreements that we may have with foreign persons, including manufacturers and suppliers, are also subject to U.S. export control laws. In addition, we are subject to trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the U.S. Department of the Treasury.

A determination that we have failed to comply with one or more of these export controls or trade sanctions could result in civil or criminal penalties, including the imposition of fines upon us as well as the denial of export privileges and debarment from participation in U.S. government contracts. Additionally, restrictions may be placed on the export of technical data and goods in the future as a result of changing geopolitical conditions. Any one or more of such sanctions could have a material adverse effect on our business, financial condition, and results of operations.

We are required to comply with “conflict minerals” rules promulgated by the SEC, which impose costs on us, may make our supply chain more complex, and could adversely impact our business.

We are subject to annual due diligence, disclosure, and reporting requirements as a company that manufactures or contracts to manufacture products that contain certain minerals and metals known as “conflict minerals.” We have, and expect to continue to, incur additional costs and expenses, in order to comply with these rules, including for due diligence to determine whether conflict minerals are necessary to the functionality or production of any of our products and, if so, to verify the sources of such conflict minerals; and to implement any changes we deem necessary to our products, processes, or sources of supply as a result of such diligence and verification activities. Compliance with these rules could adversely affect the sourcing, supply, and pricing of materials used in certain of our products. As there may be only a limited number of suppliers offering conflict minerals from sources outside of the Democratic Republic of Congo or adjoining countries, or that have been independently verified as not funding armed conflict in those countries, we cannot assure that we will be able to obtain such verified minerals from such suppliers in sufficient quantities or at competitive prices. Since our supply chain is complex, we may not ultimately be able to sufficiently verify the origin of the conflict minerals used in our products through the due diligence procedures that we implement, which may adversely affect our reputation with our customers, stockholders, and other stakeholders. In such event, we may also face difficulties in satisfying customers who require that all of the components in our products be certified as “conflict free.” If we are not able to

Table of Contents

meet such requirements, customers may choose to disqualify us as a supplier, which may require us to write off inventory that cannot be sold. Any one or a combination of these factors could harm our business, reduce market demand for our products, and adversely affect our profit margins, net sales, and overall financial results. We may face similar risks in connection with any other regulations focusing on social responsibility or ethical sourcing that may be adopted in the future.

We could be materially adversely affected by high fuel prices.

Due to the competitive nature of the airline industry, airlines are often unable to pass on increased fuel prices to customers by increasing fares. Fluctuations in the global supply of crude oil and the possibility of changes in government policy on jet fuel production, transportation, and marketing make it difficult to predict the future availability and price of jet fuel. In the event there is an outbreak or escalation of hostilities or other conflicts, or significant disruptions in oil production or delivery in oil-producing areas or elsewhere, there could be reductions in the production or importation of crude oil and significant increases in the cost of fuel. If there were major reductions in the availability of jet fuel or significant increases in its cost, the airline industry and, as a result, our business, could be materially adversely affected.

Our operations could be negatively impacted by service interruptions, data corruption or misuse, cyber-based attacks, or network security breaches.

We rely on information technology networks and systems to manage and support a variety of business activities, including procurement and supply chain, engineering support, and manufacturing. These networks and systems, some of which are managed by third-parties, are susceptible to damage, disruptions, or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or insiders, telecommunication failures, user errors, or catastrophic events. If these networks and systems suffer severe damage, disruption, or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our manufacturing process could be disrupted, resulting in late deliveries or even no deliveries if there is a total shutdown. This could have a material adverse effect on our reputation and we could face financial losses.

The General Data Protection Regulation (“GDPR”) went into effect in the EU on May 25, 2018. The GDPR creates a range of compliance obligations applicable to the collection, use, retention, security, processing, and transfer of personally identifiable information of EU residents. Violations of the GDPR may result in significant fines and sanctions. Any failure, or perceived failure, by us to comply with the GDPR, or any other privacy, data protection, information security, or consumer protection-related privacy laws and regulations could result in financial losses and have an adverse effect on our reputation.

Further, we routinely experience cyber security threats and attempts to gain access to sensitive information, as do our customers, suppliers, and other third parties with which we work. We have established threat detection, monitoring, and mitigation processes and procedures and are continually exploring ways to improve these processes and procedures. However, we cannot provide assurance that these processes and procedures will be sufficient to prevent cyber security threats from materializing. If threats do materialize, we could experience significant financial or information losses and/or reputational harm. If we are unable to protect sensitive or confidential information from these threats, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures and, as a result, our present and future business could be negatively impacted.

We are subject to financial maintenance covenants in our credit agreement and any failure to comply with such covenants, or obtain waivers in the event of non-compliance, could result in acceleration of outstanding indebtedness. Any additional issues related to B737 MAX production could cause us to breach our financial maintenance covenants.

As of December 31, 2019, we had total debt of $3,034.3 million, including $438.5 million of borrowings under our term loan facility, $800.0 million under our revolving credit facility, $1,589.3 million of bonds, and $206.5 million of finance lease and other obligations. In addition to our debt, as of December 31, 2019, we had $21.5 million of letters of guarantee outstanding.

On February 24, 2020, we entered into an amendment (the “2020 Amendment”) to our 2018 Credit Agreement (as defined under Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, below). Prior to entering into the 2020 Amendment, the 2018 Credit Agreement required the Company to maintain as of the end of each fiscal quarter a total leverage ratio not exceeding 3.50:1.00, and an interest coverage ratio that is not less than 4.00:1.00, each based on a test period that is the most recent four quarters then ended. Given the production suspension and 2020 production rate for the B737 MAX, absent entering into 2020 Amendment, the Company was expected to breach the total leverage ratio beginning with the quarter ending March 31, 2020 continuing into 2021. The 2020 Amendment waived or modified the testing of the ratios set forth in the 2018 Credit Agreement until the commencement of the second fiscal quarter of 2021 (the “Reversion Date”) and put the following financial ratios and tests in place for such time period:


•	Senior Secured Leverage Ratio: Commencing with the first fiscal quarter of 2020, the ratio of senior secured debt to consolidated EBITDA over the last twelve months shall not, as of the end of the applicable fiscal quarter, be greater than:

Table of Contents

(i) 3.00:1.00, with respect to the first fiscal quarter of 2020; (ii) 4.25:1.00, with respect to the second fiscal quarter of 2020; (iii) 5.50:1.00, with respect to the third fiscal quarter of 2020; (iv) 5.00:1.00, with respect to the fourth fiscal quarter of 2020; and (v) 3.00:1.00, with respect to the first fiscal quarter of 2021.

•

Interest Coverage Ratio: Commencing with the first fiscal quarter of 2020, the interest coverage ratio as of the end of the applicable fiscal quarter shall not be less than: (i) 4.00:1.00, with respect to the first fiscal quarter of 2020; (ii) 3.75:1.00, with respect to the second fiscal quarter of 2020; (iii) 2.50:1.00, with respect to the third fiscal quarter of 2020; (iv) 2.25:1.00, with respect to the fourth fiscal quarter of 2020; and (v) 3.75:1.00, with respect to the first fiscal quarter of 2021.

•

Minimum Liquidity: As of the end of each fiscal month, commencing with the first fiscal month ending after entering into the 2020 Amendment, the Company shall have minimum liquidity of not less than: (i) $1,000 million through, and including, the last fiscal month ending in the third fiscal quarter of 2020; (ii) $850 million, as of the end of each fiscal month ending in the fourth fiscal quarter of 2020; and (iii) $750 million, as of the end of each fiscal month ending in the first fiscal quarter of 2021; provided, however, that if the Company receives proceeds of at least $750 million from the issuance of indebtedness before the Reversion Date, the minimum liquidity requirement shall remain at $1,000 million. Liquidity includes cash and cash equivalents and amounts available to be drawn under the Revolver and the 2020 DDTL (as defined below).

Upon the Reversion Date, the ratios will revert back to the ratios in the 2018 Credit Agreement except that the total leverage ratio will be 4.00:1.00, with respect to the second fiscal quarter of 2021, returning to 3.50:1:00 thereafter. The Senior Secured Leverage Ratio and minimum liquidity covenants will no longer be applicable following the Reversion Date. The Credit Agreement is further described under Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, below.

There can be no assurance that we will be able to comply with the financial and other covenants in the 2018 Credit Agreement as amended by the 2020 Amendment (the "Credit Agreement"). Among other things, any delays or adverse changes to the B737 MAX production schedule or other program, on which we rely to generate revenue, or difficulties in managing our cost structure to take into account changes in production schedules to accommodate a ramp-up in production, could significantly adversely affect our operating income and materially adversely affect our liquidity. The need to fund our pending acquisitions and associated expenses could also adversely affect our liquidity. Our failure to comply with these covenants could cause us to be unable to borrow under the agreement and may constitute an event of default that, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the agreement, which would require us to pay all amounts outstanding. As of December 31, 2019, we had $1,239.7 million in indebtedness outstanding under the Credit Agreement. The occurrence of an event of default, or the acceleration of indebtedness under the Credit Agreement, could result in an event of default under other indebtedness we have outstanding as a result of cross-acceleration or cross default provisions, which would also entitle the creditors under those instruments to seek remedies, including requiring us to pay all amounts outstanding. There can be no assurance, in light of the B737 MAX grounding and resulting impacts on demand for the aircraft that, absent new debt or equity financing, the Company would have the funds to repay indebtedness that becomes due as a result of acceleration of the maturity in the future. Failure to maintain compliance with these covenants could (absent a further amendment or waiver) have a material adverse effect on our financial position, operations, and solvency, and could adversely affect the market price for our common stock and our ability to obtain financing in the future.

The 2020 DDTL is subject to substantially the same financial and other covenants as the Credit Agreement, except with respect to any covenants or events of default relating to security.

A decline in the Company’s financial performance or outlook, or the financial markets generally, could negatively impact the Company’s access to the global capital markets, reduce the Company’s liquidity and increase its borrowing costs.

We may periodically need to obtain additional financing in order to meet our debt obligations as they come due, to support our operations and/or to make acquisitions. Our access to the debt capital markets and the cost of borrowings are affected by a number of factors including market conditions and the strength of our credit ratings. A decline in the Company’s financial performance or outlook due to internal or external factors, such as the B737 MAX grounding, could affect the Company’s access to, and the availability or cost of financing on acceptable terms and conditions. There can be no assurance that the Company will have access to the global capital market on terms the Company finds acceptable. Limitations on the Company’s ability to access the global capital markets, a reduction in the Company’s liquidity or an increase in borrowing costs could materially and adversely affect the Company’s ability to maintain or grow its business, which in turn may adversely affect its financial condition and results of operations.

Our debt could adversely affect our financial condition and our ability to operate our business. The terms of our Credit Agreement impose significant operating and financial restrictions on our company and our subsidiaries, which could also adversely affect our operating flexibility and put us at a competitive disadvantage by preventing us from capitalizing on business opportunities.

Table of Contents

As of December 31, 2019, we had total debt of $3,034.3 million, including $1,238.5 million of borrowings under our Credit Agreement, $1,589.3 million of long-term bonds, $147.1 million of finance lease obligations, and approximately $59.4 million in other debt obligations. In addition to our debt, as of December 31, 2019, we had $21.5 million of letters of credit and letters of guarantee outstanding.

The terms of our Credit Agreement impose significant operating and financial restrictions on us, which limit our ability, among other things, to:


•	incur additional debt or issue preferred stock with certain terms;


•	pay dividends or make distributions to our stockholders over certain amounts;


•	repurchase or redeem our capital stock;


•	make investments;


•	incur liens;


•	enter into transactions with our stockholders and affiliates;


•	sell certain assets;


•	acquire the assets of, or merge or consolidate with, other companies (the Asco Acquisition and the Bombardier Acquisition are permitted thereunder);


•	incur restrictions on the ability of our subsidiaries to make distributions or transfer assets to us; and


•	consider strategic transactions.

These restrictions could have consequences, including the following:


•	making it more difficult for us to satisfy our obligations with respect to our debt;


•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, strategic acquisitions or other general corporate requirements;


•	requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;


•	increasing our vulnerability to general adverse economic and industry conditions;


•	limiting our financial flexibility in planning for and reacting to changes in the industry in which we compete;


•	placing us at a disadvantage compared to other, less leveraged competitors;


•	having a material adverse effect on us if we fail to comply with the covenants in the Credit Agreement or in the indentures governing our long-term bonds or in the instruments governing our other debt; and


•	increasing our cost of borrowing.

The terms of our Credit Agreement became significantly more restrictive as a result of the 2020 Amendment. We cannot assure you that we will be able to maintain compliance with the covenants in the agreements governing our indebtedness in the future or, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

In addition, despite the restrictions and limitations described above, subject to the limits contained in the agreements governing our indebtedness, we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. The terms of any future indebtedness we may incur could include more restrictive covenants. If we incur additional debt, the risks related to our high level of debt could intensify.

In addition, if we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital. We cannot provide assurance that we could affect any of these actions on a timely basis, on commercially reasonable terms or at all, or that these actions would be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from effecting certain or any of these alternatives.

Any reduction in our credit ratings could limit the Company’s ability to obtain future financing, increase its borrowing costs, increase the pricing of its credit facilities, adversely affect the market price of its securities, or otherwise impair its business, financial condition, and results of operations.

As of December 31, 2019, our corporate credit ratings were BBB- by Standard & Poor’s Global Ratings (“S&P”), and Baa3 by Moody’s Investors Service, Inc. (“Moody’s”). On January 13, 2020, Moody’s downgraded the Company’s credit rating from Baa3 to Ba2, and the Company continues to be under review for a possible downgrade. On January 31, 2020, S&P downgraded the Company’s credit rating from BBB- to BB.

The ratings reflect the agencies’ assessment of our ability to pay interest and principal on our debt securities and credit agreements. A rating is not a recommendation to purchase, sell, or hold securities. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be considered independently of all other ratings. Lower ratings would typically result in higher interest costs of debt securities when they are sold, could make it more difficult to issue future debt securities, could require us to provide creditors with more restrictive covenants, which would limit our flexibility and ability to pay dividends and may require us to

Table of Contents

pledge additional collateral under our credit facility. Any downgrade in our credit ratings could thus have a material adverse effect on our business or financial condition.

Our delayed draw term loan facility has a short maturity and as a result only potentially would provide liquidity for a brief period.

The 2020 DDTL is intended to function as a short-term liquidity facility, if needed. The 2020 DDTL is available to be drawn until August 15, 2020, and matures and shall be repaid in full (if drawn) on the earlier to occur of (a) September 15, 2020 and (b) the date that is 45 days after the date on which the Federal Aviation Administration re-certifies the B737 MAX program. The commitments and loans under the 2020 DDTL are subject to mandatory reduction or prepayment, as applicable, with 100% of the net cash proceeds from issuances of indebtedness and equity interests, subject to certain exceptions. As a result, if Spirit receives net cash proceeds from issuances of indebtedness or equity that exceed the amount of the 2020 DDTL, the commitments under that facility will be canceled and any amounts outstanding prepaid.

We may sell more equity and reduce your ownership in Spirit Holdings.

Our business plan may require the investment of new capital, which we may raise by issuing additional equity (including equity interests that may have a preference over shares of our Common Stock). However, this capital may not be available at all, or when needed, or upon terms and conditions favorable to us. The issuance of additional equity in Spirit Holdings may result in significant dilution of shares of our Common Stock. We may issue additional equity in connection with or to finance acquisitions and to enhance our liquidity in connection to the B737 MAX grounding. Further, our subsidiaries could issue securities in the future to persons or entities (including our affiliates) other than us or another subsidiary. This could materially adversely affect your investment in us because it would dilute your indirect ownership interest in our subsidiaries.

Spirit Holdings’ certificate of incorporation and by-laws and our supply agreements with Boeing contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

Provisions of Spirit Holdings’ certificate of incorporation and by-laws may discourage, delay, or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our current board of directors. These provisions include:


•	advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and


•	the authority of the board of directors to issue, without stockholder approval, up to 10 million shares of preferred stock with such terms as the board of directors may determine.

In addition, our supply agreements with Boeing include provisions giving Boeing the ability to terminate the agreements in the event any of certain disqualified persons acquire a majority of Spirit’s direct or indirect voting power or all or substantially all of Spirit’s assets. See “Business - Our Relationship with Boeing.”

Item 1B. Unresolved Staff Comments

None.

Item 2. Significant Properties

Table of Contents

The location, primary use, approximate square footage and ownership status of our principal properties as of December 31, 2019 are set forth below:



Location	Primary Use	Approximate Square Footage	Owned/Leased
United States
Wichita, Kansas⁽¹⁾	Primary Manufacturing	12.8 million	Owned/Leased
	Facility/Offices/Warehouse
Tulsa, Oklahoma	Manufacturing Facility	1.73 million	Leased
McAlester, Oklahoma	Manufacturing Facility	139,000	Owned
Kinston, North Carolina	Primary Manufacturing/Office/Warehouse	851,000	Leased
San Antonio, Texas	Manufacturing/Warehouse	320,000	Leased
United Kingdom
Prestwick, Scotland	Manufacturing Facility	935,000	Owned
Malaysia
Subang, Malaysia	Manufacturing	386,000	Owned/Leased
France
Saint-Nazaire, France	Primary Manufacturing/Office	58,800	Leased

_______________________________________


(1)	88% of the Wichita facility is owned.

Our physical assets consist of 17.2 million square feet of building space located on 1,349 acres in eight facilities. We produce our fuselage systems and propulsion systems from our primary manufacturing facility located in Wichita, Kansas with some fuselage work done in our Kinston, North Carolina; Saint Nazaire, France; and Subang, Malaysia facilities. We produce wing systems in our manufacturing facilities in Tulsa, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; and Subang, Malaysia. In addition to these sites, we have a facility located in McAlester, Oklahoma that supplies machined parts and sub-assemblies to the Wichita and Tulsa facilities, and is now offering services to third parties as part of our focus on leveraging our fabrication and assembly expertise. In July 2019 we leased a facility in San Antonio, Texas from Advanced Integration Technology which specializes in sheet metal fabrication, machining, metal finishing and kitting.

The Wichita facility, which includes Spirit's corporate offices, is comprised of 650 acres, 8.0 million square feet of manufacturing space, 1.8 million square feet of offices and laboratories for the engineering and design group and 3.0 million square feet for support functions and warehouses. A total of 568,000 square feet are currently vacant, with 280,000 square feet of that planned to support increases in rates across programs and the expansion of fabrication and assembly work. Two new facilities were constructed in Wichita in 2019. The first is the Global Digital Logistics Center, a 170,000 square foot automated warehouse that was completed in November 2019. The second is the Northeast Manufacturing Facility, a 150,000 square foot manufacturing building that houses the B767 section 41 program. The Wichita site has access to transportation by rail, road, and air via the runways of McConnell Air Force Base. Additionally, a 6,000 square foot lease commenced in January 2019 on the Wichita State University (WSU) campus to establish an innovative relationship between Spirit AeroSystems and WSU through the National Institute for Aviation Research and the WSU Campus of Applied Sciences and Technology. The three areas of strategic focus are joint strategic research projects, applied learning opportunities for WSU students, and improved workforce training services to meet the growing demands of the aerospace industry. Lastly, Spirit AeroSystems purchased two buildings from Air Capital Flight Line in December 2019. They include a 106,000 square foot office building to be used as a Defense headquarters and a 140,000 square foot building to be used as a Research & Technology Lab. Included in the purchase is 19.85 acres.

The Tulsa facility consists of 1.73 million square feet of building space set on 147 acres. The Tulsa plant is located five miles from an international shipping port (Port of Catoosa) and is located next to the Tulsa International Airport. Triumph currently subleases 78,000 square feet of the Tulsa plant for manufacturing purposes. The sublease includes 66,000 square feet of manufacturing space and 12,000 square feet of office space. The McAlester site, which manufactures parts and sub-assemblies, consists of 139,000 square feet of building space on 90 acres.

The Prestwick facility consists of 935,000 square feet of building space, comprised of 424,000 square feet of manufacturing space, 255,000 square feet of office space, and 256,000 square feet of warehouse/support space. This facility is set on 93 acres. The Aerospace Innovation Center, a new 70,000 square foot facility, is scheduled for completion in late September 2020. The

Table of Contents

Prestwick plant is located within close proximity to the motorway network that provides access between England and continental Europe. It is also easily accessible by air (at Prestwick International Airport) or by sea. A portion of the Prestwick facility is leased to the Regional Aircraft division of BAE Systems and certain other tenants.

The Malaysian manufacturing plant is located at the Malaysia International Aerospace Center in Subang. The 386,000 square foot leased facility is set on 45 acres and is centrally located with easy access to Kuala Lumpur, as well as nearby ports and airports. The facility assembles composite panels for wing components. A new 57,000 square foot warehouse was constructed in June 2018 to accommodate the need for more manufacturing space in the facility.

The Wichita and Tulsa manufacturing facilities have significant scale to accommodate the very large structures that are manufactured there, including, in Wichita, entire fuselages. Three of the U.S. facilities are in close proximity, with approximately 175 miles between Wichita and Tulsa and 90 miles between Tulsa and McAlester. Currently, these U.S. facilities utilize approximately 95% of the available building space.

The Kinston, North Carolina facility supports the manufacturing of composite panels and wing components. The primary manufacturing site and off-site leased spaces total 318 acres and 851,000 square feet. In addition to the primary manufacturing facility, this includes three additional buildings leased from the North Carolina Global Transpark Authority: a 27,800 square foot warehouse/office supporting receiving needs, a 26,400 square foot warehouse providing tooling storage, and a 121,000 square foot manufacturing facility supporting light manufacturing. A new 11,000 square foot Trim & Drill expansion facility was completed in November 2018 in support of the A350 XWB program.

The Saint-Nazaire, France site was built on 6.25 acres and totals 58,800 square feet. This facility receives center fuselage frame sections for the Airbus A350 XWB from the facility in Kinston, North Carolina. Sections designed and manufactured in North Carolina are shipped across the Atlantic, received in Saint-Nazaire, and assembled before being transported to Airbus.

The San Antonio, Texas site is located within one mile of the San Antonio International Airport. The 320,000 square foot site specializes in sheet metal fabrication, machining, minor assembly, and chemical processing. Parts for several of Spirit's programs, including the B737 and the B787 are manufactured at the facility. Spirit acquired the facility to maintain the flow of parts and improve delivery performance.

Item 3. Legal Proceedings

Information concerning the litigation and other legal proceedings in which the Company is involved may be found in Note 22 to the Consolidated Financial Statements, Commitments, Contingencies and Guarantees, under the sub-heading “Litigation” in this Annual Report and that information is hereby incorporated by reference.

Item 4. Mine Safety Disclosures

Not applicable.

Executive Officers of the Registrant

Listed below are the names, ages, positions held, and biographies of all executive officers of Spirit Holdings. Executive officers hold office until their successors are appointed, or until their death, retirement, resignation, or removal.

Tom Gentile III, 55. Mr. Gentile became President and Chief Executive Officer on August 1, 2016. From April 2016 to July 2016, Mr. Gentile served as Executive Vice President and Chief Operating Officer. From 2014 to April 2016, Mr. Gentile served as President and Chief Operating Officer of GE Capital where he oversaw GE Capital’s global operations, IT, and capital planning and served on its board of directors. Mr. Gentile had been employed by GE since 1998, and prior to his most recent position with GE, held the position of President and CEO of GE Healthcare’s Healthcare Systems division from 2011 until 2014 and the position of President and CEO of GE Aviation Services from 2008 until 2011. Mr. Gentile received his Bachelor of Arts degree in economics and Master of Business Administration degree from Harvard University, and also studied International Relations at the London School of Economics.

Mark Suchinski, 53. Mr. Suchinski became Senior Vice President and Chief Financial Officer on January 29, 2020. Mr. Suchinski has been with Spirit since 2006 and served as the Company’s and Spirit’s Vice President, Controller and Principal Accounting Officer from February 2014 to February 2018. Most recently, Mr. Suchinski served as Spirit’s Vice President, Quality, beginning in August 2019 and as Spirit’s Vice President, Boeing 787 Program, from February 2018 to August 2019. Prior to February 2014, he held the following roles at Spirit: October 2013 to February 23, 2014 - Vice President, Treasurer and Financial Planning; August 2012 to October 2013 - Vice President, Finance and Treasurer; from July 2010 to August 2012, Vice President,

Table of Contents

Financial Planning & Analysis and Corporate Contracts; and 2006 - July 2010, Controller, Aerostructures Segment. Prior to joining Spirit in 2006, he was at Home Products International, where he held the position of Corporate Controller from 2000 to 2004 and the position of Vice President and Chief Accounting Officer from 2004 to 2006. Prior to that, he held financial leadership positions of controller and senior finance manager at other companies. He also spent three years in public accounting. Mr. Suchinski received his Bachelor of Science degree in Accounting from DePaul University.

William (Bill) Brown, 57. Mr. Brown has served as Senior Vice President, Boeing Programs, since October 1, 2018. Previously, from 2014 to 2018, Mr. Brown served as Senior Vice President and General Manager, Oklahoma Operations, Business and Regional Jets and Global Customer Support. Mr. Brown assumed responsibility of Oklahoma Operations in December 2014 and responsibility of Business and Regional Jets in September 2017. Mr. Brown joined Spirit in May 2014 as Senior Vice President, Global Customer Support and Services. Previously, Mr. Brown served as Executive Vice President for Global Operations and President for Global Customer Service and Support at Beechcraft from 2007 to May 2014. Prior to joining Beechcraft, Mr. Brown served as President and General Manager of AAR Aircraft Services in Oklahoma and held senior-level positions with Independence Air, Avborne Inc. and Midwest Airlines. Mr. Brown received his Bachelor of Science degree in Aviation Management from Oklahoma State University and his Masters of Business Administration degree from Colorado State University. He also holds an A&P license and is a commercial instrument pilot.

Stacy Cozad, 49. Ms. Cozad became Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary in September 2017. Previously, Ms. Cozad served Spirit as Senior Vice President, General Counsel, and Corporate Secretary since January 4, 2016. Prior to joining Spirit, she served as Southwest Airlines’ associate general counsel for litigation from October 2006 to December 2015, overseeing all litigation for the airline. Prior to joining Southwest, Ms. Cozad was an associate and partner in private law practices from September 1997 to September 2006, working on high-profile litigation cases. Ms. Cozad earned a Bachelor of Arts degree in behavioral science from Concordia University Texas and her Juris Doctor degree from Pepperdine University

Duane Hawkins, 61. Mr. Hawkins became Senior Vice President of Defense and Fabrication in October 2018. In January 2019, Mr. Hawkins was also given the title of President, Defense and Fabrication Division. Previously, from July 2015 to October 2018, he served as Senior Vice President and General Manager of Boeing, Defense, Business and Regional Jet Programs and Global Customer Support. From July 2013 to June 2015, Mr. Hawkins served as Senior Vice President, Operations. In that position, he had responsibility and oversight for Defense, Supply Chain Management, Fabrication, Global Quality, and Operations, including global footprint, Manufacturing Engineering, Industrial Engineering, and Tooling. Prior to joining Spirit, Mr. Hawkins held several positions at Raytheon Missile Systems between 2002-2013. Mr. Hawkins served as Vice President, Deputy Air Warfare Systems; Vice President, Deputy Land Combat Systems; and Vice President, Deputy Supply Chain Management and Standard Missile Program Director. From 1994 to 2001, Mr. Hawkins was President of Defense Research Inc., and from 1993 to 1994 he was Vice President, Engineering at the company. He was factory manager for Hughes Missile Systems/ General Dynamics from 1991 to 1993, and Chief of Manufacturing Engineering for General Dynamics Missile Systems from 1988 to1991. Mr. Hawkins holds a Bachelor of Science degree in manufacturing/industrial engineering from Brigham Young University and a Master in Business Administration degree from Regis University.

Samantha Marnick, 49. Ms. Marnick has served as the Company's Executive Vice President, Chief Administration Officer and Strategy since October 1, 2018. Her responsibilities also include mergers and acquisitions, global customer support and services, and business and regional jets. From August 2016 to October 1, 2018, Ms. Marnick served as Executive Vice President, Chief Administration Officer. From October 2012 to July 2016, Ms. Marnick served as Senior Vice President, Chief Administration Officer. From January 2011 to September 2012, Ms. Marnick served as Senior Vice President of Corporate Administration and Human Resources. From March 2008 to December 2010, Ms. Marnick served as Vice President, Labor Relations and Workforce Strategy, responsible for labor relations, the global human resource project management office, compensation and benefits, and workforce planning. Ms. Marnick previously served as Director of Communications and Employee Engagement from March 2006 to March 2008. Prior to joining the Company, Ms. Marnick was a senior consultant and Principal for Mercer Human Resource Consulting, holding management positions in both the U.K. and in the U.S. Prior to that, Ms. Marnick worked for Watson Wyatt, the UK’s Department of Health and Social Security and The British Wool Marketing Board. Ms. Marnick holds a Master degree in Corporate Communication Strategy and Management from the University of Salford.

Kevin Matthies, 50. Mr. Matthies became Senior Vice President, Global Fabrication in September 2017. Mr. Matthies joined Spirit in 2013 and has held various leadership roles in both Airbus and Boeing program management, most recently serving as Vice President, General Manager of the B787 program until September 2017. Prior to joining Spirit AeroSystems, Mr. Matthies spent 26 years at Raytheon Missile Systems, where he most recently served as President of the Javelin joint venture between Raytheon and Lockheed Martin. Mr. Matthies is a 30 year veteran of the aerospace industry, having worked in executive positions for Raytheon Missile Systems, Hughes Aircraft Company, and General Dynamics. Mr. Matthies earned a Bachelor degree in Computer Science from California State University, San Bernadino, and a Master degree in Systems Engineering from the

Table of Contents

University of Arizona. He is a graduate of Raytheon's Leadership Excellence Program and was the recipient of the Raytheon 2010 Corporate Program Leadership Award.

Scott McLarty, 50. Mr. McLarty became Senior Vice President of Airbus Programs in November 2018. Before assuming the senior vice president position, Mr. McLarty was a Vice President with responsibility for Spirit’s U.K. and Malaysia business units and was responsible for developing the strategy and driving profitable growth. Mr. McLarty joined Spirit in April 2006 as part of the acquisition of the UK BAE Systems’ Aerostructures business unit which created Spirit AeroSystems (Europe) Ltd. Throughout his extensive career, Mr. McLarty has held a number of leadership roles in Operations, Project Management, Business Improvement, Supply Chain and HR. He has worked on several aircraft programs including Boeing, Airbus, Hawker, Business Jets and Jetstream aircraft. Mr. McLarty has a breadth of experience in the aerospace industry gathered over 26 years and has key skills within project and program management, HR and industrial relations, commercial customer & government relations, business turnaround and driving strategic growth. Mr. McLarty holds external board-level positions and is influential within the industry and supporting bodies including government boards. He is a Chartered Fellow of the Institute of Personnel Development (FCIPD) and a Fellow of the Royal Aeronautical Society. He holds a Fellowship in Aerospace Manufacturing Management (FAMM) gained at Cranfield University.

Vic McMullen, 56. Mr. McMullen became Senior Vice President of Global Manufacturing and Boeing Operations in October 2018, with overall responsibility for Wichita and Oklahoma Operations and Operations Excellence. Mr. McMullen held multiple vice president and general manager positions before joining the executive leadership team, including all Wichita Boeing Program Operations, Supply Chain, Fabrication, and Sikorsky Helicopter and Bell V-280 for the Fuselage business segment. Mr. McMullen has been with Spirit since 2005 when the company was formed following the divestiture of the Commercial Airplanes Wichita Division from Boeing. Before working for Spirit, Mr. McMullen was employed by the Boeing Company for 20 years. During his tenure at Boeing, he held positions in Military/Commercial Modifications, Propulsion, Fuselage business units and Quality. Mr. McMullen is a graduate of Southwestern College with a Bachelor of Science in Strategic Leadership.

John Pilla, 60. Mr. Pilla has served as Senior Vice President, Chief Technology Officer since September 2017. Previously, Mr. Pilla served as the Senior Vice President of Engineering and Chief Technology Officer from June 2015 to September 2017. From May 2013 to June 2015, Mr. Pilla served as the Senior Vice President/General Manager - Airbus and A350 XWB Program Management. Mr. Pilla previously served as the Senior Vice President/General Manager, Propulsion Systems Segment from July 2009 through May 2013 as well as the Senior Vice President/General Manager of the Wing Systems Segment from September 2012 through May 2013. From July 2011 to May 2013, he was also responsible for the Aftermarket Customer Support Organization. From April 2008 to July 2009, Mr. Pilla was Chief Technology Officer of Spirit Holdings and he served as Vice President/General Manager-787 of Spirit Holdings and/or Spirit, a position he assumed at the date of the Boeing Acquisition in June 2005 and held until March 2008. He received his Bachelor degree in Aerospace Engineering from Kansas University, and a Master degree in Aerospace Structures Engineering and a Master of Business Administration degree from Wichita State University.

Ron Rabe, 54. Mr. Rabe became the Company's Senior Vice President of Operations and the Chief Procurement Officer in October 2018. From September 2017 to October 2018, Mr. Rabe served as the Company's Senior Vice President, Fabrication and Supply Chain Management and from June 2015 to September 2017, Mr. Rabe served as the Company's Senior Vice President of Operations. Prior to joining Spirit in June 2015, Mr. Rabe was Eaton Corporation’s vice president of global manufacturing and supply chain, vehicle group from June 2011 to June 2015. In that role he had responsibility for global operations of more than 40 sites, including with respect to supply chain, quality, materials, advanced manufacturing and lean manufacturing. From September 2009 to June 2011, Mr. Rabe worked at Eaton Aerospace Group, leading global operations on conveyance systems and operational support for the F-35, CH-53K, 787, and A350 new programs. Mr. Rabe also led operations for the global vehicle group and was responsible for opening new sites in China, India, and Mexico from 2000 to 2009. He started his career at the Boeing Company in Wichita in 1986. Mr. Rabe holds a Bachelor of Science degree from Newman University and a Masters of Business Administration degree from the Ross School of Business at University of Michigan in Ann Arbor.

Table of Contents

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our class A common stock (“Common Stock”) has been quoted on the NYSE under the symbol “SPR” since November 21, 2006. As of February 24, 2020, there were approximately 3,819 holders of record of Common Stock and, in addition, there were approximately 63,000 stockholders with shares in street name or nominee accounts. The closing price on February 24, 2020 was $62.57 per share as reported by the NYSE.

Securities Authorized for Issuance under Equity Compensation Plans

The following table represents restricted shares outstanding under the Omnibus Incentive Plan as of December 31, 2019.

Equity Compensation Plan Information



Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuances Under the Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)
Restricted Stock Awards
Equity compensation plans approved by security holders⁽¹⁾⁽²⁾	433,227	N/A	5,308,653
Equity compensation plans not approved by security holders⁽²⁾	—	—	—
Total	433,227	—	5,308,653

_______________________________________

(1)

On April 30, 2014, the Company’s Board of Directors approved the Omnibus Incentive Plan of 2014 (as amended, the “Omnibus Plan”). The Omnibus Plan was approved by the Company’s stockholders at the Company’s 2014 annual stockholder’s meeting. The Omnibus Plan provides for the issuance of incentive awards to officers, directors, employees, and consultants in the form of restricted stock, restricted stock units, stock appreciation rights, and other equity compensation, in lieu of cash compensation. The Omnibus Plan was amended on October 23, 2019, to allow for participants to elect between the minimum and maximum tax withholding amounts for equity awards.

(2)

Represents time-based and performance-based long-term incentives that may be issued under the Omnibus Plan. For outstanding performance-based awards, the amount shown reflects the maximum payout. The amount of shares that could be paid out under the performance-based awards ranges from 0-200% based on actual performance. On the initial grant dates for these performance-based awards, the Company grants shares of restricted stock in the amount that would vest if the Company achieves the award target.

Table of Contents

Stock Performance

The following graph shows a comparison from December 31, 2014 through December 31, 2019 of cumulative total return of our Common Stock, Standard & Poor’s 500 Stock Index, and the Standard & Poor’s 500 Aerospace & Defense Index. Such returns are based on historical results and are not intended to suggest future performance. We made dividend payments on our Common Stock during the year ended December 31, 2019.



	INDEXED RETURNS Years Ending
Company/Index	Base Period 12/31/14	12/31/2015	12/31/2016	12/31/2017	12/31/2018	12/31/2019
Spirit AeroSystems Holdings, Inc.	100	116.33	135.80	204.27	169.72	172.55
S&P 500 Index	100	101.38	113.51	138.29	132.23	173.86
S&P 500 Aerospace & Defense Index	100	105.43	125.36	177.24	162.93	212.35

Dividends

The Company paid cash dividends of $0.12 per share of Common Stock in each quarter in 2019. The total amount of dividends paid during 2019 was $50.4 million. On February 6, 2020, the Company announced that its Board of Directors reduced its quarterly dividend to a penny per share to preserve liquidity until B737 MAX production reaches higher levels. Accordingly, on February 6, 2020, the Board declared a $0.01 per share quarterly cash dividend on the outstanding Common Stock of the Company payable on April 9, 2020 to stockholders of record at the close of business on March 20, 2020. The Board regularly evaluates the Company's capital allocation strategy and dividend policy. Any future determination to continue to pay dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements

Table of Contents

and contractual restrictions, including the requirements of financing agreements to which we may be a party. No assurance can be given that cash dividends will continue to be declared and paid at historical levels or at all.

Issuer Purchases of Equity Securities

The following table provides information about our repurchases during the three months ended December 31, 2019 of our Common Stock that is registered pursuant to Section 12 of the Exchange Act.

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)

September 27, 2019 - October 31, 2019	—	—		—		$925.0
November 1, 2019 - November 28, 2019 ⁽³⁾	7,623	$	88.94	—		$925.0
November 29, 2019 - December 31, 2019	—	—		—		$925.0
Total	7,623	$	88.94	—		$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, November 28, 2019 was the last day of our November 2019 fiscal month.

(2)


(3)	The repurchase of shares related to an administrative error correction related to the issuance ratification previously disclosed in Item 5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2019.

Table of Contents

Item 6. Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

The following table sets forth our selected consolidated financial data for each of the periods indicated. Financial data is derived from the audited consolidated financial statements of Spirit Holdings. The audited consolidated financial statements for the years ended December 31, 2019, December 31, 2018, and December 31, 2017 are included in this Annual Report. You should read the information presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined and consolidated financial statements and related notes contained elsewhere in the Annual Report.



	Spirit Holdings
	Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017			December 31, 2016			December 31, 2015
	(Dollars in millions, except per share data)
Statement of Income Data:
Net revenues	$	7,863.1		$	7,222.0		$	6,983.0		$	6,792.9		$	6,643.9
Cost of sales⁽¹⁾	6,786.4			6,135.9			6,195.3			5,800.3			5,532.3
Selling, general and administrative⁽²⁾	261.4			210.4			204.7			230.9			220.8
Impact of severe weather event	—			(10.0		)	19.9			12.1			—
Research and development	54.5			42.5			31.2			23.8			27.8
Operating income	760.8			843.2			531.9			725.8			863.0
Interest expense and financing fee amortization	(91.9		)	(80.0		)	(41.7		)	(57.3		)	(52.7		)
Other (expense) income, net	(5.8		)	(7.0		)	44.4			(8.0		)	(2.2		)
Income before income taxes and equity in net income of affiliates	663.1			756.2			534.6			660.5			808.1
Income tax provision	(132.8		)	(139.8		)	(180.0		)	(192.1		)	(20.6		)
Equity in net income of affiliates	(0.2		)	0.6			0.3			1.3			1.2
Net income	$	530.1		$	617.0		$	354.9		$	469.7		$	788.7
Earnings per share, basic	$	5.11		$	5.71		$	3.04		$	3.72		$	5.69
Shares used in per share calculation, basic	103.6			108.0			116.8			126.1			138.4
Earnings per share, diluted	$	5.06		$	5.65		$	3.01		$	3.70		$	5.66
Shares used in per share calculation, diluted	104.7			109.1			117.9			127.0			139.4
Dividends declared per common share	$	0.48		$	0.46		$	0.40		$	0.10		$	—

(1)

Included in 2019 costs of sales are net forward loss charges of ($63.5) million. Included in 2018 costs of sales are net favorable changes in estimates on loss programs of $3.9 million. Included in 2017 costs of sales are net forward loss charges of ($327.3) million. Included in 2016 costs of sales are net forward loss charges of ($118.2) million. Included in 2015 costs of sales are net favorable changes in estimates on loss programs of $10.8 million. Includes cumulative catch-up adjustments of ($2.0) million, ($3.8) million, $31.2 million, $36.6 million, and $41.6 million for periods prior to the twelve months ended December 31, 2019, 2018, 2017, 2016, and 2015, respectively.


(2)	Includes non-cash stock compensation expenses of $36.1 million, $27.4 million, $22.1 million, $42.5 million, and $26.0 million for the twelve months ended December 31, 2019, 2018, 2017, 2016, and 2015, respectively.

Table of Contents



	Spirit Holdings
	Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017			December 31, 2016			December 31, 2015
	(Dollars in millions)
Other Financial Data:
Net cash provided by operating activities	$	922.7		$	769.9		$	573.7		$	716.9		$	1,289.7
Net cash used in investing activities	$	(239.9	)	$	(267.8	)	$	(272.8	)	$	(253.4	)	$	(357.4	)
Net cash provided by (used in) financing activities	$	884.4		$	(153.5	)	$	(578.7	)	$	(718.7	)	$	(351.1	)
Purchase of property, plant, & equipment	$	(232.2	)	$	(271.2	)	$	(273.1	)	$	(254.0	)	$	(360.1	)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	2,350.5		$	773.6		$	423.3		$	697.7		$	957.3
Accounts receivable, net	$	546.4		$	545.1		$	722.2		$	660.5		$	537.0
Inventories, net	$	1,118.8		$	1,012.6		$	1,449.9		$	1,515.3		$	1,774.4
Property, plant & equipment, net	$	2,271.7		$	2,167.6		$	2,105.3		$	1,991.6		$	1,950.7
Total assets	$	7,606.0		$	5,685.9		$	5,267.8		$	5,405.2		$	5,764.5
Total debt	$	3,034.3		$	1,895.4		$	1,151.0		$	1,086.7		$	1,120.2
Long-term debt	$	2,984.1		$	1,864.0		$	1,119.9		$	1,060.0		$	1,085.3
Total equity	$	1,761.9		$	1,238.1		$	1,801.5		$	1,928.8		$	2,120.0

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with the Consolidated Financial Statement and notes thereto.

Management’s Focus

In 2019, management’s focus revolved around operational execution, with a focus on safety and quality while working to meet our customers' requirements and organic and inorganic growth opportunities.

In 2020, management’s focus will continue to be on operational execution in addition to closing and integrating the Asco Acquisition and Bombardier Acquisition, and preserving liquidity in light of the continued grounding of the B737 MAX and lower 2020 production rates.

Programs

B737 Program

2019 was a challenging year for the B737 program. 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. On April 12, 2019, Boeing and Spirit entered into the 2019 MOA relating to Spirit’s production of aircraft with respect to the B737 program. Under the MOA, Spirit was to 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 established that all excess shipments (B737 shipsets in excess of Boeing’s rate) would be deemed to be delivered to Boeing “FOB” at Spirit’s facilities, which would trigger Boeing’s payment obligations for the excess shipsets. Under the 2019 MOA, the Company received an advance payment from Boeing in the amount of $123.0 million during the third quarter of 2019.

On December 19, 2019, Boeing directed Spirit to stop all B737 MAX deliveries to Boeing effective January 1, 2020, due to Boeing’s announced temporary suspension of B737 MAX production. Accordingly, Spirit suspended all B737 MAX production beginning on January 1, 2020. On February 6, 2020, Boeing and Spirit entered into the 2020 MOA providing for Spirit to deliver to Boeing 216 B737 MAX shipsets in 2020. The production rate agreed for 2020 represents less than half of Spirit’s B737 MAX annualized production rate in 2019. The Company does not expect to be back at a production rate of 52 aircraft per month until late 2022.

The 2020 MOA provided that the $123.0 million advance would be repaid by offset against the purchase price for year 2022 shipset deliveries. In addition, the 2020 MOA provided that Boeing will pay $225 million to Spirit in the first quarter of 2020, consisting of (i) $70 million in support of Spirit’s inventory and production stabilization, of which $10 million will be repaid by Spirit in 2021, and (ii) $155 million as an incremental pre-payment for costs and shipset deliveries over the next two years. The 2020 MOA also extended B737 MAX pricing terms through 2033 (previously, the pricing was through December 31, 2030).

The parties will execute amendments to their underlying long-term contracts to incorporate the 2020 MOA on or before 60 calendar days following the B737 MAX U.S. Federal Aviation Administration ungrounding. The foregoing description of the 2020 MOA does not purport to be complete and is qualified in its entirety by reference to the full text of the 2020 MOA, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2020, subject to certain omissions of confidential portions.

While Spirit has taken actions to align its cost structure to the production suspension and 2020 production rate, including instructing its suppliers to stop delivering B737 MAX products throughout the suspension, implementing workforce actions, and reducing its quarterly dividend, the B737 MAX situation presents challenges to Spirit’s liquidity. Spirit has fully drawn all $800 million of the Revolver (as defined below) to address critical issues that may arise and agreed to maintain minimum liquidity as required by the Company’s Credit Agreement through the first quarter of 2021. If Boeing is unable to return the B737 MAX to service in one or more jurisdictions, begin timely deliveries to customers, if production levels are reduced beyond current expectations due to depressed demand or otherwise, or if Spirit has difficulties in managing its cost structure to take into account changes in production schedules or to accommodate a ramp-up in production, Spirit’s liquidity position may worsen absent Spirit’s ability to procure additional financing, Spirit may trigger an event of default under its credit facilities, and Spirit’s business, financial condition, results of operations and cash flows could be materially adversely impacted. The need to fund the Asco Acquisition and the Bombardier Acquisition and related expenses could also adversely affect our liquidity.

Based on Boeing’s public statements, we have assumed that regulatory approval will enable Boeing’s 737 MAX deliveries to resume no earlier than mid-2020. In the event of delays to this timeline and corresponding changes to our production rate, the Company may be required to take actions with longer-term impact, such as further changes to our production plans, employment

Table of Contents

reductions and/or the expenditure of significant resources to support our supply chain and/or Boeing. In addition, a delay to that timeline and corresponding changes to our production rate may cause us to default under our credit agreement.

We have made significant assumptions with respect to the B737 program regarding the number of units to be delivered in 2020 (216 units), the period during which those units are likely to be produced, and the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs. In addition, we have made assumptions regarding estimated costs expected to be incurred until resuming a normal production rate consistent with 2019 production levels to determine which costs should be (i) included in program inventory and (ii) expensed when incurred as abnormal production costs. Any changes in these estimates and/or assumptions with respect to the B737 program could have a material impact on our financial position, results of operations, and/or cash flows.

B787 Program

In October 2019, Boeing announced that it was reducing the production rate on the B787 program from 14 to 12 aircraft per month. During the third quarter, the Company announced a net forward loss charge of $32.6 million recognized on the B787 program due to Boeing’s rate reduction announcement. In addition, Boeing has announced that it plans to further reduce the B787 production rate to 10 per month in early 2021, and as a result during the fourth quarter the Company announced additional net forward loss charge of $34.1 million. However, Boeing plans to return to a production rate of 12 per month in 2023.

As we continue on the B787 program, our financial performance depends on our continued ability to achieve cost reductions in our manufacturing and supply chain.

Accounting Review

On January 30, 2020, the Company issued a press release regarding the Accounting Review. As a result of the Accounting Review, the Company determined that it did not comply with its established accounting processes with respect to certain potential contingent liabilities received by the Company after the end of the third quarter of 2019. The Accounting Review is now substantially complete.

Private securities class action lawsuit relating to these matters were filed against the Company, its Chief Executive Officer and former officers in February 2020. There may be additional lawsuits filed, including shareholder derivative actions, purportedly in the name and for the benefit of the Company. The Company intends vigorously to defend the existing lawsuits, and any other related litigation against the Company.

Acquisitions

The Company is currently involved in the following significant acquisitions:

Asco

On May 1, 2018, the Company and Spirit Belgium entered into a definitive agreement (as amended, the “Asco Purchase Agreement”) relating to the Asco Acquisition. The Asco Purchase Agreement is subject to customary closing conditions, including regulatory approvals. The Asco Acquisition is not conditioned upon the Company’s receipt of debt financing.

Table of Contents

On October 28, 2019, the Company and Spirit Belgium entered into an agreement to amend and restate the Asco Purchase Agreement (the "Asco Amendment"). The Asco Amendment incorporates amendments to the Purchase Agreement agreed among the Parties to date and reduces the purchase price for the Asco Acquisition from $604 million to $420 million. In addition, the Asco Amendment reduces the Sellers’ indemnification obligations to $80 million (except with respect to damages resulting or arising from the termination of certain commercial agreements) and removes the closing condition precedent that a “Material Adverse Change” in Asco’s business has not occurred since May 1, 2018.

On January 29, 2020, Asco and Spirit entered into an amendment to the Asco Purchase Agreement extending the date upon which the Asco Purchase Agreement will automatically terminate in the event that conditions to the Asco Acquisition are not satisfied or waived from April 4, 2020, to October 1, 2020. In addition, the amendment changed the closing date for the Acquisition to the last business day of the month that all conditions precedent are satisfied or waived (provided certain notice requirements are met) or as the parties agree.

Bombardier

On October 31, 2019, Spirit and Spirit UK entered into a definitive agreement related to the Bombardier Acquisition The Bombardier Acquisition is subject to certain consents, regulatory approvals and customary closing conditions. Closing conditions include, but are not limited to, (i) the absence of certain legal impediments to the consummation of the Bombardier Acquisition, (ii) the receipt of specified third party consents and approvals, (iii) the receipt of applicable regulatory approvals, and (iv) the absence of a material adverse change to the Bombardier Acquired Business. The Purchase Agreement contains customary representations, warranties and covenants among the parties, including, among others, certain covenants by the Sellers regarding the operation of the Bombardier Acquired Business during the interim period between the execution of the Purchase Agreement and the consummation of the Bombardier Acquisition. The Bombardier Acquisition is not conditioned upon the Company’s receipt of debt financing.

The Company, acting through certain of its subsidiaries, will assume net pension liabilities of approximately $300 million as reflected at the date of the Purchase Agreement. The Company agreed to procure payment of a special contribution of £100 million (approximately $130 million) to the Shorts pension scheme after closing and has reached a tentative agreement to delay payment of the special contribution to 2021. In addition, Shorts is a party to a repayable investment agreement with the Department for Business, Energy and Industrial Strategy of the Government of the United Kingdom, and Spirit will, at closing, assume, directly or indirectly, Shorts’ financial payment obligations under this agreement, which are approximately $290 million.

Critical Accounting Policies

The preparation of the Company’s financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”) requires management to use estimates and assumptions. The results of these estimates form the basis for making judgments that may affect the reported amounts of assets and liabilities, including the impacts of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to inventory, revenue, income taxes, financing obligations, warranties, pensions and other post-retirement benefits, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management believes that the quality and reasonableness of our most critical accounting policies enable the fair presentation of our financial position and results of operations. However, the sensitivity of financial statements to these methods, assumptions, and estimates could create materially different results under different conditions or using different assumptions. We believe application of these policies requires difficult, subjective, and complex judgments to estimate the effect of inherent uncertainties. This section should be read in conjunction with Note 3 to the Consolidated Financial Statements, Summary of Significant Accounting Policies.

Revenues and Profit Recognition

Beginning January 1, 2018, the Company adopted recognition of revenue using the principles of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from contracts with customers. Revenue is recognized when, or as, control of promised products or services transfers to a customer, and the amount recognized reflects the consideration that the Company expected to receive in exchange for those products or services. See Note 3 to the Consolidated Financial Statements, Summary of Significant Accounting Policies, for a further description of revenue recognition under ASC 606, and a description of the legacy GAAP revenue and profit recognition presented for prior comparative periods. In determining our profits and losses in accordance with this method, we are required to make significant judgments regarding our future costs, variable elements of revenue, the standalone selling price, and other variables. We continually review and update our assumptions based on market trends and our most recent experience. If we make material changes to our assumptions, we may have positive or negative cumulative catch-up

Table of Contents

adjustments related to revenues previously recognized, and in some cases, we may adjust forward loss reserves. When we experience abnormal production costs such as excess capacity costs the Company will expense the excess costs in the period incurred and report as segment costs of goods sold. These excess costs (actual and estimated future costs) are excluded from the estimates at completion of our accounting contracts with customers. For a broader description of the various types of risks we face related to new and maturing programs, see “Risk Factors”.

Income Taxes

Income taxes are accounted for in accordance with Financial Accounting Standards Board (“FASB”) authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, we assess all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified.

We record income tax provision or benefit based on the net income earned or net loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management's original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. We use the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense. See Note 20 to the Consolidated Financial Statements, Income Taxes, for further discussion.

Results of Operations

The following table sets forth, for the periods indicated, certain of our operating data:



	Twelve Months Ended
	December 31, 2019⁽¹⁾			December 31, 2018⁽¹⁾⁽²⁾			December 31, 2017⁽²⁾
	($ in millions)
Net revenues	$	7,863.1		$	7,222.0		$	6,983.0
Cost of sales	6,786.4			6,135.9			6,195.3
Gross profit	1,076.7			1,086.1			787.7
Selling, general and administrative	261.4			210.4			204.7
Impact of severe weather event	—			(10.0		)	19.9
Research and development	54.5			42.5			31.2
Operating income	760.8			843.2			531.9
Interest expense and financing fee amortization	(91.9		)	(80.0		)	(41.7		)
Other (expense) income, net	(5.8		)	(7.0		)	44.4
Income before income taxes and equity in net income of affiliates	663.1			756.2			534.6
Income tax provision	(132.8		)	(139.8		)	(180.0		)
Income before equity in net income of affiliates	530.3			616.4			354.6
Equity in net income of affiliates	(0.2		)	0.6			0.3
Net income	$	530.1		$	617.0		$	354.9

_______________________________________


(1)	See “Twelve Months Ended December 31, 2019 as Compared to Twelve Months Ended December 31, 2018” for detailed discussion of operating data.


(2)	See “Twelve Months Ended December 31, 2018 as Compared to Twelve Months Ended December 31, 2017” for detailed discussion of operating data.

Table of Contents

Comparative shipset deliveries by model are as follows:



	Twelve Months Ended
Model	December 31, 2019	December 31, 2018	December 31, 2017
B737	606	605	532
B747	6	6	6
B767	33	30	28
B777	56	44	70
B787	166	143	136
Total Boeing	867	828	772
A220⁽¹⁾	40	12	—
A320 Family	682	657	608
A330	35	62	80
A350	111	98	90
A380	1	6	13
Total Airbus	869	835	791
Business and Regional Jets⁽¹⁾	55	71	88
Total	1,791	1,734	1,651

_______________________________________


(1)	Airbus acquired 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 of 2018 are included in 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 and 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:



	Twelve Months Ended
Prime Customer	December 31, 2019		December 31, 2018		December 31, 2017
	($ in millions)
Boeing	$	6,237.2	$	5,677.7	$	5,527.5
Airbus	1,250.6		1,180.8		1,123.5
Other	375.3		363.5		332.0
Total net revenues	$	7,863.1	$	7,222.0	$	6,983.0

Changes in Estimates

During the twelve months ended December 31, 2019, we recognized an unfavorable changes in estimates of $65.5 million primarily driven by Boeing announced production rate change on B787 from 14 aircraft per month to 10 aircraft per month. During the twelve months ended December 31, 2018, there was a negligible amount of net change in estimates. During the twelve months ended December 31, 2017, we recognized unfavorable changes in estimate of $296.1 million primarily due to Boeing pricing negotiations (The 2017 MOU) associated with the B787 program.

Table of Contents

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

Twelve Months Ended December 31, 2019 as Compared to Twelve Months Ended December 31, 2018

Net Revenues. Net revenues for the twelve months ended December 31, 2019 were $7,863.1 million, an increase of $641.1 million, or 9%, compared with net revenues of $7,222.0 million, for the prior year. The increase was primarily due to higher production on the B777, B787, A220, and A350 XWB programs, favorable model mix on B737 program, increased Global Customer Support and Services (GCS&S) and defense related activity, partially offset by lower production on the A330 program, lower revenue recognized on the A350 XWB program in accordance with pricing terms and lower revenue recognized on certain Boeing nonrecurring programs. Approximately 95% of Spirit’s net revenues in 2019 came from our two largest customers, Boeing and Airbus.

Deliveries to Boeing increased to 867 shipsets during 2019, compared to 828 shipsets delivered in the prior year, driven by production increases on the B787 and B777 programs. Deliveries to Airbus increased to 869 shipsets during 2019, compared to 835 shipsets delivered in the prior year, primarily driven by higher production of the A320, A350 XWB, and A220 programs partially offset by decreased production on the A330 program. Production deliveries of business/regional jet wing and wing components decreased to 55 shipsets during 2019, compared to 71 shipsets delivered in the prior year, driven by the transfer of the A220 program to total Airbus deliveries in the third quarter of 2018. In total, shipset deliveries increased 3% to 1,791 shipsets in 2019 compared to 1,734 shipsets in 2018.

Gross Profit. Gross Profit for the twelve months ended December 31, 2019 was $1,076.7 million, as compared to $1,086.1 million for the same period in the prior year, a decrease of $9.4 million. The reduction in gross profit was primarily driven by forward loss charge on B787 due to Boeing announced production rate change from 14 aircraft per month to 12 aircraft per month in the third quarter, from 12 aircraft per month to 10 aircraft per month in the fourth quarter, and certain Boeing nonrecurring programs partially offset by increased profit recognized on B737 due to model mix, B777, A220 and the A350 XWB program.

SG&A and Research and Development. SG&A expense was $51.0 million higher for the twelve months ended December 31, 2019, as compared to the same period in the prior year, primarily due to costs incurred related to the Asco Acquisition and Bombardier Acquisition, increased headcount and absence of a one-time recovery of legal fees related to a court decision in 2018. Research and development expense for the twelve months ended December 31, 2019 was $12.0 million higher as compared to the same period in the prior year, due to more internal projects underway.

Operating Income. Operating income for the twelve months ended December 31, 2019 was $760.8 million, which was $82.4 million lower than operating income of $843.2 million for the prior year. The decrease in operating income was primarily due to costs incurred related to the anticipated purchase of Asco and Bombardier, reduced profitability on the B737 program due to B737 MAX grounding and forward loss charge on B787 due to announced production rate changes.

Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2019 includes $78.6 million of interest and fees paid or accrued in connection with long-term debt and $3.6 million in amortization of deferred financing costs and original issue discount, compared to $55.7 million of interest and fees paid or accrued in connection with long-term debt and $18.3 million in amortization of deferred financing costs and original issue discount for the prior year. The increase in interest expense is primarily a result of additional debt taken on in 2018 in anticipation of our ASRs and the planned purchase of Asco. The decrease in deferred financing costs and fees in 2019 compared to 2018 is mainly due to the 2018 credit agreement which resulted in a loss on extinguishment of existing debt of $14.4 million included in the $18.3 million of deferred financing costs.

Other (Expense) Income, net. Other expense for the twelve months ended December 31, 2019 was ($5.8) million, compared to other expense of ($7.0) million for the same period in the prior year. Other expense during 2019 was primarily driven by losses on foreign currency forward contracts as the U.S. Dollar strengthened against the Euro, expenses related to a voluntary retirement program offered by the Company in the second quarter of 2019, as well as net losses on the sale of receivables, partially offset by gain on proceeds from a litigation settlement and pension income.

Provision for Income Taxes. The income tax provision for the twelve months ended December 31, 2019, was $132.8 million compared to $139.8 million for the prior year. The 2019 effective tax rate was 20.0% as compared to 18.5% for 2018. The difference in the effective tax rate recorded for 2019 as compared to 2018 is primarily related to a reduction in federal tax credits, an adjustment to our one-time transition tax liability, and an increase in income tax in the current year reflecting the finalization of the 2018 amounts related to Global Intangible Low-Taxed Income ("GILTI") and the federal R&D tax credit reported in the tax return as

Table of Contents

agreed upon with the IRS in the course of the Company’s participation in the Internal Revenue Service’s Compliance Assurance Process (“CAP”) offset by a re-measurement of our net deferred tax asset balance in 2019 and a decrease in the impact of GILTI.

The decrease from the U.S. statutory tax rate is attributable primarily to generation of state income tax and federal research tax credits, foreign rates less than the U.S. rate, and share based compensation excess tax benefit, offset by the impacts of finalizing the 2018 amounts related to GILTI and the federal R&D tax credit and estimated state income tax.

Segments. The following table shows segment revenues and operating income for the twelve months ended December 31, 2019, 2018, and 2017:



	Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	($ in millions)
Segment Revenues
Fuselage Systems	$	4,206.2		$	4,000.8		$	3,730.8
Propulsion Systems	2,057.8			1,702.5			1,666.2
Wing Systems	1,588.3			1,513.0			1,578.8
All Other	10.8			5.7			7.2
	$	7,863.1		$	7,222.0		$	6,983.0
Segment Operating Income^{(1, 2)}
Fuselage Systems	$	440.8		$	576.1		$	329.6
Propulsion Systems	404.6			283.5			267.7
Wing Systems	216.0			226.4			205.1
All Other	3.4			0.3			2.0
	1,064.8			1,086.3			804.4
Corporate SG&A⁽²⁾	(261.4		)	(210.4		)	(204.7		)
Unallocated impact of severe weather event	—			10.0			(19.9		)
Research and development	(54.5		)	(42.5		)	(31.2		)
Unallocated cost of sales⁽³⁾	11.9			(0.2		)	(16.7		)
Total operating income	$	760.8		$	843.2		$	531.9

Table of Contents

_______________________________________


(1)	Inclusive of forward losses, changes in estimates on loss programs, and cumulative catch-up adjustments. These changes in estimates for the periods ended December 31, 2019, 2018, and 2017 are further detailed in the segment discussions below and in Note 5 to the Consolidated Financial Statements, Changes in Estimates.

(2)

Prior period information has been reclassified as a result of the Company's adoption of ASU 2017-07 on a retrospective basis in 2018. In accordance with the adoption of this guidance, prior year amounts related to the components of net periodic pension and postretirement benefit cost other than service costs have been reclassified from cost of sales and selling, general, and administrative expense to other (expense) income within the consolidated statement of operation for all periods presented. Accordingly, expenses of $18.1 million, $7.4 million, and $7.3 million attributable to the Fuselage Systems segment, Propulsion Systems segment, and Wing Systems segment, respectively, were reclassified into segment operating income for the twelve months ended December 31, 2017.


(3)	For 2019, includes $13.9 million related to release of warranty reserves. For 2018, includes charges of $1.1 million related to warranty reserves. For 2017, includes charges of $1.8 million and $12.7 million related to warranty reserve and charges for excess purchases and purchase commitments, respectively.

Fuselage Systems, Propulsion Systems, Wing Systems, and All Other segments represented approximately 54%, 26%, 20%, and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2019.

Fuselage Systems. Fuselage Systems segment net revenues for the twelve months ended December 31, 2019 were $4,206.2 million, an increase of $205.4 million, or 5%, compared to the same period in the prior year. The increase in net revenues was primarily due to higher production on the B787, B777, and A350 XWB programs and increased Global Customer Support and Services (GCS&S) and defense related work, partially offset by lower revenue recognized on certain non-recurring Boeing programs. Fuselage Systems segment operating margins were 11% for the twelve months ended December 31, 2019, compared to 14% for the same period in the prior year, with the decrease primarily driven by B737 performance, the net forward loss charges recorded on the B787 fuselage program during the third and fourth quarter of 2019 due to announced production rate changes, and decreased margins recognized on the A350 XWB program. In 2019, the segment recorded unfavorable cumulative catch-up adjustments of ($1.3) million, as well as ($37.9) million of net forward loss charges. In comparison, during 2018, the segment recorded unfavorable cumulative catch-up adjustments of ($5.3) million and $3.4 million of favorable changes in estimates on loss programs.

Propulsion Systems. Propulsion Systems segment net revenues for the twelve months ended December 31, 2019 were $2,057.8 million, an increase of $355.3 million, or 21%, compared to the same period in the prior year. The increase was primarily due to favorable model mix on B737, and increased production on B787, B777 and A220 programs, partially offset by lower revenue recognized on certain non-recurring Boeing programs. Propulsion Systems segment operating margins were 20% for the twelve months ended December 31, 2019, compared to 17% for the same period in the prior year. This increase was primarily driven by B737, B777 and A220, partially offset by net forward loss charges on B787 due to announced production rate changes. In 2019, the segment recorded unfavorable cumulative catch-up adjustments of ($1.2) million and net forward loss charges of ($15.1) million. In comparison, during 2018, the segment recorded unfavorable cumulative catch-up adjustments of ($0.2) million and net forward loss charges of ($0.7) million.

Wing Systems. Wing Systems segment net revenues for the twelve months ended December 31, 2019 were $1,588.3 million, an increase of $75.3 million, or 5%, compared to the same period in the prior year. This was primarily due to increased production on the B737, B777, B787, and A350 XWB programs. Wing Systems segment operating margins were 14% for the twelve months ended December 31, 2019 compared to 15% for the same period in the prior year mainly due to forward loss charge on B787 due to announced production rate changes, B737 performance, offset by the favorable performance on A350 XWB. In 2019, the segment recorded favorable cumulative catch-up adjustments of $0.5 million and net forward loss charges of ($10.5) million. In comparison, during 2018, the segment recorded favorable cumulative catch-up adjustments of $1.7 million and $1.2 million of favorable changes in estimates on loss programs.

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 the Company is a major participant. In the twelve months ended December 31, 2019, All Other segment net revenues were $10.8 million, an increase of $5.1 million compared to the same period in the prior year. The All Other segment recorded 31% operating margins for the twelve months ended December 31, 2019.

Twelve Months Ended December 31, 2018 as Compared to Twelve Months Ended December 31, 2017

Net Revenues. Net revenues for the twelve months ended December 31, 2018 were $7,222.0 million, an increase of $239 million, or 3%, compared with net revenues of $6,983.0 million, for the prior year. The increase was primarily due to higher

Table of Contents

production on the B737, B787, A320, and A350 XWB programs and increased defense related activity, partially offset by lower production on the B777, lower revenue recognized on the B787 program due to the adoption of ASC 606, and lower revenue recognized on the A350 XWB program in accordance with pricing terms. Approximately 95% of Spirit’s net revenues in 2018 came from our two largest customers, Boeing and Airbus.

Deliveries to Boeing increased to 828 shipsets during 2018, compared to 772 shipsets delivered in the prior year, driven by production increases on the B737 and B787 programs, partially offset by a decrease on the B777 program. Deliveries to Airbus increased to 835 shipsets during 2018, compared to 791 shipsets delivered in the prior year, primarily driven by higher production of the A320 and A350 XWB programs and the transfer of the A220 program to total Airbus deliveries in the third quarter of 2018, partially offset by decreased production on the A330 and A380 programs. Production deliveries of business/regional jet wing and wing components decreased to 71 shipsets during 2018, compared to 88 shipsets delivered in the prior year, driven by the transfer of the A220 program to total Airbus deliveries in the third quarter of 2018. In total, shipset deliveries increased 5% to 1,734 shipsets in 2018 compared to 1,651 shipsets in 2017.

Gross Profit. Gross profit was $1,086.1 million for the twelve months ended December 31, 2018, as compared to $787.7 million for the same period in the prior year, an increase of $298.4 million. The increase in gross profit was primarily driven by the absence of the $352.8 million net forward loss charge recognized on the B787 program in the second quarter of 2017 and increased margins recognized on the A350 XWB program due to the adoption of ASC 606, partially offset by decreased production on the B777 program and lower margins recognized on the B737 and B777 programs.

SG&A and Research and Development. SG&A expense was $5.7 million higher for the twelve months ended December 31, 2018, as compared to the same period in the prior year, primarily due to costs incurred related to the anticipated purchase of Asco, partially offset by the recovery of legal fees related to a court decision in 2018. Research and development expense for the twelve months ended December 31, 2018 was $11.3 million higher as compared to the same period in the prior year, due to more internal projects underway.

Impact of Severe Weather Event. During the twelve months ended December 31, 2018, the Company recorded a gain of $10.0 million from an insurance settlement related to costs incurred from the aftermath of Hurricane Matthew, compared to expenses of $19.9 million for the same period in the prior year for Hurricane Matthew. The impact of Hurricane Matthew caused the Company’s Kinston, North Carolina site operations to temporarily shut down during the fourth quarter of 2016 with carryover effects into 2017.

Operating Income. Operating income for the twelve months ended December 31, 2018 was $843.2 million, which was $311.3 million higher than operating income of $531.9 million for the prior year. The increase in operating income was primarily due to the absence of the B787 net forward loss charges recognized during the second quarter of 2017, partially offset by costs incurred related to the anticipated purchase of Asco.

Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2018 includes $55.7 million of interest and fees paid or accrued in connection with long-term debt and $18.3 million in amortization of deferred financing costs and original issue discount, compared to $36.3 million of interest and fees paid or accrued in connection with long-term debt and $3.5 million in amortization of deferred financing costs and original issue discount for the prior year. The increase in interest expense is primarily a result of additional debt taken on in 2018 in anticipation of our ASRs and the planned purchase of Asco. During 2018, we extinguished our 2022 Notes (as defined below) through a tender offer and redemption and we replaced our prior credit agreement with the 2018 Credit Agreement. As a result, we recognized a loss on extinguishment of existing debt of $14.4 million included in $18.3 million of deferred financing costs above.

Other (Expense) Income, net. Other expense for the twelve months ended December 31, 2018 was $7.0 million, compared to other income of $44.4 million for the same period in the prior year. Other expense during 2018 was primarily driven by 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.

Provision for Income Taxes. The income tax provision for the twelve months ended December 31, 2018, was $139.8 million compared to $180.0 million for the prior year. The 2018 effective tax rate was 18.5% as compared to 33.7% for 2017. The difference in the effective tax rate recorded for 2018 as compared to 2017 is primarily related to the enactment of the Tax Cuts and Jobs Act ("TCJA"), including the reduction in the U.S. corporate federal income tax rate from 35% to 21%, the elimination of the domestic manufacturing deduction, and the inclusion of provisional tax impacts of our one-time transition tax liability and re-measurement of our net deferred tax asset balance in 2017. Unrelated to the TCJA, the difference in the effective tax rate is primarily related to higher state income and federal research tax credits generated in 2018 and the proportional tax rate effects of lower pre-tax income in 2017. The decrease from the U.S. statutory tax rate is attributable primarily to generation of state income tax and federal research tax credits, foreign rates less than the U.S. rate, and share based compensation excess tax benefit, offset by estimated state income tax.

Table of Contents

Fuselage Systems. Fuselage Systems segment net revenues for the twelve months ended December 31, 2018 were $4,000.8 million, an increase of $270.0 million, or 7%, compared to the same period in the prior year. The increase in net revenues was primarily due to higher production on the B737 and A350 XWB programs and increased defense related work, partially offset by lower production on the B777 program and lower revenue recognized on the B787 program due to the adoption of ASC 606. Fuselage Systems segment operating margins were 14% for the twelve months ended December 31, 2018, compared to 9% for the same period in the prior year, with the increase primarily driven by the absence of the net forward loss charges recorded on the B787 fuselage program during the second quarter of 2017 and increased margins recognized on the A350 XWB program due to the adoption of ASC 606, partially offset by lower margins recognized on the B737 and B777 programs. In 2018, the segment recorded unfavorable cumulative catch-up adjustments of ($5.3) million, as well as $3.4 million of favorable changes in estimates on loss programs. In comparison, during 2017, the segment recorded favorable cumulative catch-up adjustments of $4.0 million as well as ($223.2) million of net forward loss charges.

Propulsion Systems. Propulsion Systems segment net revenues for the twelve months ended December 31, 2018 were $1,702.5 million, an increase of $36.3 million, or 2%, compared to the same period in the prior year. The increase was primarily due to higher production on the B737 program, partially offset by lower production on the B777 program, lower revenue recognized on certain non-recurring Boeing programs, and lower net revenues recognized on the B787 program due to the adoption of ASC 606. Propulsion Systems segment operating margins were 17% for the twelve months ended December 31, 2018, compared to 16% for the same period in the prior year. This increase was primarily driven by the absence of net forward loss charges recorded on the B787 program during the second quarter of 2017, partially offset by lower margins recognized on the B777 program. In 2018, the segment recorded unfavorable cumulative catch-up adjustments of ($0.2) million and net forward loss charges of ($0.7) million. In comparison, during 2017, the segment recorded favorable cumulative catch-up adjustments of $3.8 million and net forward loss charges of ($40.2) million.

Wing Systems. Wing Systems segment net revenues for the twelve months ended December 31, 2018 were $1,513.0 million, a decrease of $65.8 million, or 4%, compared to the same period in the prior year. The decrease was primarily due to decreased production on the B777 program, lower revenues recognized on the B787 program due to the adoption of ASC 606, and lower revenue recognized on the A350 XWB program in accordance with pricing terms, partially offset by increased production on the B737 and A320 programs. Wing Systems segment operating margins were 15% for the twelve months ended December 31, 2018, compared to 13% for the same period in the prior year, primarily driven by the absence of net forward loss charges recorded on the B787 program in the second quarter of 2017 and increased margin recognized on the A350 XWB program due to the adoption of ASC 606, partially offset by lower margins recognized on the B737 and B777 programs. In 2018, the segment recorded favorable cumulative catch-up adjustments of $1.7 million and favorable changes in estimates on loss programs of $1.2 million. In comparison, during 2017, the segment recorded favorable cumulative catch-up adjustments of $23.4 million and net forward loss charges of ($63.9) 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 the Company is a major participant. In the twelve months ended December 31, 2018, All Other segment net revenues were $5.7 million, a decrease of $1.5 million compared to the same period in the prior year. The All Other segment recorded 5% operating margins for the twelve months ended December 31, 2018.

Liquidity and Capital Resources

The primary sources of our liquidity include cash on hand, cash flow from operations, which includes receivables from customers, and borrowings made available by our 2018 Credit Agreement (as defined below):

2018 Credit Agreement

On July 12, 2018, the Company entered into a $1,256.0 million 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 an $800.0 million revolving credit facility (the “Revolver”), a $206.0 million term loan A facility (the “ Term Loan”) and a $250.0 million delayed draw term loan facility (the “Delayed Draw Term Loan”).

Each of the Revolver, the 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 Term Loan are to be repaid in equal quarterly installments of $2.6 million, commencing with the fiscal quarter ending March 31, 2019, and with the balance due at maturity of the Term Loan. The principal obligations under the

Table of Contents

Delayed Draw Term Loan are to be repaid in equal quarterly installments of $3.1 million, subject to adjustments for any extension of the availability period of the Delayed Draw Term Loan, commencing with the fiscal quarter ending September 26, 2019, with the balance due at maturity of the Delayed Draw Term Loan.



Interest Coverage Ratio		Shall not be less than 4.0:1.0
Total Leverage Ratio		Shall not exceed 3.5:1.0

The 2020 Amendment

On February 24, 2020, we entered into the 2020 Amendment. The primary purpose for entering into the 2020 Amendment was to obtain covenant relief with respect to expected breaches of the total leverage and interest coverage ratios under the 2018 Credit Agreement. Given the production suspension and 2020 production rate for the B737 MAX, absent a waiver or an amendment of the 2018 Credit Agreement, the Company was expected to breach the total leverage ratio beginning with the first fiscal quarter of 2020. The 2020 Amendment waived the ratios in the 2018 Amendment until the commencement of the second fiscal quarter of 2021 (the “Reversion Date”) and put the following financial ratios and tests in place for such time period:

•

Senior Secured Leverage Ratio: Commencing with the first fiscal quarter of 2020, the ratio of senior secured debt to consolidated EBITDA over the last twelve months shall not, as of the end of the applicable fiscal quarter, be greater than: (i) 3.00:1.00, with respect to the first fiscal quarter of 2020; (ii) 4.25:1.00, with respect to the second fiscal quarter of 2020; (iii) 5.50:1.00, with respect to the third fiscal quarter of 2020; (iv) 5.00:1.00, with respect to the fourth fiscal quarter of 2020; and (v) 3.00:1.00, with respect to the first fiscal quarter of 2021.

•

The 2020 Amendment adds Spirit AeroSystems North Carolina, Inc. as an additional guarantor (the “New Guarantor”) and provides for the grant of security interests to the lenders under the 2018 Credit Agreement with respect to certain real property and personal property, including certain equity interests, owned by Spirit, as borrower, and the Guarantors, which include Holdings and New Guarantor. Such guarantee and security interests will be released, at the option of Spirit, so long as no default or event of default shall exist at the time thereof, or immediately after giving effect thereto, if (A) (I) the senior unsecured debt rating of Spirit is “BBB-” or higher as determined by Standard & Poor’s Financial Services LLC (“S&P”), and (II) the senior unsecured debt rating of Spirit is “Baa3” or higher as determined by Moody’s Investors Service, Inc. (“Moody’s”), or (B) S&P and Moody’s have each confirmed, in a writing in form and substance reasonably satisfactory to the administrative agent, that (I) the senior unsecured debt rating of Spirit will be “BBB-” or higher as determined by S&P, and (II) the senior unsecured debt rating of Spirit will be “Baa3” or higher as determined by Moody’s, in each case of the foregoing clauses (B)(I) and (B)(II), after giving effect to the release of the security (the date of such release, the “Security Release Date”). Each of the Revolver, the Term Loan and the Delayed Draw Term Loan continues to mature on July 12, 2023, and, following the 2020 Amendment, bears interest, at Spirit’s

Table of Contents

option, at either LIBOR plus 2.375% or a defined “base rate” plus 1.375%, subject to adjustment to between LIBOR plus 1.625% and LIBOR plus 2.625% (or between base rate plus 0.625% and base rate plus 1.625%, as applicable) based on Spirit’s senior unsecured debt ratings provided by S&P and/or Moody’s.

The 2020 Amendment also added increased restrictions on our ability to incur additional indebtedness, consolidate or merge, make acquisitions and other investments (although the Asco Acquisition and the Bombardier Acquisition are expressly permitted thereunder), guarantee obligations of third parties, make loans or advances, declare or pay certain dividends or distributions on our stock, redeem or repurchase shares of our stock, or pledge assets. The 2020 Amendment provides that a number of these increased restrictions will no longer apply following the Security Release Date. The accordion feature to increase the 2018 Revolver commitments and/or institute one or more additional term loans will not be available to Spirit during the period between the effective date of the 2020 Amendment and the Security Release Date.

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, breach of a covenant, cross-default to material indebtedness, material judgments, ERISA events, change in control, bankruptcy and invalidity of the guarantee of the Borrower’s obligations under the Credit Agreement made by the Company. The 2020 Amendment added new events of default for validity, perfection and priority of liens and the public announcement by Boeing of the termination or permanent cessation of the B737 MAX program, which will no longer apply following the Security Release Date.

As of December 31, 2019, the outstanding balance of the Term Loan and Delayed Draw Term Loan was $439.7 million and the carrying value was $438.5 million. The outstanding balance of the Revolver, drawn in December 2019 was $800.0 million and the carrying value was $800.0 million.

2020 Delayed Draw Term Loan

On February 24, 2020, Spirit also entered into a $375.0 million senior unsecured delayed draw term loan among Spirit, as borrower, the Company, as parent guarantor, the New Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “2020 DDTL”). The 2020 DDTL is available to be drawn until August 15, 2020. The 2020 DDTL matures and shall be repaid in full (if drawn) on the earlier to occur of (a) September 15, 2020 and (b) the date that is 45 days after the date on which the Federal Aviation Administration re-certifies the B737 MAX program.

The 2020 DDTL bears interest, at Spirit’s option, at either LIBOR plus 3.625% or a defined “base rate” plus 2.625%. The 2020 DDTL is subject to substantially the same affirmative, negative and financial covenants and events of default as the 2018 Credit Agreement (as amended by the 2020 Amendment), except with respect to any covenants or events of default relating to security.

The 2020 DDTL is intended to function as a short-term liquidity facility, if needed. The commitments and loans under the 2020 DDTL are subject to mandatory reduction or prepayment, as applicable, with 100% of the net cash proceeds from issuances of indebtedness and equity interests, subject to certain exceptions. As a result, if Spirit receives net cash proceeds from issuances of indebtedness or equity that exceed the amount of the 2020 DDTL, the commitments under that facility will be canceled and any amounts outstanding prepaid. Spirit may pursue financing options in the near term that would result in the cancellation of this facility.

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 million aggregate principal amount of its Senior Floating Rate Notes due 2021 (the “Floating Rate Notes”), $300.0 million aggregate principal amount of its 3.950% Senior Notes due 2023 (the “2023 Notes”) and $700.0 million 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 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 million, $300.0 million, and $700.0 million as of December 31, 2019, respectively. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $299.1 million, $298.3 million, and $694.1 million as of December 31, 2019, respectively.

Table of Contents

The Notes and the Guarantees have been registered under the Securities Act of 1933, as amended (the “Act”), pursuant to a Registration Statement on Form S-3 (No. 333-211423) previously filed with the SEC under the 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, Spirit issued $300.0 million 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 December 31, 2019, the outstanding balance of the 2026 Notes was $300.0 million and the carrying value was $297.8 million. The indenture for the 2026 Notes 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 2026 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. On February 24, 2020, Spirit entered into a Second Supplemental Indenture (the “Supplemental Indenture”) by and among Spirit, the Company, the New Guarantor, and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with the 2026 Notes. Under the Supplemental Indenture, the noteholders were granted security on an equal and ratable basis with the lenders under the 2018 Credit Agreement (as amended by the 2020 Amendment) until the security in favor of the lenders under the 2028 Credit Agreement is released. The Supplemental Indenture also added the New Guarantor as an additional guarantor under the indenture governing the 2026 Notes. The guarantee of the New Guarantor will be released upon the release of its guarantee under the 2018 Credit Agreement.

For additional information on our outstanding debt, please see Note 16 to the Consolidated Financial Statements, Debt.

Other

Additionally, we may receive proceeds from asset sales and may seek to access the credit markets, if needed. The Company has two agreements to sell, on a revolving basis, certain trade accounts receivable balances with Boeing and Airbus to third party financial institutions. These programs were primarily entered into as a result of Boeing and Airbus seeking payment term extensions with the Company and continue to allow Spirit to monetize prior to the payment date for the receivables, subject to payment of a discount. No guarantees are delivered under the agreements. Our ability to continue using such agreements is primarily dependent upon the strength of Boeing’s and Airbus’s financial condition. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the Company's balance sheet. For additional information on the sale of receivables, please see Note 6 to the Consolidated Financial Statements, Accounts Receivable, net.

Credit Ratings

Our credit ratings are periodically reviewed by rating agencies. As of December 31, 2019, our corporate credit ratings were BBB- by Standard & Poor’s Global Ratings (“S&P”), and Baa3 by Moody’s Investors Service, Inc. (“Moody’s”). On January 13, 2020, Moody’s downgraded the Company’s credit rating from Baa3 to Ba2, and the Company continues to be under review for a possible downgrade. On January 31, 2020, S&P downgraded the Company’s credit rating from BBB- to BB.

As compared to the Company’s prior investment grade rating, this rating and our current credit condition affects, among other things, our ability to access new capital. Further negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt.

Table of Contents

Cash Flows

The following table provides a summary of our cash flows for the twelve months ended December 31, 2019, 2018, and 2017:



	For the Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	($ in millions)
Net income	$	530.1		$	617.0		$	354.9
Adjustments to reconcile net income	401.0			2.6			241.3
Changes in working capital	(8.4		)	150.3			(22.5		)
Net cash provided by operating activities	922.7			769.9			573.7
Net cash used in investing activities	(239.9		)	(267.8		)	(272.8		)
Net cash provided by (used in) financing activities	884.4			(153.5		)	(578.7		)
Effect of exchange rate change on cash and cash equivalents	5.9			—			5.6
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period	1,573.1			348.6			(272.2		)
Cash, cash equivalents, and restricted cash, beginning of period	794.1			445.5			717.7
Cash, cash equivalents, and restricted cash, end of period	$	2,367.2		$	794.1		$	445.5

Twelve Months Ended December 31, 2019 as Compared to Twelve Months Ended December 31, 2018

Operating Activities.

For the twelve months ended December 31, 2019, we had a net cash inflow of $922.7 million from operating activities, an increase of $152.8 million, compared to a net cash inflow of $769.9 million for the prior year. The increase in net cash provided by operating activities was primarily due to the B737 advanced payment of $123.0 million received during the third quarter, partially offset by repayment of B787 advances of $98.0 million in 2018. Net tax payments made during 2019 were $105.0 million compared to net tax payments of $202.3 million during the prior year, primarily due to recognition of underlying taxable temporary differences.

Investing Activities

For the twelve months ended December 31, 2019, we had a net cash outflow of $239.9 million from investing activities, compared to a net cash outflow of $267.8 million for the prior year due to reduced spend on capital projects.

Financing Activities

For the twelve months ended December 31, 2019, we had a net cash inflow of $884.4 million for financing activities, an increase in inflow of $1,037.9 million as compared to a net cash outflow of $153.5 million for the same period in the prior year. During 2019, the Company has drawn $250.0 million on the Delayed Draw Term Loan and net draws of $800.0 million on the Revolver in December 2019. During 2019, the Company paid cash dividends totaling $50.4 million to its stockholders of record, compared to $48.0 million in 2018.

Twelve Months Ended December 31, 2018 as Compared to Twelve Months Ended December 31, 2017

Operating Activities

For the twelve months ended December 31, 2018, we had a net cash inflow of $769.9 million from operating activities, an increase of $196.2 million, compared to a net cash inflow of $573.7 million for the prior year. The increase in net cash provided by operating activities was primarily due to the absence of a repayment of $236.0 million in accordance with the B787 Amendment #25 in 2017, partially offset by higher net tax payments in 2018. Net tax payments made during 2018 were $202.3 million compared to net tax payments of $101.9 million during the prior year, primarily due to recognition of underlying taxable temporary differences and the absence of a material forward loss.

Investing Activities

For the twelve months ended December 31, 2018, we had a net cash outflow of $267.8 million from investing activities, compared to a net cash outflow of $272.8 million for the prior year.

Table of Contents

Financing Activities

For the twelve months ended December 31, 2018, we had a net cash outflow of $153.5 million for financing activities, a decrease in outflow of $425.2 million as compared to a net cash outflow of $578.7 million for the same period in the prior year. The decrease in net cash outflow is primarily due to the issuance of the New Notes during the second quarter of 2018, which resulted in $1,300.0 million proceeds from the issuance of debt, partially offset by $586.2 million repayments on debt and debt issuance and financing costs. During 2018, the Company repurchased 9.3 million shares of its Common Stock for $800.0 million, compared to the repurchase of 7.5 million shares of Common Stock for $496.3 million in 2017. During 2018, the Company paid cash dividends totaling $48.0 million to its stockholders of record, compared to $47.1 million in 2017.

Future Cash Needs and Capital Spending

Our liquidity requirements are driven by our long-cycle business model. Our business model is comprised of four to six year non-recurring investment periods, which include design and development efforts, followed by recurring production, in most cases, through the life of the contract, which could extend beyond twenty years. The non-recurring investment periods require significant outflows of cash as we design the product, build tooling, purchase equipment, and build initial production inventories. These activities could be funded partially through customer advances and milestone payments, which are offset against revenue as production units are delivered in the case of customer advances, or recognized as revenue as milestones are achieved in the case of milestone payments. The remaining funds needed to support non-recurring programs come from predictable cash inflows from our mature programs that are in the recurring phase of the production cycle. The non-recurring investment period typically ends concurrently with initial deliveries of completed aircraft by our customers, which indicates that a program has entered into the recurring production phase. When a program reaches steady recurring production, it typically results in long-term generation of cash from operations. As part of our business model, we have continuously added new non-recurring programs, which are supported by mature programs that are in the steady recurring phase of the production cycle to promote growth.

Our primary future cash needs will consist of working capital, research and development, capital expenditures, debt service, and merger and acquisitions. We expend significant capital as we undertake new programs, which begin in the non-recurring investment phase of our business model. In addition, we expend significant capital to meet increased production rates on certain mature and maturing programs. We also require capital to develop new technologies for the next generation of aircraft, which may not be funded by our customers. Purchases of property, plant and equipment for the twelve months ended December 31, 2019 totaled $232.2 million, as compared to $271.2 million for the same period in 2018.

As mentioned previously, for the twelve months ended December 31, 2019, approximately 53% of our net revenues were generated from sales of components to Boeing for the B737 aircraft. On December 19, 2019, Boeing directed Spirit to stop all B737 MAX deliveries to Boeing effective January 1, 2020, due to Boeing’s announced temporary suspension of B737 MAX production. Accordingly, Spirit suspended all B737 MAX production beginning on January 1, 2020. On February 6, 2020, Boeing and Spirit entered into the 2020 MOA superseding the 2019 MOA between the parties (except for Sections 15 and 16). The 2020 MOA provides for Spirit to deliver to Boeing 216 B737 MAX shipsets in 2020. The production rate agreed for 2020 represents less than half of Spirit’s B737 MAX annualized production rate in 2019. The Company currently does not expect to be back at a production rate of 52 aircraft per month until late 2022.

While Spirit has taken actions to align its cost structure to the production suspension and 2020 production rate, including instructing its suppliers to stop delivering B737 MAX products throughout the suspension, implementing workforce actions and reducing its quarterly dividend, the B737 MAX situation presents challenges to Spirit’s liquidity. Spirit has fully drawn all $800.0 million of the Revolver (as defined below) to address critical issues that may arise and agreed to maintain minimum liquidity levels as required by the Company’s Credit Agreement through the first quarter of 2021. If Boeing is unable to return the B737 MAX to service in one or more jurisdictions, begin timely deliveries to customers, if production levels are reduced beyond current expectations due to depressed demand or otherwise, or if Spirit has difficulties in managing its cost structure to take into account changes in production schedules or to accommodate a ramp-up in production, Spirit’s liquidity position may worsen absent Spirit’s ability to procure additional financing, Spirit may trigger an event of default under its credit facilities, and Spirit’s business, financial condition, results of operations and cash flows could be materially adversely impacted. The need to fund the Asco Acquisition and The Bombardier Acquisition and related expenses could also adversely affect our liquidity.

There can be no assurance that we will be able to comply with the financial and other covenants in the Credit Agreement. Our failure to comply with these covenants could cause us to be unable to borrow under the agreement and may constitute an event of default that, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the agreement, which would require us to pay all amounts outstanding. As of December 31, 2019, we had $1,239.7 million in indebtedness outstanding under the Credit Agreement. The occurrence of an event of default, or the acceleration of indebtedness under the Credit Agreement, could result in an event of default under other indebtedness we have outstanding as a result of cross-acceleration or cross default provisions, which would also entitle the creditors under those instruments to seek remedies, including requiring us to pay all amounts outstanding. There can be no assurance, in light of the B737 MAX grounding and resulting impacts

Table of Contents

on demand for the aircraft that, absent new debt or equity financing, the Company would have the funds to repay indebtedness that becomes due as a result of acceleration of the maturity in the future. Failure to maintain compliance with these covenants could (absent a further amendment or waiver) have a material adverse effect on our financial position, operations, and solvency, and could adversely affect the market price for our common stock and our ability to obtain financing in the future.

Furthermore, if the B737 MAX production rates are insufficient to generate the cash the Company needs for working capital in the future, the Company may need to access the debt or equity markets for additional liquidity. To the extent the Company is unable to secure such additional liquidity the Company’s operations and financial position could be materially adversely affected. The Company may not be able to obtain new debt or equity financing in light of the significant uncertainty relating to the B737 MAX.

With respect to the Asco Acquisition and Bombardier Acquisition, to the extent the Company does not have sufficient cash to pay the purchase price and is unable to obtain debt or equity financing or negotiate other arrangements, the Company will still be contractually obligated to close the acquisitions as there is no financing contingency in either acquisition. In addition, there may be unforeseen expenses in connection with the integration of the Asco’s and Bombardier’s businesses, and the costs of generating synergies from the acquisitions of the Asco and Bombardier businesses may be higher than expected.

On October 28, 2018, the Board of Directors increased the capacity of its share repurchase program to $1.0 billion. During the three months ended March 28, 2019, the Company repurchased 0.8 million shares of its Common Stock for $75.0 million. As a result, the total authorization amount remaining under the share repurchase program is $925.0 million. Share repurchases are currently on hold pending the outcome of the B737 MAX grounding. The 2020 Amendment imposes additional restrictions on the Company’s ability to repurchase shares. On February 6, 2020, the Company announced that its Board of Directors reduced its quarterly dividend to a penny per share to preserve liquidity until B737 MAX production reaches higher levels. Accordingly, on February 6, 2020, the Board declared a $0.01 per share quarterly cash dividend on the outstanding Common Stock of the Company payable on April 9, 2020 to stockholders of record at the close of business on March 20, 2020. The Board regularly evaluates the Company's capital allocation strategy and dividend policy. Any future determination to continue to pay dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions, including the requirements of financing agreements to which we may be a party. No assurance can be given that cash dividends will continue to be declared and paid at historical levels or at all.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2019:



Contractual Obligations⁽¹⁾⁽²⁾	2020		2021		2022		2023		2024		2025 and After		Total

Principal payments on term loan	$	22.8	$	22.8	$	22.8	$	371.3	$	—	$	—	$	439.7
Interest on debt⁽³⁾	13.9		13.1		12.4		6.3		—		—		$	45.7
Long-term bonds	—		300.0		—		300.0		—		1,000.0		$	1,600.0
Interest on long-term bonds	66.4		61.0		55.6		49.7		43.7		173.8		$	450.2
Revolver	—		—		—		800.0		—		—		$	800.0
Interest on revolver⁽⁴⁾	41.1		41.0		41.0		21.7		—		—		$	144.8
Non-cancelable financing lease payments	31.4		31.1		27.2		24.1		18.7		36.3		$	168.8
Non-cancelable operating lease payments	8.5		7.5		7.1		6.0		5.6		30.3		$	65.0
Other⁽⁵⁾	6.1		6.1		5.5		5.7		5.7		84.8		$	113.9
Purchase obligations⁽⁶⁾	111.4		8.5		—		—		—		—		$	119.9
Total	$	301.6	$	491.1	$	171.6	$	1,584.8	$	73.7	$	1,325.2	$	3,948.0

_______________________________________


(1)	Does not include repayment of $231.9 million of B787 advances or deferred revenue credits to Boeing. See Note 13 to the Consolidated Financial Statements, Advance Payments.


(2)	The $5.4 million of unrecognized tax benefit liability for uncertain tax positions has been excluded from this table due to uncertainty involving the ultimate settlement period. See Note 20 to the Consolidated Financial Statements, Income Taxes.

Table of Contents


(3)	Interest on our Term Loan was calculated for all years using the three-month LIBOR yield curve as of December 31, 2019 plus applicable margin.


(4)	Interest on our Revolver was calculated for all years using the base rate as of December 31, 2019.


(5)	Includes build to suit asset obligation total of $112.9 million as of December 31, 2019.


(6)	Purchase obligations represent computing, tooling, and property, plant and equipment commitments as of December 31, 2019.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements as of December 31, 2019.

Foreign Operations

We engage in business in various non-U.S. markets. As of December 31, 2019, we have facilities in the U.K., France, and Malaysia, a worldwide supplier base, and a repair center for the European and Middle-Eastern regions. We purchase certain components, assemblies, and materials that we use in our products from foreign suppliers and a portion of our products will be sold directly to foreign customers, including Airbus, or resold to foreign end-users (e.g., foreign airlines and militaries). In addition, we operate an assembly facility in Saint-Nazaire, France to receive and assemble center fuselage frame sections for the A350 XWB commercial aircraft from the facility in Kinston, North Carolina before they are shipped to Airbus.

Currency fluctuations, tariffs and similar import limitations, price controls, tax reform, and labor regulations can affect our foreign operations. Other potential limitations on our foreign operations include expropriation, nationalization, restrictions on foreign investments or their transfers, and additional political and economic risks. In addition, the transfer of funds from foreign operations could be impaired by any restrictive regulations that foreign governments could enact.

Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations, political uncertainties, and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other actions that would have a direct or indirect adverse impact on our business or market opportunities with such governments’ countries. Furthermore, the political, cultural, and economic climate outside the U.S. may be unfavorable to our operations and growth strategy.

For the twelve months ended December 31, 2019, our net revenues from direct sales to non-U.S. customers were approximately $1,296.8 million, or 16% of total net revenues for the same period. For the twelve months ended December 31, 2018, our net revenues from direct sales to non-U.S. customers were approximately $1,254.9 million, or 17% of total net revenues for the same period. For the twelve months ended December 31, 2017, our net revenues from direct sales to non-U.S. customers were approximately $1,260.1 million, or 18% of total net revenues for the same period.

Inflation

A majority of our sales are conducted pursuant to long-term contracts that set fixed unit prices. Certain, but not all, of these contracts provide for price adjustments for inflation or abnormal escalation. Although we have attempted to minimize the effect of inflation on our business through contractual protections, the presence of longer pricing periods within our contracts increases the likelihood that there will be sustained or higher than anticipated increases in costs of labor or materials. Furthermore, if one of the raw materials on which we are dependent (e.g. aluminum, titanium, steel, or raw composite material) were to experience an isolated price increase without inflationary impacts on the broader economy, we may not be entitled to inflation protection under certain of our contracts. If our contractual protections do not adequately protect us in the context of substantial cost increases, it could have a material adverse effect on our results of operations.

Spirit’s contracts with suppliers currently provide for fixed pricing in U.S. dollars, while contracts with respect to our U.K. operations are denominated in U.S. dollars, British pounds sterling or Euros. In some cases, our supplier arrangements contain inflationary adjustment provisions based on accepted industry indices, and we typically include an inflation component in estimating our supply costs. In addition, Spirit has long-term supply agreements for raw materials with most of its suppliers and for certain raw materials, Spirit is party to collective raw material sourcing contracts arranged through Boeing and Airbus (see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Commodity Price and Availability Risks” below). With these strategies, Spirit expects pricing for raw materials to be stable in the near term. We will continue to focus our strategic cost reduction plans on mitigating the effects of potential cost increases on our operations.

Table of Contents

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a result of our operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include credit risks, commodity price, availability risks, interest rate risks, and foreign exchange risks.

Credit Risks

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, the funds in which our pension assets are invested, trade accounts receivable, and unbilled receivables included in contract assets.

Accounts receivable includes amounts billed and currently due from customers. Contract assets include amounts due from customers for performance obligations that have been satisfied but for which amounts have not been billed. These amounts include particular estimated contract changes, claims in negotiation that are probable of recovery, and amounts retained by the customer pending dispute resolution. For the twelve months ended December 31, 2019, approximately 79% of our net revenues were from sales to Boeing. We continuously monitor collections and payments from customers and maintain a provision for estimated credit losses as deemed appropriate based upon historical experience and any specific customer collection issues that have been identified. While we cannot guarantee that we will continue to experience the same credit loss rates in the future, such credit losses have historically not been material. For this reason, we believe that our exposure to this credit risk is not material.

We maintain cash and cash equivalents with various financial institutions and perform periodic evaluations of the relative credit standing of those financial institutions. We have not experienced any losses in such accounts and believe that we are not exposed to any significant credit risk on cash and cash equivalents. Additionally, we monitor our defined benefit pension plan asset investments on a quarterly basis and we believe that we are not exposed to any significant credit risk in these investments. Therefore, exposure to credit risk for these items is not believed to be material.

Commodity Price and Availability Risks

In our business we use various raw materials, including aluminum, titanium, steel, and composites, all of which can experience price fluctuations depending on market conditions. Substantial price increases could reduce our profitability. Although our supply agreements with our customers allow us to pass on certain abnormal increases in component and raw material costs in limited situations, we may not be fully compensated for such increased costs. To mitigate these risks, we use our strategic sourcing initiatives, and are parties to collective raw material sourcing contracts arranged through certain customers that allow us to obtain raw materials at pre-negotiated rates and help insulate us from market volatility across the industry for certain specialized metallic and composite raw materials used in the aerospace industry. In addition, we also have long-term supply agreements with a number of our major parts suppliers. We generally do not employ forward contracts or other financial instruments to hedge commodity price risk, although we continue to review a full range of business options focused on strategic risk management for all raw material commodities. We do not expect our exposure to commodity price and availability risks to be material.

If one or more of our suppliers or subcontractors experiences delivery delays or other performance problems, we may be unable to meet commitments to our customers or incur additional costs. Any failure by our suppliers to provide acceptable raw materials, components, kits, or subassemblies could adversely affect our production schedules and contract profitability. We do not anticipate material risk in this area, as we assess qualification of suppliers and continually monitor them to control risk associated with such supply base reliance.

To a lesser extent, we also are exposed to fluctuations in the prices of certain utilities and services, such as electricity, natural gas, chemicals and freight. We do not believe there is a material exposure, as we utilize a range of long-term agreements to minimize procurement expense and supply risk in these areas.

Interest Rate Risks

As of December 31, 2019, under our 2018 Credit Agreement, we had $1,239.7 million of variable rate debt outstanding consisting of the term loan bearing interest that varies with one month LIBOR, and the revolver bearing interest based on the prime rate as publicly announced by Bank of America. Additionally, as of December 31, 2019, we had $300 million outstanding of Floating Rate Notes bearing 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. Interest rate changes generally do not affect the market value of such debt, but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant.

Table of Contents

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, using Level 2 inputs, was a liability of $0.1 million as of December 31, 2019 and an asset of $2.2 million as of December 31, 2018. The Company recorded a loss related to swap activity of $2.3 million and a gain of $1.4 million to Other (expense) income, net in the Consolidated Statement of Operations for the twelve months ended December 31, 2019 and 2018, respectively.

During the third quarter of 2019 the Company entered into two interest rate swap agreements with a combined notional value of $450.0 million. These derivatives have been designated as cash flow hedges by the Company. The fair value of these hedges was a liability of $0.8 million as of December 31, 2019. Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income (“AOCI”) and recorded in earnings in the period in which the hedged transaction occurs. For the twelve months ended December 31, 2019, the Company recorded a net loss in AOCI of $0.8 million. Within the next 12 months, the Company expects to recognize $0.3 million in earnings related to these hedged contracts. As of December 31, 2019, the maximum term of hedged forecasted transactions was 3 years.

Assuming other variables remain constant, including levels of indebtedness, a 1% increase in interest rates on our variable debt would have an estimated impact on pre-tax earnings and cash flows for the next twelve months of approximately $11.1 million.

Foreign Exchange Risks

We have certain sales, expenses, assets, and liabilities that are denominated in British pounds sterling. Our functional currency for our U.K. operations is the British pound sterling. However, sales made to Boeing and some procurement costs are denominated in U.S. dollars and Euros. As a consequence, movements in exchange rates could cause our net sales and expenses to fluctuate, affecting our profitability and cash flows. We do not believe that this risk to profitability and cash flows is material, as the impact of fluctuations within sales and expenses are expected to be largely offsetting.

Even when revenues and expenses are matched, we must translate British pound sterling denominated results of operations, assets, and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated financial statements. Consequently, increases and decreases in the value of the U.S. dollar as compared to the British pound sterling will affect our reported results of operations and the value of our assets and liabilities on our balance sheet, even if our results of operations or the value of those assets and liabilities has not changed in its original currency. These transactions could affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets, liabilities and shareholders’ equity. We do not believe this exposure to foreign currency exchange risk is material.

In accordance with FASB authoritative guidance, the intercompany revolving credit facility with our U.K. subsidiary is exposed to fluctuations in foreign exchange rates. The intercompany revolving credit facility did not have an outstanding balance as of December 31, 2019. The fluctuation in rates for 2019 resulted in a loss of $0 million reflected in other income/expense. We do not believe that the exposure to foreign currency risk is material for the intercompany revolving credit facility.

In advance of the planned purchase of Asco, we entered into a foreign currency forward contract during the second and third quarter of 2018. The objective of these contracts is to minimize the impact of currency exchange rate movements on the Company's cash flows, 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 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 net settled at the end of the first quarter of 2019 and a fourth contract was entered into in the amount of $542.1 million and settled early in the second quarter of 2019. There is no exposure remaining to this foreign currency forward contract activity, as there is no remaining asset or liability as of December 31, 2019 related to the foreign currency forward contract. The Company recorded a net loss related to foreign currency forward contract activity of $16.7 million for the year ended December 31, 2019.

Table of Contents

Item 8. Financial Statements and Supplementary Data

SPIRIT AEROSYSTEMS HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
Consolidated Financial Statements of Spirit AeroSystems Holdings, Inc. for the periods ended December 31, 2019, December 2018, and December 31, 2017
Report of Independent Registered Public Accounting Firm	57
Consolidated Statements of Operations	59
Consolidated Statements of Comprehensive Income	60
Consolidated Balance Sheets	61
Consolidated Statements of Changes in Stockholders' Equity	62
Consolidated Statements of Cash Flows	63
Notes to Consolidated Financial Statements	65

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Spirit AeroSystems Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Spirit AeroSystems Holdings, Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2020 expressed an adverse opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition in 2018 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for lease recognition in 2019 due to the adoption of ASU No. 2016-02, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition for over time contracts

Table of Contents



Description of the Matter	As more fully described in Note 3 of the consolidated financial statements, significant estimates and assumptions are made to account for the revenue earned through the satisfaction of performance obligations from long-term supply agreements. For performance obligations that are satisfied over time, the Company generally recognizes revenue using an input method with revenue amounts being recognized proportionately as costs are incurred relative to the total expected costs to satisfy the performance obligation. During 2019, revenue from over time contracts accounted for approximately $5,964 million of the Company’s $7,863 million revenues. Auditing the Company’s estimate-at-completion process used in their revenue recognition process is complex due to the judgment involved in evaluating the assumptions made by management to forecast the estimated cost to complete individual accounting contracts. For example, total cost estimates to satisfy the performance obligations reflect management’s assumptions about future labor and overhead efficiencies, program progress on various initiatives and program performance. Changes in those assumptions can have a material effect on the previously recognized revenue. These adjustments are recorded as cumulative catch-up adjustments. Additionally, as described in Management’s Report on Internal Control Over Financial Reporting, the Company identified a material weakness in their internal control over financial reporting associated with the estimate-at-completion process, including instances of non-compliance with the Company’s policies and controls, which required significant changes to the nature and extent of effort in the performance of our procedures.
How We Addressed the Matter in Our Audit	We performed audit procedures that included, among others, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used in management's estimate-at-completion analysis. Specifically, for cost estimates, we (1) inspected contracts and related modifications with the Company’s customers and significant suppliers, (2) inspected the results of the Company's retrospective review analysis of actual costs compared to costs estimated at completion, (3) inquired of contract management, program management and supplier management to evaluate the basis of assumptions used in the estimate at completion and to assess whether all contracts were provided for accounting analysis, and (4) inspected source documentation for customer and supplier claims. We also involved our specialists to perform an independent estimate-at-completion for certain programs and performed sensitivity analyses to determine the effect of changes in assumptions. In response to the material weakness in the Company’s internal controls, we (1) expanded the number of programs tested using a mix of the procedures listed above, (2) expanded the number of individuals that we inquired of and obtained letters of representation from these individuals as to the completeness of items evaluated in the Company’s estimates at completion and (3) sought confirmations from the Company’s key customers to test the completeness of the accounting records relating to contingent liabilities in this area. Additionally, we involved our forensic professionals to assist us in testing the completeness of the identified instances of non-compliance with the Company’s policies and controls and of the contingent liabilities recorded in the Company’s financial statements.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

Wichita, Kansas

February 28, 2020

Table of Contents

Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Operations



	For the Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	($ in millions, except per share data)
Net revenues	$	7,863.1		$	7,222.0		$	6,983.0
Operating costs and expenses
Cost of sales	6,786.4			6,135.9			6,195.3
Selling, general and administrative	261.4			210.4			204.7
Impact of severe weather event	—			(10.0		)	19.9
Research and development	54.5			42.5			31.2
Total operating costs and expenses	7,102.3			6,378.8			6,451.1
Operating income	760.8			843.2			531.9
Interest expense and financing fee amortization	(91.9		)	(80.0		)	(41.7		)
Other (expense) income, net	(5.8		)	(7.0		)	44.4
Income before income taxes and equity in net income of affiliates	663.1			756.2			534.6
Income tax provision	(132.8		)	(139.8		)	(180.0		)
Income before equity in net income of affiliates	530.3			616.4			354.6
Equity in net income of affiliates	(0.2		)	0.6			0.3
Net income	$	530.1		$	617.0		$	354.9
Earnings per share
Basic	$	5.11		$	5.71		$	3.04
Diluted	$	5.06		$	5.65		$	3.01
Dividends declared per common share	$	0.48		$	0.46		$	0.40

See notes to consolidated financial statements

Table of Contents

Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Comprehensive Income



	For the Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	($ in millions)
Net income	$	530.1		$	617.0		$	354.9
Other comprehensive income (loss), net of tax:
Pension, SERP, and Retiree medical adjustments, net of tax effect of ($21.9), $12.7, and ($6.0), respectively	71.7			(41.0		)	19.8
Unrealized foreign exchange income (loss) on intercompany loan, net of tax effect of $2.1, $0.8, and ($1.2), respectively	4.3			(3.2		)	4.9
Unrealized loss on interest rate swaps, net of tax effect of $0.2	(0.6		)	—			—
Foreign currency translation adjustments	20.3			(23.9		)	33.7
Total other comprehensive income (loss), net of tax	95.7			(68.1		)	58.4
Total comprehensive income	$	625.8		$	548.9		$	413.3

See notes to consolidated financial statements

Table of Contents

Spirit AeroSystems Holdings, Inc.

Consolidated Balance Sheets



	December 31, 2019			December 31, 2018
	($ in millions)
Assets
Cash and cash equivalents	$	2,350.5		$	773.6
Restricted cash	0.3			0.3
Accounts receivable, net	546.4			545.1
Contract assets, short-term	528.3			469.4
Inventory, net	1,118.8			1,012.6
Other current assets	98.7			48.3
Total current assets	4,643.0			2,849.3
Property, plant and equipment, net	2,271.7			2,167.6
Right of use assets	48.9			—
Contract assets, long-term	6.4			54.1
Pension assets	449.1			326.7
Deferred income taxes	106.5			205.0
Other assets	80.4			83.2
Total assets	$	7,606.0		$	5,685.9
Liabilities
Accounts payable	$	1,058.3		$	902.6
Accrued expenses	240.2			313.1
Profit sharing	84.5			68.3
Current portion of long-term debt	50.2			31.4
Operating lease liabilities, short-term	6.0			—
Advance payments, short-term	21.6			2.2
Contract liabilities, short-term	158.3			157.9
Forward loss provision, short-term	83.9			12.4
Deferred revenue and other deferred credits, short-term	14.8			20.0
Deferred grant income liability — current	3.6			16.0
Other current liabilities	39.3			58.2
Total current liabilities	1,760.7			1,582.1
Long-term debt	2,984.1			1,864.0
Operating lease liabilities, long-term	43.0			—
Advance payments, long-term	333.3			231.9
Pension/OPEB obligation	35.7			34.6
Contract Liabilities, long-term	356.3			369.8
Forward loss provision, long-term	163.5			170.6
Deferred revenue and other deferred credits, long-term	34.4			31.2
Deferred grant income liability — non-current	29.0			28.0
Deferred income taxes	8.3			0.8
Other non-current liabilities	95.8			134.8
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, 104,882,379 and 105,461,817 shares issued and outstanding, respectively	1.1			1.1
Additional paid-in capital	1,125.0			1,100.9
Accumulated other comprehensive loss	(109.2		)	(196.6		)
Retained earnings	3,201.3			2,713.2
Treasury stock, at cost (41,523,470 and 40,719,438 shares, respectively)	(2,456.8		)	(2,381.0		)
Total stockholders' equity	1,761.4			1,237.6
Noncontrolling interest	0.5			0.5
Total equity	1,761.9			1,238.1
Total liabilities and equity	$	7,606.0		$	5,685.9

See notes to consolidated financial statements

Table of Contents

Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity



	Common Stock					Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings
	Common Stock
	Shares		Amount															Total
	($ in millions, except share data)
Balance — December 31, 2016	121,642,556		$	1.2		$	1,078.9		$	(1,078.8	)	$	(186.9	)	$	2,113.9		$	1,928.3
Net income	—		—			—			—			—			354.9			354.9
Dividends declared	—		—			—			—			—			(46.4		)	(46.4		)
Employee equity awards	667,845		—			22.1			—			—			—			22.1
Stock forfeitures	(92,482	)	—			—			—			—			—			—
Net shares settled	(250,066	)	—			(14.2		)	—			—			—			(14.2		)
SERP shares issued	11,369		—			—			—			—			—			—
Treasury shares	(7,531,617	)	(0.1		)	0.1			(502.1		)	—			—			(502.1		)
Other comprehensive income	—		—			—			—			58.4			—			58.4
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	—		—			—			—			—			617.0			617.0
Adoption of ASC 606	—		—			—			—			—			(277.0		)	(277.0		)
Dividends declared	—		—			—			—			—			(49.2		)	(49.2		)
Employee equity awards	466,719		—			27.4			—			—			—			27.4
Stock forfeitures	(47,962	)	—			—			—			—			—			—
Net shares settled	(177,812	)	—			(15.6		)	—			—			—			(15.6		)
ESPP shares issued	24,996		—			2.1			—			—			—			2.1
Treasury shares	(9,251,729	)	—			0.1			(800.1		)	—			—			(800.0		)
Other comprehensive loss	—		—			—			—			(68.1		)	—			(68.1		)
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	—		—			—			—			—			530.1			530.1
Adoption of ASC 2018-02	—		—			—			—			(8.3		)	8.3			—
Dividends declared	—		$	—		$	—		$	—		$	—		$	(50.3	)	(50.3		)
Employee equity awards	448,594		$	—		$	34.4		$	—		$	—		$	—		34.4
Stock forfeitures	(125,055	)	$	—		$	—		$	—		$	—		$	—		—
Net shares settled	(137,500	)	$	—		$	(12.9	)	$	—		$	—		$	—		(12.9		)
ESPP shares issued	32,341		$	—		$	2.6		$	—		$	—		$	—		2.6
SERP shares issued	6,214		$	—		$	—		$	—		$	—		$	—		—
Treasury shares	(804,032	)	$	—		$	—		$	(75.8	)	$	—		$	—		(75.8		)
Other comprehensive income	—		$	—		$	—		$	—		$	95.7		$	—		95.7
Balance — December 31, 2019	104,882,379		$	1.1		$	1,125.0		$	(2,456.8	)	$	(109.2	)	$	3,201.3		$	1,761.4

See notes to consolidated financial statements

Table of Contents

Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Cash Flows



	For the Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
	($ in millions)
Operating activities
Net income	$	530.1		$	617.0		$	354.9
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	251.6			230.6			214.1
Amortization expense	0.1			0.4			0.2
Amortization of deferred financing fees	3.5			17.9			3.4
Accretion of customer supply agreement	4.3			4.1			2.6
Employee stock compensation expense	36.1			27.4			22.1
Loss (gain) from derivative instruments	8.1			(7.2		)	(0.9		)
Loss (gain) from foreign currency transactions	1.6			(0.3		)	(8.1		)
Loss on impairment and disposition of assets	4.9			1.8			9.5
Deferred taxes	86.1			(38.0		)	52.4
Pension and other post-retirement benefits, net	(20.0		)	(33.4		)	(34.7		)
Grant liability amortization	(16.2		)	(21.6		)	(19.0		)
Equity in net income of affiliates	0.2			(0.6		)	(0.3		)
Forward loss provision	40.7			(170.9		)	—
Changes in assets and liabilities
Accounts receivable, net	12.8			(47.9		)	(48.5		)
Inventory, net	(95.4		)	(61.3		)	319.6
Contract assets	(5.2		)	(8.5		)	—
Accounts payable and accrued liabilities	34.6			244.5			160.3
Profit sharing/deferred compensation	16.0			(40.9		)	7.6
Advance payments	120.8			(98.3		)	(209.6		)
Income taxes receivable/payable	(59.6		)	(28.4		)	25.7
Contract liabilities	(13.0		)	208.3			—
Deferred revenue and other deferred credits	6.2			16.9			(231.2		)
Other	(25.6		)	(41.7		)	(46.4		)
Net cash provided by operating activities	922.7			769.9			573.7
Investing activities
Purchase of property, plant and equipment	(232.2		)	(271.2		)	(273.1		)
Proceeds from sale of assets	0.2			3.4			0.4
Equity in net assets of affiliates	(7.9		)	—			—
Other	—			—			(0.1		)
Net cash used in investing activities	(239.9		)	(267.8		)	(272.8		)
Financing activities
Proceeds from issuance of debt	250.0			1,300.0			—
Proceeds from revolving credit facility	900.0			—			—
Principal payments of debt	(13.4		)	(6.7		)	(2.8		)
Payments on term loan	(16.6		)	(256.3		)	(25.0		)
Payments on revolving credit facility	(100.0		)	—			—
Payments on bonds	—			(300.0		)	—
Taxes paid related to net share settlement awards	(12.9		)	(15.6		)	(14.2		)
Proceeds from issuance of ESPP stock	2.6			2.1			—
Debt issuance and financing costs	—			(23.2		)	(0.9		)
Proceeds from financing under the New Markets Tax Credit Program	—			—			7.6
Purchase of treasury stock	(75.8		)	(805.8		)	(496.3		)
Dividends paid	(50.4		)	(48.0		)	(47.1		)
Other	0.9			—			—
Net cash provided by (used in) financing activities	884.4			(153.5		)	(578.7		)
Effect of exchange rate changes on cash and cash equivalents	5.9			—			5.6
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period	1,573.1			348.6			(272.2		)
Cash, cash equivalents, and restricted cash, beginning of period	794.1			445.5			717.7
Cash, cash equivalents, and restricted cash, end of period	$	2,367.2		$	794.1		$	445.5
Supplemental information
Interest paid	$	93.2		$	70.4		$	43.6
Income taxes paid	$	105.0		$	202.3		$	101.9
Property acquired through finance leases	$	120.3		$	26.8		$	29.3

Table of Contents



Reconciliation of Cash, Cash Equivalents, and Restricted Cash:	For the Twelve Months Ended
	December 31, 2019		December 31, 2018		December 31, 2017
	($ in millions)
Cash and cash equivalents, beginning of the period	$	773.6	$	423.3	$	697.7
Restricted cash, short-term, beginning of the period	0.3		2.2		—
Restricted cash, long-term, beginning of the period	20.2		20.0		20.0
Cash, cash equivalents, and restricted cash, beginning of the period	$	794.1	$	445.5	$	717.7

Cash and cash equivalents, end of the period	$	2,350.5	$	773.6	$	423.3
Restricted cash, short-term, end of the period	0.3		0.3		2.2
Restricted cash, long-term, end of the period	16.4		20.2		20.0
Cash, cash equivalents, and restricted cash, end of the period	$	2,367.2	$	794.1	$	445.5

See notes to consolidated financial statements

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements

($, €, and RM in millions other than per share amounts)

1. Nature of Business

Spirit AeroSystems Holdings, Inc. (“Holdings” or the “Company”) 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 subsidiaries, including 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; Saint-Nazaire, France; and San Antonio, Texas.

2. Adoption of New Accounting Standards

Adoption of ASU 2016-02

In February 2016, the Financial Accounting Standards Board (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 and related updates 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 ASU 2016-02 was an increase to both assets and liabilities of $52.7. 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 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. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the Company’s financial statements and the financial statements of its majority owned or controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and Regulation S-X. All intercompany balances and transactions have been eliminated in consolidation.

The Company is the majority participant in the Kansas Industrial Energy Supply Company ("KIESC"), a tenancy-in-common with other Wichita companies established to purchase natural gas. KIESC is fully consolidated as the Company owns 77.8% of the entity’s equity.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The Company’s U.K. subsidiary uses local currency, the British pound, as its functional currency; the Malaysian subsidiary uses the British pound and the Singapore subsidiary uses the Singapore dollar. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency. As part of the monthly consolidation process, the functional currencies of the Company’s international subsidiaries are translated to U.S. dollars using the end-of-month translation rate for assets and liabilities and average period currency translation rates for revenue and income accounts.

Use of Estimates

The preparation of the Company's financial statements in conformity with GAAP requires management to use estimates and assumptions. The results of these estimates form the basis for making judgments that may affect the reported amounts of assets and liabilities, including the impacts of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period.

Management may make significant judgments when assessing estimated amounts of variable consideration and related constraints, the number of options likely to be exercised, and the standalone selling prices of the Company’s products and services. The Company also estimates the cost of satisfying the performance obligations in its contracts and options that may extend over many years. Cost estimates reflect currently available information and the impact of any changes to cost estimates, based upon the facts and circumstances, are recorded in the period in which they become known.

The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. The Company’s contracts with customers are typically for products and services to be provided at fixed stated prices but may also include variable consideration. Variable consideration may include, but is not limited to, unpriced contract modifications, cost sharing provisions, incentives and awards, non-warranty claims and assertions, provisions for non-conformance and rights to return, or other payments to, or receipts from, customers. The Company estimates the variable consideration using the expected value or the most likely amount based upon the facts and circumstances, available data and trends and the history of resolving variability with specific customers and suppliers.

The Company regularly commences work and incorporates customer-directed changes prior to negotiating pricing terms for engineering work, product modifications, and other statements of work. The Company's contractual terms typically provide for price negotiations after certain customer-directed changes have been accepted by the Company. Prices are estimated until they are contractually agreed upon with the customer. When a contract is modified, the Company evaluates whether additional distinct products and services have been promised at standalone selling prices, in which case the modification is treated as a separate contract. If not, depending on whether the remaining performance obligations are distinct from the goods or services transferred on or before the modification, the modification is either treated prospectively as if it were a termination of the existing contract and the creation of a new contract, treated as if it were a part of the existing contract, or treated as some combination.

The Company allocates the consideration for a contract to the performance obligations on the basis of their relative standalone selling price. The Company estimates the likelihood of the amount of options that the customer is going to exercise when assessing the existence of performance obligations with respect to this allocation or for assessing the impact of loss contracts.

The Company typically provides warranties on all the Company's products and services. Generally, warranties are not priced separately because customers cannot purchase them independently of the products or services under contract so they do not create performance obligations. Spirit warranties generally provide assurance to the Company's customers that the products or services meet the specifications in the contract. In the event that there is a warranty claim because of a covered design, material or workmanship issue, the Company may be required to redesign or modify the product, offer concessions, and/or pay the customer for repairs or perform the repair. Provisions for estimated expenses related to design, service, and product warranties and certain extraordinary rework are made at the time products are sold. These costs are accrued at the time of the sale and are recorded as unallocated cost of sales. These estimates are established using historical information on the nature, frequency, and the cost experience of warranty claims, including the experience of industry peers. In the case of new development products or new customers, Spirit also considers factors including the warranty experience of other entities in the same business, management judgment, and the type and nature of the new product or new customer, among others.

Actual results could differ from those estimates and assumptions.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Revenues and Profit Recognition

Substantially all of the Company’s revenues are from long-term supply agreements with Boeing, Airbus, and other aerospace manufacturers. The Company participates in its customers’ programs by providing design, development, manufacturing, fabrication, and support services for major aerostructures in the fuselage, propulsion, and wing segments. During the early stages of a program, this frequently involves nonrecurring design and development services, including tooling. As the program matures, the Company provides recurring manufacturing of products in accordance with customer design and schedule requirements. Many contracts include clauses that provide sole supplier status to the Company for the duration of the program’s life (including derivatives). The Company's long-term supply agreements typically include fixed price volume-based terms and require the satisfaction of performance obligations for the duration of the program’s life.

The identification of an accounting contract with a customer and the related promises require an assessment of each party’s rights and obligations regarding the products or services to be transferred, including an evaluation of termination clauses and presently enforceable rights and obligations. In general, these long-term supply agreements are legally governed by master supply agreements (or general terms agreements) together with special business provisions (or work package agreements), which define specific program requirements. Purchase orders (or authorizations to proceed) are issued under these agreements to reflect presently enforceable rights and obligations for the units of products and services being purchased. The units for accounting purposes (“accounting contract”) are typically determined by the purchase orders. Revenue is recognized when the Company has a contract with presently enforceable rights and obligations, including an enforceable right to payment for work performed. These agreements may lead to continuing sales for more than twenty years. Customers generally contract with the Company for requirements in a segment relating to a specific program, and the Company’s performance obligations consist of a wide range of engineering design services and manufactured structural components, as well as spare parts and repairs for OEMs. A single program may result in multiple contracts for accounting purposes, and within the respective contracts, non-recurring work elements and recurring work elements may result in multiple performance obligations. The Company generally contracts directly with its customers and is the principal in all current contracts.

Management considers a number of factors when determining the existence of an accounting contract and the related performance obligations that include, but are not limited to, the nature and substance of the business exchange, the contractual terms and conditions, the promised products and services, the termination provisions in the contract, including the presently enforceable rights and obligations of the parties to the contract, the nature and execution of the customer’s ordering process and how the Company is authorized to perform work, whether the promised products and services are distinct or capable of being distinct within the context of the contract, as well as how and when products and services are transferred to the customer.

Revenue is recognized when, or as, control of promised products or services transfers to a customer and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those products or services. Revenue is recognized over time as work progresses when the Company is entitled to the reimbursement of costs plus a reasonable profit for work performed for which the Company has no alternate use. For these performance obligations that are satisfied over time, the Company generally recognizes revenue using an input method with revenue amounts being recognized proportionately as costs are incurred relative to the total expected costs to satisfy the performance obligation. The Company believes that costs incurred as a portion of total estimated costs is an appropriate measure of progress towards satisfaction of the performance obligation since this measure reasonably depicts the progress of the work effort. When we experience abnormal production costs such as excess capacity costs the Company will expense the costs in the period incurred separately from the costs incurred for satisfaction of the performance obligations under our contracts with customers.

Revenue for performance obligations that are not recognized over time are recognized at the point in time when control transfers to the customer (which is generally upon delivery). For performance obligations that are satisfied at a point in time, the Company evaluates the point in time when the customer can direct the use of, and obtain the benefits from, the products and services. Shipping and handling costs are not considered performance obligations and are included in cost of sales as incurred.

The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. The Company’s current contracts do not include any significant financing components because the timing of the transfer of the underlying products and services under contract are at the customers’ discretion. Additionally, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The Company's contracts with customers generally require payment under normal commercial terms after delivery. Payment terms are typically within 30 to 120 days of

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

delivery. The total transaction price is allocated to each of the identified performance obligations using the relative standalone selling price to reflect the amount the Company expects to be entitled for transferring the promised products and services to the customer. A majority of the Company’s agreements with customers include options for future purchases. For the purposes of allocating transaction price, the Company assesses, based upon the facts and circumstances of the business arrangement, the amount and likelihood of options to be exercised that may result in deferral of revenue to future contracts and options. Deferred revenues are recognized as, or when, the underlying future performance obligations are satisfied.

Standalone selling price is the price at which the Company would sell a promised good or service separately to a customer. Standalone selling prices are established at contract inception and subsequent changes in transaction price are allocated on the same basis as at contract inception. Standalone selling prices for the Company’s products and services are generally not observable and the Company uses the “Expected Cost plus a Margin” approach to determine standalone selling price. Expected costs are typically derived from the available periodic forecast information. If a contract modification changes the overall transaction price of an existing contract, the Company allocates the new transaction price on the basis of the relative standalone selling prices of the performance obligations and cumulative adjustments, if any, are recorded in the current period.

The Company also identifies and estimates variable consideration for contractual provisions such as unpriced contract modifications, cost sharing provisions, incentives and awards, non-warranty claims and assertions, provisions for non-conformance and rights to return, or other payments to, or receipts from, customers and suppliers. The timing of satisfaction of performance obligations and actual receipt of payment from a customer may differ and affects the balances of the contract assets and liabilities.

For contracts that are deemed to be loss contracts, the Company establishes forward loss reserves for total estimated costs that are in excess of total estimated consideration in the period in which they become known. These reserves are based on estimates for accounting contracts, plus options that the Company believes are likely to be exercised. The Company records forward loss reserves for all performance obligations in the aggregate for the accounting contract.

Adoption of New Revenue Standard

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) that superseded ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts (“legacy GAAP”). Subsequently, the FASB issued several updates to ASU 2014-09, which are codified in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). ASC 606 also included new guidance on costs related to a contract, which is codified in ASC Subtopic 340-40 (“ASC 340-40”). The Company adopted ASC 606 using the modified retrospective method (“method”) effective as of January 1, 2018 (“date of initial application”). Under this method, the cumulative effect of the adoption of ASC 606 was recognized as an adjustment to retained earnings on the date of initial application (“Transition Adjustment”), and the comparative financial statements for prior periods were not adjusted and continue to be reported under legacy GAAP. The Transition Adjustment was an after tax decrease to retained earnings of approximately $277.0. Financial information for 2019 and 2018 is presented under ASC 606 and financial information for 2017 is presented under legacy GAAP.

The adoption of ASC 606 did not impact the Company's cash flows or the underlying economics of the Company's contracts with customers. However, the pattern and timing of revenue and profit recognition, as well as financial statement presentation and disclosures, has changed.

The significant changes and the qualitative and quantitative impact of the adoption of ASC 606 are noted below:

a.Revenue from Contracts with Customers

The Company no longer uses the units-of-delivery method, and the historical use of contract blocks to define contracts for accounting purposes has been replaced by accounting contracts as identified under ASC 606. The Company's accounting contracts under ASC 606 are for the specific number of units for which orders have been received, which is typically for fewer units than what was used to define contract blocks under legacy GAAP. In most of the Company's contracts, the customer has options or requirements to purchase additional products and services.

b.Deferred Production Costs

Under legacy GAAP, certain production costs were deferred over the life of the contract block, which is not permitted under ASC 606. Accordingly, deferred production costs of $640.3 (pretax), net of previously recognized forward loss reserves of $364.0 (pretax), were eliminated, resulting in a decrease to retained earnings in the Transition Adjustment.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

c.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 in the amount of $342.0 were established in the Transition Adjustment. Contract liabilities primarily represent cash received that is in excess of revenues recognized and is contingent upon the satisfaction of performance obligations. For certain contracts, the allocation of consideration to the performance obligations results in a deferral of revenue that was previously recognized under legacy GAAP. Contract liabilities in the amount of $113.0 were established in the Transition Adjustment, which reflects consideration received prior to the date of initial application that is in excess of the standalone selling price. This liability includes an allocation of consideration to future units, including those under options that the Company believes are likely to be exercised, with prices that are lower than standalone selling price. This liability 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.

d.Contract Costs

The Company’s accounting for preproduction, tooling, and certain other costs has not changed since these costs generally do not fall within the scope of ASC 340-40. Incurred production costs for anticipated contracts (satisfaction of performance obligations, which have commenced because the Company expects the customer to exercise options) continue to be classified as inventory.

Research and Development

Research and development includes costs incurred for experimentation, design, and testing that are expensed as incurred.

Cash and Cash Equivalents

Cash and cash equivalents represent all highly liquid investments with original maturities of three months or less.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. Unbilled receivables are recorded on the balance sheet as contract assets, as per ASC 606 guidance. The Company determines an allowance for doubtful accounts based on a review of outstanding receivables. Account balances are charged off against the allowance after the potential for recovery is considered remote. See Note 6, Accounts Receivable, net, for more information.

The Company has two agreements to sell, on a revolving basis, certain trade accounts receivable balances with Boeing and Airbus to a third party financial institution. These programs were primarily entered into as a result of Boeing and Airbus seeking payment term extensions with the Company and continue to allow Spirit to monetize prior to the payment date for the receivables, subject to payment of a discount. No guarantees are delivered under the agreements. Our ability to continue using such agreements is primarily dependent upon the strength of Boeing’s and Airbus’s financial condition. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the Company's balance sheet. For additional information on the sale of receivables see Note 6, Accounts Receivable, net.

Inventory

Raw materials are stated at lower of cost (principally on an actual or average cost basis) or net realizable value. Production costs for contracts, including costs expected to be recovered on specific anticipated contracts (work that has commenced because the Company expects the customer to exercise options), are classified as work-in-process and include direct material, labor, overhead, and purchases. When we experience abnormal production costs such as excess capacity costs the Company will expense the costs in the period incurred excluded from inventoriable costs. Typically, anticipated contracts materialize and the related performance obligations are satisfied within 6-12 months. Revenue and related cost of sales are recognized as the performance obligations are satisfied. These costs are evaluated for impairment periodically and capitalized costs for which anticipated contracts do not materialize are written off in the period in which it becomes known. Valuation reserves for excess, obsolete, and slow-moving inventory are estimated by evaluating inventory of individual raw materials and parts against both historical usage rates and forecasted production requirements. See Note 9, Inventory.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is applied using a straight-line method over the useful lives of the respective assets as described in the following table:



	Estimated Useful Life
Land improvements	20 years
Buildings	45 years
Machinery and equipment	3-20 years
Tooling — Airplane program — B787, Rolls-Royce	5-20 years
Tooling — Airplane program — all others	2-10 years
Capitalized software	3-7 years

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. The Company’s capitalization policy includes specifications that the software must have a service life greater than one year, is legally and substantially owned by Spirit, and has an acquisition cost of greater than $0.1.

Where the Company is involved in build-to-suit leasing arrangements, the Company is deemed the owner of the asset for accounting purposes during the construction period of the asset. The Company records the related assets and liabilities for construction costs incurred under these build-to-suit leasing arrangements during the construction period. Upon completion of the asset, the Company considers whether the assets and liabilities qualify for derecognition under the sale-leaseback accounting guidance.

Impairment or Disposal of Long-Lived Assets and Goodwill

Spirit reviews capital and amortization of intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the recorded amount may not be recoverable. Under the standard, assets must be classified as either held-for-use or available-for-sale. An impairment loss is recognized when the recorded amount of the asset that is held for use exceeds its fair value, which is measured by discounted cash flows when quoted market prices are not available. For assets available-for-sale, an impairment loss is recognized when the recorded amount exceeds the fair value less cost to sell. The Company performs an annual impairment test for goodwill in the fourth quarter of each year, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below current value.

Deferred Financing Costs

Costs relating to long-term debt are deferred and included in other long-term assets. These costs are amortized over the term of the related debt or debt facilities and are included as a component of interest expense.

Derivative Instruments and Hedging Activity

The Company uses derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates and interest rates. Derivative financial instruments are recognized on the balance sheet as either assets or liabilities and are measured at fair value. Changes in fair value of derivatives are recorded each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item or when the hedge is no longer effective. Cash flows associated with the Company’s derivatives are presented as a component of the operating section of the statement of cash flows. The use of derivatives has generally been limited to interest rate swaps and foreign currency forward contracts. The Company enters into foreign currency forward contracts to reduce the risks associated with the changes in foreign exchange rates on sales and cost of sales denominated in currencies other than the entities’ functional currency.

Fair Value of Financial Instruments

Financial instruments are measured in accordance with FASB authoritative guidance related to fair value measurements. This guidance clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

on the inputs used to measure fair value, and expands disclosures about fair value measurements. See Note 14, Fair Value Measurements.

Income Taxes

Income taxes are accounted for in accordance with FASB authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.

We record an income tax expense or benefit based on the income earned or loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management's original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. We use the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense. See Note 20, Income Taxes, for further discussion.

Stock-Based Compensation and Other Share-Based Payments

Many of the Company’s employees are participants in various stock compensation plans. The expense attributable to the Company’s employees is recognized over the period the amounts are earned and vested, as described in Note 19, Stock Compensation. The expense includes an estimate of expected forfeitures, based on historical forfeiture trends.

4. 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 planning the adoption of ASC 326 effective January 1, 2020, by means of the required cumulative-effect adjustment to the opening retained earnings as of that date. The Company has assessed the scope, approach, and processes required for implementation of the new standard. The Company expects that ASU 2016-13 will be primarily applicable to trade receivables (“AR”) and Contract Assets recorded on our consolidated financial statements. The Company does not expect a material impact of adopting this guidance on our consolidated financial statements, other than incorporating the required changes to our existing presentation and disclosures, which will impact the information reported in our financial statements.

5. 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 2017, the changes in estimates apply to contract blocks under legacy GAAP under the units-of-delivery method. For 2019 and 2018, cumulative catch-up adjustments are primarily related to changes in the estimated margin of contracts with performance obligations that are satisfied over time.

Changes in estimates are summarized below:



Changes in Estimates	December 31, 2019		December 31, 2018		December 31, 2017
(Unfavorable) Favorable Cumulative Catch-up Adjustments by Segment
Fuselage	(1.3	)	(5.3	)	4.0
Propulsion	(1.2	)	(0.2	)	3.8
Wing	0.5		1.7		23.4
Total (Unfavorable) Favorable Cumulative Catch-up Adjustment	(2.0	)	(3.8	)	31.2

(Forward Loss) and Changes in Estimates on Loss Programs by Segment
Fuselage	(37.9	)	3.4		(223.2	)
Propulsion	(15.1	)	(0.7	)	(40.2	)
Wing	(10.5	)	1.2		(63.9	)
Total (Forward Loss) and Change in Estimate on Loss Program	(63.5	)	3.9		(327.3	)

Total Change in Estimate	(65.5	)	0.1		(296.1	)
EPS Impact (diluted per share based on statutory rates)	(0.50	)	0.00		(1.58	)

2019 Changes in Estimates

During the twelve months ended December 31, 2019, we recognized net forward loss charges of $65.5 primarily driven by the production rate change on B787 from 14 aircraft per month to 10 aircraft per month.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

2018 Changes in Estimates

Favorable changes in estimates on loss programs were primarily driven by favorable performance on cost initiatives and mitigation of risks, partially offset by forward loss charges due to the adoption of ASU 2017-07 on the B787 program. Total unfavorable cumulative catch-up adjustments were driven by increased production costs incurred due to factory disruption challenges on the B737 program.

2017 Changes in Estimates

On August 1, 2017, Boeing and the Company through its subsidiary, Spirit, entered into a Collective Resolution Memorandum of Understanding (the “2017 MOU”), which required Boeing and Spirit to negotiate and execute definitive documentation implementing the agreements set forth in the 2017 MOU by September 29, 2017.

On September 22, 2017, Boeing and Spirit completed their negotiation of such definitive documentation and entered into Amendment 30 to the long-term supply agreement covering products for Boeing’s B737, B747, B767, and B777 commercial aircraft programs (“Sustaining Amendment #30”) and Amendment 25 to the long-term supply agreement covering products for Boeing's B787 commercial aircraft program (the “787 Amendment #25” and, together with the Sustaining Amendment #30, the “Definitive Documentation”) generally established pricing terms for the B737, B747, B767, and B777 models (excluding the B777X) through December 31, 2022 (with certain limited exceptions), and for the B787-8, -9, and -10 models through line unit 1405.

In the second quarter of 2017, in connection with the 2017 MOU, the Company formally extended the current contract block ending at line unit 1003 to line unit 1300 and established a planning block from line units 1301 to 1405. Based on cost updates, contract block extension, and planning block addition, the Company updated its estimated contract costs and revenue for the B787 program. As a result, the Company recorded a second quarter 2017 forward loss of $352.8 on its B787 program. In the fourth quarter of 2017, favorable cost initiatives and benefits from absorption of fixed costs due to announced rate increases, resulted in a favorable change in estimate on the B787 program of $41.1.

During 2017, the Company recorded a forward loss on the A350XWB program of $19.4, primarily related to unfavorable exchange rate impacts on labor and non-labor costs and supplier claims.

6. 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:



	December 31, 2019			December 31, 2018
Trade receivables	$	515.2		$	527.9
Other	32.6			17.9
Less: allowance for doubtful accounts	(1.4		)	(0.7		)
Accounts receivable, net	$	546.4		$	545.1

_______________________________________

During 2019, $6,064.6 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 $24.7 for the year ended December 31, 2019 and is included in Other (expense) income. See Note 23, Other (Expense) Income, net.

7. 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 have been fully satisfied and billing is expected within 12 months of contract origination and contract assets, long-term are fully satisfied obligations that are expected to be billed in more than 12 months. No impairments to contract assets were recorded for the period ended December 31, 2019.

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 21, 2018			December 31, 2019			Change
Contract assets	$	523.5		$	534.7		$	11.2
Contract liabilities	(527.7		)	(514.6		)	13.1
Net contract assets (liabilities)	$	(4.2	)	$	20.1		$	24.3

The increase in contract assets reflects the net impact of additional revenue recognized in excess of billed revenues during the period. The decrease in contract liabilities reflects the net impact of additional deferred revenues recorded in excess of revenue recognized during the period. For the period ended December 31, 2019, the Company recognized $139.0 of revenue that was included in the contract liability balance at the beginning of the period.

8. 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. Additionally, the Company disaggregates revenue based upon the location where products and services are transferred to the customer, and based upon major customer. The Company’s principal operating segments and related revenue are noted in Note 26, Segment and Geographical Information.

The following table disaggregates revenues by the method of performance obligation satisfaction:



	For the Twelve Months Ended
Revenue	December 31, 2019		December 31, 2018
Contracts with performance obligations satisfied over time	$	5,963.5	$	5,628.5
Contracts with performance obligations satisfied at a point in time	1,899.6		1,593.5
Total Revenue	$	7,863.1	$	7,222.0

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The following table disaggregates revenue by major customer:



	For the Twelve Months Ended
Customer	December 31, 2019		December 31, 2018
Boeing	$	6,237.2	$	5,677.7
Airbus	1,250.6		1,180.8
Other	375.3		363.5
Total net revenues	$	7,863.1	$	7,222.0

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



	For the Twelve Months Ended
Location	December 31, 2019		December 31, 2018
United States	$	6,566.3	$	5,967.1
International
United Kingdom	771.9		763.3
Other	524.9		491.6
Total International	1,296.8		1,254.9
Total Revenue	$	7,863.1	$	7,222.0

Remaining Performance Obligations

Unsatisfied, or partially unsatisfied, performance obligations currently under contract that are expected to be recognized to revenue in the future are noted in the table below. The Company expects options to be exercised in addition to the amounts presented below.



	2020	2021	2022	2023 and After
Unsatisfied performance obligations	$3,777.2	$4,645.0	$4,686.1	$2,829.2

9. 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. See Note 3, Summary of Significant Accounting Policies - Inventory.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	December 31, 2019		December 31, 2018
Raw materials	$	253.1	$	240.4
Work-in-process⁽¹⁾	822.8		727.8
Finished goods	14.5		7.1
Product inventory	1,090.4		975.3
Capitalized pre-production	28.4		37.3
Total inventory, net	$	1,118.8	$	1,012.6

_______________________________________

Product inventory, summarized in the table above, is shown net of valuation reserves of $39.0 and $55.2 as of December 31, 2019 and December 31, 2018, respectively.

(1)

For the period ended December 31, 2019, 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 period ended December 31, 2019, and December 31, 2018, work-in-process inventory includes $157.2 and $151.6, respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the period.

10. Property, Plant and Equipment, net

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



	December 31, 2019			December 31, 2018
Land	$	15.9		$	15.0
Buildings (including improvements)	924.0			822.7
Machinery and equipment	1,941.5			1,697.0
Tooling	1,047.4			1,032.3
Capitalized software	277.8			269.2
Construction-in-progress	192.8			227.8
Total	4,399.4			4,064.0
Less: accumulated depreciation	(2,127.7		)	(1,896.4		)
Property, plant and equipment, net	$	2,271.7		$	2,167.6

Capitalized interest was $6.5 and $6.7 for the twelve months ended December 31, 2019 and 2018, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs of $142.2, $136.2, and $130.0 for the twelve months ended December 31, 2019, 2018 and 2017, 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 $17.7, $16.7, and $19.2 for the twelve months ended December 31, 2019, 2018, and 2017, 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 that an impairment of $3.8 and $1.9 primarily related to unused machinery, was necessary for the twelve months ended December 31, 2019 and 2018 respectively. For the twelve months ended December 31, 2017 an impairment of $8.2 was recorded, primarily related to abandoned construction-in-progress. The Company records impairments related to property, plant and equipment to costs of sales on the statement of operations.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

11. Leases

The Company determines if an arrangement is a lease at the inception of a signed agreement. Operating leases are included in 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 portion 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 those specific leases referenced above. 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.

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 twelve months ended December 31, 2019, total net lease cost was $25.1. This was comprised of $9.0 of operating lease costs, $13.1 amortization of assets related to finance leases, and $3.0 interest on finance lease liabilities.

Supplemental cash flow information related to leases was as follows:



	For the Twelve Months Ended
	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	8.9
Operating cash flows from finance leases	$	3.0
Financing cash flows from finance leases	$	12.1

ROU assets obtained in exchange for lease obligations:
Operating leases	$	2.3
Finance leases	$	—

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Supplemental balance sheet information related to leases:



	December 31, 2019
Finance leases:
Property and equipment, gross	$	165.5
Accumulated amortization	(23.5		)
Property and equipment, net	$	142.0

The weighted average remaining lease term as of December 31, 2019 for operating and finance leases was 10.2 years and 6.5 years, respectively. The weighted average discount rate as of December 31, 2019 for operating and finance leases was 5.6% and 4.3%, respectively. See Note 16, Debt, for current and non-current finance lease obligations.

As of December 31, 2019, remaining maturities of lease liabilities were as follows:



	2020		2021		2022		2023		2024		2025 and thereafter		Total Lease Payments		Less: Imputed Interest			Total Lease Obligations
Operating Leases	$	8.5	$	7.5	$	7.1	$	6.0	$	5.6	$	30.3	$	65.0	$	(16.0	)	$	49.0
Financing Leases	$	31.4	$	31.1	$	27.2	$	24.1	$	18.7	$	36.3	$	168.8	$	(21.7	)	$	147.1

As of December 31, 2019, the Company had additional operating and financing lease commitments that have not yet commenced of approximately $2.6 and $59.8 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 7 years. The Company's involvement in the construction and design process for these assets is generally limited to project management.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

12. Other Assets

Other assets are summarized as follows:



	December 31, 2019			December 31, 2018
Intangible assets
Patents	$	2.0		$	2.0
Favorable leasehold interests	2.8			6.2
Total intangible assets	4.8			8.2
Less: Accumulated amortization-patents	(1.9		)	(1.9		)
Accumulated amortization-favorable leasehold interest	(1.7		)	(4.9		)
Intangible assets, net	1.2			1.4
Deferred financing
Deferred financing costs	41.7			41.7
Less: Accumulated amortization-deferred financing costs	(36.9		)	(35.6		)
Deferred financing costs, net	4.8			6.1
Other
Goodwill — Europe	2.4			2.4
Equity in net assets of affiliates	7.7			—
Supply agreement⁽¹⁾	11.5			14.6
Restricted cash	16.4			20.2
Other	36.4			38.5
Total	$	80.4		$	83.2

_______________________________________


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

13. Advance Payments

Advances on the B787 Program. Boeing has made advance payments to Spirit under the B787 Special Business Provisions and General Terms Agreement (collectively, 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 originally 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 were to offset the purchase price for shipsets 1001 through 1120. 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 $0.45 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 December 31, 2019, the amount of advance payments received by us from Boeing and not yet repaid was approximately $231.9.

Advances on the B737 Program. 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. In an effort to minimize the disruption to Spirit's operations and its supply chain, the Company received an advance payment from Boeing in the amount of $123.0, during the third quarter of 2019. On February 6, 2020, Boeing and Spirit entered into a Memorandum of Agreement (the “2020 MOA”) that included terms and conditions for the advance repayment that will occur over 2022 shipset deliveries.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

14. 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 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, an unsecured revolver, 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:



	December 31, 2019					December 31, 2018
	Carrying Amount		Fair Value			Carrying Amount		Fair Value
Senior unsecured term loan A (including current portion)	$	438.5	$	440.1	⁽²⁾	$	204.7	$	197.8	⁽²⁾
Revolver	800.0		800.0		⁽²⁾	—		—
Floating Rate Notes	299.1		298.4		⁽¹⁾	298.5		292.9		⁽¹⁾
Senior unsecured notes due 2023	298.3		307.2		⁽¹⁾	297.9		297.5		⁽¹⁾
Senior unsecured notes due 2026	297.8		305.6		⁽¹⁾	297.5		274.5		⁽¹⁾
Senior unsecured notes due 2028	694.1		734.4		⁽¹⁾	693.5		663.0		⁽¹⁾
Total	$	2,827.8	$	2,885.7		$	1,792.1	$	1,725.7

_______________________________________


(1)	Level 1 Fair Value hierarchy


(2)	Level 2 Fair Value hierarchy

15. 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.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

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 16, Debt, for more information.

Derivatives Not Accounted for as Hedges

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 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 a liability of $0.1 as of December 31, 2019 and an asset of $2.2 as of December 31, 2018. The Company recorded a loss related to swap activity of $2.3 and a gain of $1.4 to Other (expense) income, net in the Consolidated Statement of Operations for the twelve months ended December 31, 2019 and 2018, respectively.

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”), 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 into 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 net settled at the end of the first quarter of 2019 and a fourth contract was entered into in the amount of $542.1; this contract was net settled early in the second quarter of 2019 and a fifth contract was entered into and also net settled early in the second quarter of 2019 in the amount of $537.6. There are no foreign currency forward contracts outstanding as of December 31, 2019. The Company recorded a net loss related to foreign currency forward contract activity of $16.7 for the year ended December 31, 2019.

Derivatives Accounted for as Hedges

Cash Flow Hedges

During the third quarter of 2019 the Company entered into two interest rate swap agreements with a combined notional value of $450.0. These derivatives have been designated as cash flow hedges by the Company. The fair value of these hedges was a liability of $0.8 as of December 31, 2019.

Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income (“AOCI”) and recorded in earnings in the period in which the hedged transaction occurs. For the twelve months ended December 31, 2019, the Company recorded a net loss in AOCI of $0.8. For the twelve months ended December 31, 2019, $0.1 of income was reclassified from AOCI to earnings. Within the next 12 months, the Company expects to recognize $0.3 in earnings related to these hedged contracts. As of December 31, 2019, the maximum term of hedged forecasted transactions was 3 years.

16. Debt

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

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	December 31, 2019				December 31, 2018
	Current		Noncurrent		Current		Noncurrent
Senior unsecured term loan A	$	22.8	$	415.7	$	22.7	$	182.0
Revolver	—		800.0		—		—
Floating Rate Notes			299.1		—		298.5
Senior notes due 2023			298.3		—		297.9
Senior notes due 2026			297.8		—		297.5
Senior notes due 2028			694.1		—		693.5
Present value of finance lease obligations	25.8		121.3		7.1		35.3
Other	1.6		57.8		1.6		59.3
Total	$	50.2	$	2,984.1	$	31.4	$	1,864.0

2018 Credit Agreement

On July 12, 2018, the Company entered into a $1,256.0 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 an $800.0 revolving credit facility (the “Revolver”), a $206.0 term loan A facility (the “Term Loan”) and a $250.0 delayed draw term loan facility (the “Delayed Draw Term Loan”).

Each of the Revolver, the 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 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 Term Loan. The principal obligations under the Delayed Draw Term Loan are to be repaid in equal quarterly installments of $3.1, subject to adjustments for any extension of the availability period of the Delayed Draw Term Loan, commencing with the fiscal quarter ending September 26, 2019, with the balance due at maturity of the Delayed Draw Term Loan.

The 2018 Credit Agreement also contains an accordion feature that provides Spirit with the option to increase the 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, 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.

In addition to paying interest on outstanding principal under the 2018 Credit Agreement, Spirit is required to pay an unused line fee at a rate per annum equal to the applicable percentage for the applicable pricing tier set forth in the table below under the heading “Commitment Fee” on the unused portion of the commitments under the revolving credit facility. Spirit is required to pay letter of credit fees at a rate per annum equal to the applicable percentage for the applicable pricing tier set forth in the table below under the heading “Letter of Credit Fee” on the amounts available to be drawn under each standby letter of credit. Spirit is also required to pay fronting fees in respect of letters of credit to the issuing banks and customary administrative fees to the administrative agent. At December 31, 2019, Spirit had no letters of credit outstanding. The Company was subject to pricing tier 3 at December 31, 2019. However, the Company’s credit ratings were downgraded two notches in January 2020.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



Pricing Tier	Credit Rating (S&P/Moody's)	Commitment Fee	Letter of Credit Fee	Eurodollar Rate Loans	Base Rate Loans
1	≥BBB+/Baa1	0.125%	1.125%	1.125%	0.125%
2	BBB/Baa2	0.150%	1.250%	1.250%	0.250%
3	BBB-/Baa3	0.200%	1.375%	1.375%	0.375%
4	BB+/Ba1	0.250%	1.625%	1.625%	0.625%
5	≤BB/Ba2	0.300%	1.875%	1.875%	0.875%

As a result of the modification and extinguishment of the Company's prior credit agreement, the Company recognized a loss on extinguishment of $1.1, all of which is reflected within amortization of deferred financing fees on the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2018. As of December 31, 2019, the outstanding balance of the Term Loan and Delayed Draw Term Loan was $439.7 and the carrying value was $438.5. The outstanding balance of the Revolver, drawn in December 2019 was $800.0 and the carrying value was $800.0.

The 2018 Credit Agreement contains customary affirmative and negative covenants, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or transfers of assets, payments of dividends, transactions with affiliates, change in control and other matters customarily restricted in such agreements.

The 2018 Credit Agreement also contains the following financial covenants:



Interest Coverage Ratio		Shall not be less than 4.0:1.0
Total Leverage Ratio		Shall not exceed 3.5:1.0

The 2020 Amendment

On February 24, 2020, the Company entered into an amendment (the “2020 Amendment”) to the 2018 Credit Agreement. The primary purpose for entering into the 2020 Amendment was to obtain covenant relief with respect to expected breaches of the total leverage ratio and interest coverage ratios under the 2018 Credit Agreement. Given the production suspension and 2020 production rate for the B737 MAX, absent a waiver or an amendment of the 2018 Credit Agreement, the Company was expected to breach the total leverage ratio beginning with the first fiscal quarter of 2020 and continuing into 2021. The 2020 Amendment waived or modified the testing of the ratios set forth in the 2018 Credit Agreement until the commencement of the second fiscal quarter of 2021 (the “Reversion Date”) and put the following financial ratios and tests in place for such time period:

•

Minimum Liquidity: As of the end of each fiscal month, commencing with the first fiscal month after entering into the 2020 Amendment, the Company shall have minimum liquidity of not less than: (i) $1,000 through, and including, the last fiscal month ending in the third fiscal quarter of 2020; (ii) $850, as of the end of each fiscal month ending in the fourth fiscal quarter of 2020; and (iii) $750 , as of the end of each fiscal month ending in the first fiscal quarter of 2021; provided, however, that if the Company receives proceeds of at least $750 from the issuance of indebtedness before the Reversion Date, the minimum liquidity requirement shall remain at $1,000. Liquidity includes cash and cash equivalents and amounts available to be drawn under the Revolver and the 2020 DDTL (as defined below).

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The 2020 Amendment adds Spirit AeroSystems North Carolina, Inc. as an additional guarantor (the “New Guarantor”) and provides for the grant of security interests to the lenders under the 2018 Credit Agreement with respect to certain real property and personal property, including certain equity interests, owned by Spirit, as borrower, and the Guarantors, which include Holdings and the New Guarantor. Such guarantee and security interests will be released, at the option of Spirit, so long as no default or event of default shall exist at the time thereof, or immediately after giving effect thereto, if (A) (I) the senior unsecured debt rating of Spirit is “BBB-” or higher as determined by Standard & Poor’s Financial Services LLC (“S&P”), and (II) the senior unsecured debt rating of Spirit is “Baa3” or higher as determined by Moody’s Investors Service, Inc. (“Moody’s”), or (B) S&P and Moody’s have each confirmed, in a writing in form and substance reasonably satisfactory to the administrative agent, that (I) the senior unsecured debt rating of Spirit will be “BBB-” or higher as determined by S&P, and (II) the senior unsecured debt rating of Spirit will be “Baa3” or higher as determined by Moody’s, in each case of the foregoing clauses (B)(I) and (B)(II), after giving effect to the release of the security (the date of such release, the “Security Release Date”).

Each of the Revolver, the Term Loan and the Delayed Draw Term Loan continues to mature on July 12, 2023, and, following the 2020 Amendment, bears interest, at Spirit’s option, at either LIBOR plus 2.375% or a defined “base rate” plus 1.375%, subject to adjustment to between LIBOR plus 1.625% and LIBOR plus 2.625% (or between base rate plus 0.625% and base rate plus 1.625%, as applicable) based on Spirit’s senior unsecured debt ratings provided by S&P and/or Moody’s.

Under the 2020 Amendment, the pricing table and tiers were updated to reflect the below. The pricing table will revert back to the 2018 Credit Agreement pricing table upon the Security Release Date.



Pricing Tier	Credit Rating (S&P/Moody's)	Revolving Commitment Fee	Applicable Rate For LIBOR Loans and Letter of Credit Fees	Applicable Rate for Base Rate Loans
I	Greater than or equal to BBB+ / Baa1	0.125%	1.625%	0.625%
II	BBB / Baa2	0.15%	1.75%	0.75%
III	BBB- / Baa3	0.2%	1.875%	0.875%
IV	BB+ / Ba1	0.3%	2.125%	1.125%
V	BB / Ba2	0.375%	2.375%	1.375%
VI	Less than or equal to BB- / Ba3	0.5%	2.625%	1.625%

2020 Delayed Draw Term Loan

On February 24, 2020, Spirit also entered into a $375.0 senior unsecured delayed draw term loan among Spirit, as borrower, the Company, as parent guarantor, the New Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “2020 DDTL”). The 2020 DDTL is available to be drawn until August 15, 2020. The 2020 DDTL matures and shall be repaid in full (if drawn) on the earlier to occur of (a) September 15, 2020 and (b) the date that is 45 days after the date on which the Federal Aviation Administration re-certifies the B737 MAX program.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Senior Notes

2026 Notes. In June 2016, Spirit 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 December 31, 2019, the outstanding balance of the 2026 Notes was $300.0 and the carrying value was $297.8. The indenture for the 2026 Notes 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 2026 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. On February 24, 2020, Spirit entered into a Second Supplemental Indenture (the “Supplemental Indenture”) by and among Spirit, the Company, the New Guarantor, and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with the 2026 Notes. Under the Supplemental Indenture, the noteholders were granted security on an equal and ratable basis with the lenders under the 2018 Credit Agreement (as amended by the 2020 Amendment) until the security in favor of the lenders under the 2028 Credit Agreement is released. The Supplemental Indenture also added the New Guarantor as an additional guarantor under the indenture governing the 2026 Notes. The guarantee of the New Guarantor will be released upon the release of its guarantee under the 2018 Credit Agreement.

2022 Notes. On May 22, 2018, the Company commenced an offer to purchase for cash (the “Tender Offer”) any and all of the $300.0 outstanding principal amount of our 5 1/4% Senior Notes due 2022 (the “2022 Notes”). The Tender Offer was made pursuant to an Offer to Purchase dated May 22, 2018, and a related Letter of Transmittal and Notice of Guaranteed Delivery, which set forth the terms and conditions of the Tender Offer in full detail. Under the terms of the Tender Offer, holders of 2022 Notes who validly tendered their notes at or prior to May 29, 2018 received, in whole dollars, $1,028.50 per $1,000 principal amount of Notes tendered. Tendering holders received accrued and unpaid interest from the last applicable interest payment date to, but not including, the settlement date of the Tender Offer.

On May 30, 2018, Spirit repurchased $202.6 aggregate principal amount of its 2022 Notes pursuant to the Tender Offer. In addition, on June 29, 2018, Spirit redeemed the remaining $97.4 aggregate principal amount of the 2022 Notes outstanding. The redemption price of the 2022 Notes was 102.85% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date of June 29, 2018. Following the redemption on June 29, 2018, none of the 2022 Notes remain outstanding.

As a result of the extinguishment of the 2022 Notes, the Company recognized a loss on extinguishment of $13.2, all of which is reflected within amortization of deferred financing fees on the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2018.

New 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 Notes on a senior unsecured basis (the “Guarantees”).

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

balance of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $300.0, $300.0, and $700.0 as of December 31, 2019, respectively. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $299.1, $298.3, and $694.1 as of December 31, 2019, respectively.

As of December 31, 2019, the Company was and expects to remain in full compliance with all covenants contained in the indentures governing the 2021 Notes, 2023 Notes, 2026 Notes, and the 2028 Notes through December 31, 2020.

17. Pension and Other Post-Retirement Benefits

Multi-employer Pension Plan

In connection with the collective bargaining agreement signed with the International Association of Machinists and Aerospace Workers (“IAM”), the Company contributes to a multi-employer defined benefit pension plan (“IAM National Pension Fund”). As of July 1, 2015, the level of contribution, as specified in the bargaining agreement was, in whole dollars, $1.75 per hour of employee service. The AIM bargaining agreement provided for a $0.05 per hour increase, in whole dollars, effective July 1 of each year through 2019. Effective July 1, 2019 the level of employee contribution increased to $1.95 per hour and will remain at $1.95 per hour through contract expiration. The IAM contract expires June 24, 2023.

The collective bargaining agreement with the International Union, Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) requires the Company to contribute a specified amount per hour of service to the IAM National Pension Fund. The specified amount was $1.70 per hour in 2019. Per the negotiated UAW collective bargaining agreement, the pension contributions, in whole dollars, was $1.70 per hour effective January 1, 2019 and will be $1.75 per hour effective January 1, 2020 through year 2025.

The risk of this multi-employer plan is different from single-employer plans in the following aspects:


1.	Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.


2.	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.


3.	If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The following table summarizes the multi-employer plan to which the Company contributes. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2018 and 2019 is for the plan's year-end at December 31, 2018, and December 31, 2019, respectively. The zone status is based on information received from the plan.



		Pension Protection Act Zone Status										Expiration Date of Collective- Bargaining Agreement
				FIP/RP Status Pending/ Implemented	Contributions of the Company
	EIN/Pension Plan Number				Contributions of the Company						Surcharge Imposed
Pension Fund	EIN/Pension Plan Number	2018	2019		2017		2018		2019		Surcharge Imposed
IAM National Pension Fund	51-60321295	Green	Red	Yes	$	30.3	$	35.0	$	40.7	Yes	IAM June 24, 2023 UAW December 7, 2025
Pension Fund	Year Company Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan’s Year-End)
IAM National Pension Fund	2017, 2018, 2019

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Defined Contribution Plans

The Company contributes to a defined contribution plan available to all U.S. employees, excluding IAM and UAW represented employees. Under the plan, the Company makes a matching contribution of 75% of the employee contribution to a maximum 8% of eligible individual employee compensation. In addition, non-matching contributions based on an employee’s age and years of service are paid at the end of each calendar year for certain employee groups.

The Company recorded $35.9, $35.1, and $33.6 in contributions to these plans for the twelve months ended December 31, 2019, 2018, and 2017, respectively.

On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined contribution pension plan for those employees who are hired after the date of acquisition. Under the plan, the Company contributes 8% of base salary while participating employees are required to contribute 4% of base salary. The Company recorded $4.1 in contributions to this plan for the twelve months ended December 31, 2019, $6.8 in contributions for the twelve months ended December 31, 2018 and $5.4 in contributions for the twelve months ended December 31, 2017.

Defined Benefit Pension Plans

Effective June 17, 2005, pension assets and liabilities were spun-off from three Boeing qualified plans into four qualified Spirit plans for each Spirit employee who did not retire from Boeing by August 1, 2005. Effective December 31, 2005, all four qualified plans were merged together. In addition, Spirit has one nonqualified plan providing supplemental benefits to executives who transferred from a Boeing nonqualified plan to a Spirit plan and elected to keep their benefits in this plan. Both plans are frozen as of the date of the Boeing Acquisition (i.e., no future service benefits are being earned in these plans). The Company intends to fund its qualified pension plan through a trust. Pension assets are placed in trust solely for the benefit of the pension plans’ participants and are structured to maintain liquidity that is sufficient to pay benefit obligations.

On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined benefit pension plan for those employees that had pension benefits remaining in BAE Systems’ pension plan. In accordance with U.K. legislation, the plan and its assets are managed by an independent trustee company. The investment strategy adopted by this trustee is documented in a Statement of Investment Principles in line with U.K. legislation. The principles for the investment strategy are to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. The trustee has invested the plan assets in pooled arrangements with authorized investment companies that were selected to be consistent with the plan's overall investment principles and strategy. Effective December 31, 2013, the U.K. pension plan was closed and benefits were frozen and thereafter subject only to statutory pension revaluation.

Other Post-Retirement Benefit Plans

The Company also has post-retirement health care coverage for eligible U.S. retirees and qualifying dependents prior to age 65. Eligibility for employer-provided benefits is limited to those employees who were employed at the date of the Boeing Acquisition and retire on or after attainment of age 62 and 10 years of service. Employees who do not satisfy these eligibility requirements can retire with post-retirement medical benefits at age 55 and 10 years of service, but they must pay the full cost of medical benefits provided.

Obligations and Funded Status

The following tables reconcile the funded status of both pension and post-retirement medical benefits to the balance on the balance sheets for the fiscal years 2019 and 2018. Benefit obligation balances presented in the tables reflect the projected benefit obligation and accumulated benefit obligation for the Company’s pension plans, and accumulated post-retirement benefit obligations for the Company’s post-retirement medical plan. The Company uses an end of fiscal year measurement date of December 31 for the Company's U.S. pension and post-retirement medical plans. Special termination benefits for the period ended December 31, 2019 are related to a voluntary retirement program offered by the Company in the second quarter of 2019.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	Pension Benefits						Other Post-Retirement Benefits
	Periods Ended December 31,						Periods Ended December 31,
U.S. Plans	2019			2018			2019			2018
Change in projected benefit obligation:
Beginning balance	$	997.0		$	1,084.4		$	40.3		$	47.2
Service cost	—			—			0.9			1.1
Employee contributions	—			—			0.9			1.0
Interest cost	36.5			34.7			1.2			1.0
Actuarial losses (gains)	141.1			(91.7		)	1.8			(2.4		)
Special termination benefits	5.2			—			3.9			—
Plan Settlements	(49.9		)	—			—			—
Benefits paid	(33.3		)	(30.4		)	(7.2		)	(7.6		)
Projected benefit obligation at the end of the period	$	1,096.6		$	997.0		$	41.8		$	40.3
Assumptions used to determine benefit obligation:
Discount rate	3.19		%	4.21		%	2.55		%	3.74		%
Rate of compensation increase	N/A			N/A			N/A			N/A
Medical assumptions:
Trend assumed for the year	N/A			N/A			5.90		%	6.24		%
Ultimate trend rate	N/A			N/A			4.50		%	4.50		%
Year that ultimate trend rate is reached	N/A			N/A			2038			2038
Change in fair value of plan assets:
Beginning balance	$	1,302.8		$	1,410.3		$	—		$	—
Actual (loss) return on assets	299.7			(77.1		)	—			—
Employer contributions to plan	0.1			0.1			6.3			6.6
Employee contributions to plan	—			—			0.9			1.0
Plan Settlements	(49.9		)	—			—			—
Benefits paid	(33.2		)	(30.5		)	(7.2		)	(7.6		)
Expenses paid	—			—			—			—
Ending balance	$	1,519.5		$	1,302.8		$	—		$	—
Reconciliation of funded status to net amounts recognized:
Funded status (deficit)	$	422.9		$	305.8		$	(41.8	)	$	(40.3	)
Net amounts recognized	$	422.9		$	305.8		$	(41.8	)	$	(40.3	)
Amounts recognized in the balance sheet:
Noncurrent assets	$	424.2		$	307.0		—			$	—
Current liabilities	(0.1		)	—			(7.3		)	(6.9		)
Noncurrent liabilities	(1.2		)	(1.2		)	(34.5		)	(33.4		)
Net amounts recognized	$	422.9		$	305.8		$	(41.8	)	$	(40.3	)
Amounts not yet reflected in net periodic benefit cost and included in AOCI:
Accumulated other comprehensive (loss) income	$	(46.0	)	$	(141.9	)	$	22.6		$	27.5
Cumulative employer contributions in excess of net periodic benefit cost	468.9			447.7			(64.4		)	(67.8		)
Net amount recognized in the balance sheet	$	422.9		$	305.8		$	(41.8	)	$	(40.3	)
Information for pension plans with benefit obligations in excess of plan assets:
Projected benefit obligation	$	1.3		$	1.2		$	41.8		$	40.3
Accumulated benefit obligation	1.3			1.2			—			—

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	Pension Benefits
	Periods Ended December 31,
U.K. Plans	2019			2018
Change in projected benefit obligation:
Beginning balance	$	59.9		$	76.9
Service cost	0.9			1.3
Interest cost	1.6			1.7
Actuarial loss (gain)	5.5			(6.9		)
Benefits paid	(0.8		)	(0.6		)
Expense paid	(0.9		)	(1.3		)
Plan settlements	(2.1		)	(7.5		)
Exchange rate changes	2.6			(3.7		)
Projected benefit obligation at the end of the period	$	66.7		$	59.9
Assumptions used to determine benefit obligation:
Discount rate	2.10		%	3.00		%
Rate of compensation increase	3.15		%	3.40		%
Change in fair value of plan assets:
Beginning balance	$	79.6		$	96.8
Actual return (loss) on assets	11.1			(3.0		)
Company contributions	1.7			1.7
Plan settlements	(2.6		)	(9.1		)
Expenses paid	(0.9		)	(1.3		)
Benefits paid	(0.8		)	(0.6		)
Exchange rate changes	3.5			(4.9		)
Ending balance	$	91.6		$	79.6
Reconciliation of funded status to net amounts recognized:
Funded status	24.9			19.7
Net amounts recognized	$	24.9		$	19.7
Amounts recognized in the balance sheet:
Noncurrent assets	$	24.9		$	19.7
Noncurrent liabilities	—			—
Net amounts recognized	$	24.9		$	19.7
Amounts not yet reflected in net periodic benefit cost and included in AOCI:
Accumulated other comprehensive income (loss)	5.9			3.1
Prepaid pension cost	19.0			16.6
Net amount recognized in the balance sheet	$	24.9		$	19.7
Information for pension plans with benefit obligations in excess of plan assets:
Projected benefit obligation	$	—		$	—
Accumulated benefit obligation	—			—
Fair value of assets	$	—		$	—

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Annual Expense

The components of pension and other post-retirement benefit plans expense for the U.S. plans and the assumptions used to determine benefit obligations for each of the periods ended December 31, 2019, 2018, and 2017 are as follows:



	Pension Benefits									Other Post-Retirement Benefits
	Periods Ended December 31,									Periods Ended December 31,
U.S. Plans	2019			2018			2017			2019			2018			2017
Components of net periodic benefit cost (income):
Service cost	$	—		$	—		$	—		$	0.9		$	1.1		$	1.2
Interest cost	36.5			34.7			35.7			1.2			1.1			1.2
Expected return on plan assets	(66.7		)	(66.9		)	(69.8		)	—			—			—
Amortization of net (gain) loss	0.5			—			—			(2.2		)	(2.3		)	(2.2		)
Amortization of prior service costs	—			—			—			(0.9		)	(0.9		)	(0.9		)
Settlement (gain) loss recognized⁽¹⁾	3.4			—			—			—			—			—
Special termination benefits⁽¹⁾	5.2			—			—			3.9			—			—
Net periodic benefit (income) cost	(21.1		)	(32.2		)	(34.1		)	2.9			(1.0		)	(0.7		)
Other changes recognized in OCI:
Total recognized in other OCI (income) loss	$	(95.9	)	$	52.3		$	(24.8	)	$	4.9		$	0.8		$	4.2
Total recognized in other net periodic benefit and OCI (income) loss	$	(117.0	)	$	20.1		$	(58.9	)	$	7.8		$	(0.2	)	$	3.5
Assumptions used to determine net periodic benefit costs:
Discount rate	4.21		%	3.59		%	4.15		%	3.74		%	3.03		%	3.21		%
Expected return on plan assets	5.00		%	4.80		%	5.50		%	N/A			N/A			N/A
Salary increases	N/A			N/A			N/A			N/A			N/A			N/A
Medical Assumptions:
Trend assumed for the year	N/A			N/A			N/A			6.24		%	6.59		%	6.93		%
Ultimate trend rate	N/A			N/A			N/A			4.50		%	4.50		%	4.50		%
Year that ultimate trend rate is reached	N/A			N/A			N/A			2038			2038			2038

(1) Special termination benefits as of December 31, 2019 is a combination of pension value plan, postretirement medical plan, offset by a reduction in the Company's net benefit obligation. Due to settlement accounting, the Company remeasured the pension assets and obligations which resulted in a $95.9 impact to OCI that is included in the Company's Consolidated Statements of Comprehensive Income and a charge of $3.4 that was recorded to Other income (expense).

The estimated net gain that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year is $0.0 for Pension Benefits and $2.8 for Other Post-Retirement Benefits plans.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The components of the pension benefit plan expense for the U.K. plans and the assumptions used to determine benefit obligations for each of the periods ended December 31, 2019, 2018, and 2017 are as follows:



	Pension Benefits
	Periods Ended December 31,
U.K. Plans	2019			2018			2017
Components of net periodic benefit cost (income):
Service cost	$	0.9		$	1.3		$	1.3
Interest cost	1.7			1.7			2.0
Expected return on plan assets	(2.4		)	(2.8		)	(2.9		)
Settlement gain	(0.2		)	(0.4		)	(0.3		)
Net periodic benefit cost (income)	$	—		$	(0.2	)	$	0.1
Other changes recognized in OCI:
Total (income) recognized in OCI	$	(3.2	)	$	(0.5	)	$	(6.7	)
Total recognized in net periodic benefit cost and OCI	$	(3.2	)	$	(0.7	)	$	(6.6	)
Assumptions used to determine net periodic benefit costs:
Discount rate	3.00		%	2.60		%	2.70		%
Expected return on plan assets	3.10		%	3.10		%	3.20		%
Salary increases	3.40		%	3.35		%	3.20		%

The estimated net (gain) loss that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year for the U.K. plan is zero.

The adoption of ASU 2017-07 in 2018 requires the Company to record only the service component of net periodic benefit cost in operating profit and the non-service components of net periodic benefit cost (i.e., interest cost, expected return on plan assets, amortization of prior service cost, special termination benefits, and net actuarial gains or losses) as part of non-operating income. Results for the period ended December 31, 2017 have been adjusted to reflect this accounting change.

Assumptions

The Company sets the discount rate assumption annually for each of its retirement-related benefit plans as of the measurement date, based on a review of projected cash flow and a long-term high-quality corporate bond yield curve. The discount rate determined on each measurement date is used to calculate the benefit obligation as of that date, and is also used to calculate the net periodic benefit (income)/cost for the upcoming plan year. During 2015, the mortality assumption for the U.S. plans was updated to Mercer’s MRP-2007 generational mortality tables for non-annuitants and Mercer’s MILES-2010 generational tables for the Auto, Industrial Goods and Transportation group for annuitants both reflecting Mercer’s MMP-2007 improvement scale. In 2018, the Company incorporated the MMP-2018 improvement scale. MMP-2018 is a Mercer-developed scale that uses the same basic model as the Society of Actuaries MP-2018 scale, but with different parameters and adjustments for actual experience since 2006. A blue collar adjustment is reflected for the hourly union participants and a white collar adjustment is reflected for all other participants. Actuarial gains and losses are amortized using the corridor method over the average working lifetimes of active participants/membership.

The pension expected return on assets assumption is derived from the long-term expected returns based on the investment allocation by class specified in the Company's investment policy. The expected return on plan assets determined on each measurement date is used to calculate the net periodic benefit (income)/cost of the upcoming plan year.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. To determine the health care cost trend rates the Company considers national health trends and adjusts for its specific plan design and locations. The trend and aging assumptions were updated during 2016 to reflect more current trends. These assumptions were reviewed in 2019, and it was determined they were still reasonable and therefore were unchanged.

A one-percentage point increase in the initial through ultimate assumed health care trend rates would have increased the accumulated post-retirement benefit obligation by $2.1 at December 31, 2019 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2019 by $0.1. A one-percentage point decrease would have decreased the

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

obligation by $2.0 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2019 by $0.1.

U.S. Plans

The Company’s investment objective is to achieve long-term growth of capital, with exposure to risk set at an appropriate level. This objective shall be accomplished through the utilization of a diversified asset mix consisting of equities (domestic and international) and taxable fixed income securities. The allowable asset allocation range is:



Equities	20 - 50%
Fixed income	50 - 80%
Real estate	0 - 7%

Investment guidelines include that no security, except issues of the U.S. Government, shall comprise more than 5% of total Plan assets and further, no individual portfolio shall hold more than 7% of its assets in the securities of any single entity, except issues of the U.S. Government. The following derivative transactions are prohibited — leverage, unrelated speculation and “exotic” collateralized mortgage obligations or CMOs. Investments in hedge funds, private placements, oil and gas and venture capital must be specifically approved by the Company in advance of their purchase.

The Company’s plans have asset allocations for the U.S., as of December 31, 2019 and December 31, 2018, as follows:



	2019		2018
Asset Category — U.S.
Equity securities — U.S.	25	%	24	%
Equity securities — International	4	%	3	%
Debt securities	69	%	71	%
Real estate	2	%	2	%
Total	100	%	100	%

U.K. Plans

The Trustee’s investment objective is to ensure that they can meet their obligation to the beneficiaries of the Plan. An additional objective is to achieve a return on the total Plan, which is compatible with the level of risk considered appropriate. The overall benchmark allocation of the Plan’s assets is:



Equity securities	12 - 16%
Debt securities	80%
Property	6 - 8%

The Company’s plans have asset allocations for the U.K., as of December 31, 2019 and December 31, 2018, as follows:



	2019		2018
Asset Category — U.K.
Equity securities	15	%	36	%
Debt securities	80	%	60	%
Other	5	%	4	%
Total	100	%	100	%

Projected contributions and benefit payments

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Required pension contributions under Employee Retirement Income Security Act (ERISA) regulations are expected to be zero in 2020 and discretionary contributions are not expected in 2020. SERP and post-retirement medical plan contributions in 2020 are expected to be $7.3. Expected contributions to the U.K. plan for 2020 are $1.8.

The Company monitors its defined benefit pension plan asset investments on a quarterly basis and believes that the Company is not exposed to any significant credit risk in these investments.

The total benefits expected to be paid over the next ten years from the plans' assets or the assets of the Company, by country, are as follows:



U.S.	Pension Plans		Other Post-Retirement Benefit Plans
2020	$	39.2	$	7.3
2021	$	42.7	$	6.7
2022	$	46.2	$	5.5
2023	$	49.2	$	5.0
2024	$	52.2	$	4.2
2025-2029	$	295.3	$	15.1



U.K.	Pension Plans
2020	$	0.8
2021	$	0.9
2022	$	0.9
2023	$	0.9
2024	$	0.9
2025-2029	$	4.8

Fair Value Measurements

The pension plan assets are valued at fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Temporary Cash Investments — These investments consist of U.S. dollars and foreign currencies held in master trust accounts. Foreign currencies held are reported in terms of U.S. dollars based on currency exchange rates readily available in active markets. These temporary cash investments are classified as level 1 investments.

Collective Investment Trusts — These investments are public investment vehicles valued using market prices and performance of the fund. The trust allocates notional units to the policy holder based on the underlying notional unit buy (offer) price using the middle market price plus transaction costs. These investments are classified within level 2 of the valuation hierarchy. In addition, the collective investment trust includes a real estate fund, which is classified within level 3 of the valuation hierarchy.

Commingled Equity and Bond Funds — These investments are valued at the closing price reported by the Plan Trustee. These investments are not being traded in an active market, but are backed by various investment securities managed by the Bank of New York. Fair value is being calculated using inputs that rely on the Bank of New York’s own assumptions, which are based on underlying investments that are traded on an active market and classified within level 2 of the valuation hierarchy.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

As of December 31, 2019 and December 31, 2018, the pension plan assets measured at fair value on a recurring basis were as follows:



			At December 31, 2019 Using
Description	December 31, 2019 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Temporary Cash Investments	$	0.7	$	0.7	$	—	$	—
Collective Investment Trusts	91.6		—		87.6		3.4
Commingled Equity and Bond Funds	1,519.5		—		1,519.5		—
	$	1,611.8	$	0.7	$	1,607.1	$	3.4



			At December 31, 2018 Using
Description	December 31, 2018 Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Temporary Cash Investments	$	0.2	$	0.2	$	—	$	—
Collective Investment Trusts	79.4		—		76.2		3.2
Commingled Equity and Bond Funds	1,302.8		—		1,302.8		—
	$	1,382.4	$	0.2	$	1,379.0	$	3.2

The table below sets forth a summary of changes in the fair value of the Plan’s level 3 investment assets and liabilities for the years ended December 31, 2019 and December 31, 2018:



	December 31, 2019
Description	Beginning Fair Value		Purchases		Gain (Loss)		Sales, Maturities, Settlements, Net		Exchange rate		Ending Fair Value
Collective Investment Trusts	$	3.2	$	—	$	0.1	$	—	$	0.1	$	3.4
	$	3.2	$	—	$	0.1	$	—	$	0.1	$	3.4



	December 31, 2018
Description	Beginning Fair Value		Purchases		Gain (Loss)		Sales, Maturities, Settlements, Net			Exchange rate			Ending Fair Value
Collective Investment Trusts	$	5.9	$	—	$	0.3	$	(2.8	)	$	(0.2	)	$	3.2
	$	5.9	$	—	$	0.3	$	(2.8	)	$	(0.2	)	$	3.2

18. Capital Stock

Holdings has authorized 210,000,000 shares of stock. Of that, 200,000,000 shares are Common Stock, par value $0.01 per share, one vote per share and 10,000,000 shares are preferred stock, par value $0.01 per share.

In association with the Boeing Acquisition, Spirit executives with balances in Boeing’s Supplemental Executive Retirement Plan (“SERP”) were authorized to purchase a fixed number of units of Holdings “phantom stock” at $3.33 per unit based on the present value of their SERP balances. Under this arrangement, 860,244 phantom units were purchased. Any payment on account

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

of units may be made in cash or shares of Common Stock at the sole discretion of Holdings. The balance of SERP units was 38,754 and 47,487 as of December 31, 2019 and December 31, 2018, respectively.

Repurchases of Common Stock

During the twelve months ended December 31, 2018, the Company repurchased 9.3 million shares of its Common Stock for $800.0.

On October 28, 2018, the Board of Directors increased the capacity of its share repurchase program to $1,000. During the three months 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 under the share repurchase program is $925.0. Share repurchases are currently on hold pending the outcome of the B737 MAX grounding. The 2020 Amendment imposes additional restrictions on the Company’s ability to repurchase shares.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

19. Stock Compensation

Holdings has established the stockholder-approved 2014 Omnibus Incentive Plan, as amended (the “Omnibus Plan”) to grant cash and equity awards to certain individuals. Compensation values are based on the value of Holdings’ Common Stock on the grant date, which is added to equity and charged to period expense. The Company’s Omnibus Plan was amended in October 2018 to allow for participants to make tax elections with respect to their equity awards.

Holdings has recognized a net total of $36.1, $27.4, and $22.1 of stock compensation expense for the twelve months ended December 31, 2019, 2018, and 2017, respectively. Stock compensation expense is charged in its entirety directly to selling, general and administrative expense.

Short-Term Incentive Plan

The Short-Term Incentive Program under the Omnibus Plan enables eligible employees to receive incentive benefits in the form of cash as determined by the Compensation Committee.

Board of Directors Stock Awards

The Company’s Omnibus Plan provides non-employee directors the opportunity to receive grants of restricted shares of Common Stock, or Restricted Stock Units (“RSUs”) or a combination of both Common Stock and RSUs. The Common Stock grants and RSU grants vest one year from the grant date subject to the directors compliance with the one-year service condition; however, the RSU grants are not payable until the director’s separation from service. The Board of Directors is authorized to make discretionary grants of shares or RSUs from time to time. Compensation values are based on the value of Holdings’ Common Stock on the grant date, which is added to equity and charged to period expense or included in inventory and cost of sales.

The Company expensed a net amount of $1.4, $1.3, and $1.0 for the restricted shares of Common Stock and RSUs for the twelve months ended December 31, 2019, 2018, and 2017, respectively. The Company’s unamortized stock compensation related to these restricted shares of Common Stock and RSUs is $0.5, which will be recognized over a weighted average remaining period of 5 months. The intrinsic value of the unvested restricted shares of Common Stock and RSUs, based on the value of the Company's stock at December 31, 2019, was $1.3, based on the value of the Company’s Common Stock and the number of unvested shares of restricted Common Stock and RSUs.

The following table summarizes grants of restricted Common Stock and RSUs to members of the Company’s Board of Directors for the twelve months ended December 31, 2019, 2018, and 2017:



	Shares		Value⁽¹⁾
	Class A		Class A
	(Thousands)
Board of Directors Stock Grants
Nonvested at December 31, 2016	26		$	1.2
Granted during period	24		1.2
Vested during period	(26	)	(1.2		)
Forfeited during period	—		—
Nonvested at December 31, 2017	24		1.2
Granted during period	17		1.4
Vested during period	(19	)	(1.0		)
Forfeited during period	—		—
Nonvested at December 31, 2018	22		1.6
Granted during period	17		1.5
Vested during period	(22	)	(1.7		)
Forfeited during period	—		—
Nonvested at December 31, 2019	17		$	1.4

_______________________________________

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)


(1)	Value represents grant date fair value.

Long-Term Incentive Awards

Holdings has established the Long-Term Incentive Plan (the “LTIP”) under the Omnibus Plan to grant equity awards to certain employees. Generally, specified employees are entitled to receive a long-term incentive award that, for the 2019 year, consisted of the following:


•	60% of the award consisted of time-based, service-condition restricted Common Stock that vests in equal installments over a three-year period (the “RS Award”). Values for these awards are based on the value of Common Stock on the grant date.


•	20% of the award consisted of performance-based, market-condition restricted Common Stock that vests on the three-year anniversary of the grant date contingent upon TSR compared to the Company’s peers (the “TSR Award”). Values for these awards are initially measured on the grant date using estimated payout levels derived from a Monte Carlo valuation model.

•

20% of the award consisted of performance-based, (performance-condition) restricted Common Stock that vests on the three-year anniversary of the grant date contingent upon the Company’s cumulative three-year free cash flow as a percentage of the Company’s cumulative three-year revenues meeting certain pre-established goals (the “FCF Percentage Award”). Values for these awards are based on the dividend adjusted value of Common Stock on the grant date.

For the twelve months ended December 31, 2019, 303,638 shares of Common Stock with an aggregate grant date fair value of $27.3 were granted as RS Awards under the Company's LTIP. In addition, 127,802 shares of Common Stock with an aggregate grant date fair value of $13.4 were granted as TSR Awards and FCF Percentage Awards under the Company’s LTIP.

For the twelve months ended December 31, 2018, 295,482 shares of Common Stock with an aggregate grant date fair value of $25.6 were granted as RS Awards under the Company's LTIP. In addition, 156,279 shares of Common Stock with an aggregate grant date fair value of $14.1 were granted as TSR Awards under the Company’s LTIP.

For the twelve months ended December 31, 2017, 352,053 shares of Common Stock with an aggregate grant date fair value of $20.4 were granted as RS Awards under the Company’s LTIP. In addition, 292,160 shares of Common Stock with an aggregate grant date fair value of $15.0 were granted as TSR Awards under the Company’s LTIP.

The Company expensed a net total of $32.2, $26.1, and $21.1 for share of Common Stock issued under the LTIP for the twelve month periods ended December 31, 2019, 2018, and 2017, respectively.

The Company’s unamortized stock compensation related to these unvested shares of Common Stock is $33.7, which will be recognized over a weighted average remaining period of 1.7 years. The intrinsic value of the unvested shares of Common Stock issued under the LTIP at December 31, 2019 was $66.3, based on the value of the Company’s Common Stock and the number of unvested shares.

The following table summarizes the activity of the restricted shares under the LTIP for the twelve month periods ended December 31, 2019, 2018, and 2017:

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	Shares		Value⁽¹⁾
	Common Stock		Common Stock
	(Thousands)
Long-Term Incentive Plan/Long-Term Incentive Award under Omnibus Plan
Nonvested at December 31, 2016	1,557		$	67.3
Granted during period	644		35.5
Vested during period	(655	)	(25.0		)
Forfeited during period	(93	)	(4.4		)
Nonvested at December 31, 2017	1,453		73.4
Granted during period	451		39.7
Vested during period	(465	)	(24.1		)
Forfeited during period	(48	)	(3.0		)
Nonvested at December 31, 2018	1,391		86.0
Granted during period	431		40.6
Vested during period	(393	)	(24.2		)
Forfeited during period	(125	)	(8.4		)
Nonvested at December 31, 2019	1,304		$	94.0

_______________________________________


(1)	Value represents grant date fair value.

20. Income Taxes

The following summarizes pretax income:



	2019		2018		2017
U.S.	$	552.4	$	655.0	$	426.6
International	110.7		101.2		108.0
Total (before equity earnings)	$	663.1	$	756.2	$	534.6

The tax provision contains the following components:



	2019			2018			2017
Current
Federal	$	57.8		$	159.4		$	107.3
State	0.7			4.1			0.7
Foreign	(12.8		)	11.4			20.0
Total current	$	45.7		$	174.9		$	128.0
Deferred
Federal	$	71.8		$	(27.8	)	$	53.6
State	(11.4		)	(12.8		)	(0.2		)
Foreign	26.7			5.5			(1.4		)
Total deferred	87.1			(35.1		)	52.0
Total income tax provision	$	132.8		$	139.8		$	180.0

The income tax provision from operations differs from the tax provision computed at the U.S. federal statutory income tax rate due to the following:

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	2019					2018					2017
Tax at U.S. Federal statutory rate	$	139.3		21.0	%	$	158.8		21.0	%	$	187.1		35.0	%
State income taxes, net of Federal benefit	14.9			2.3		18.1			2.4		8.8			1.6
State income tax credits, net of Federal benefit	(22.6		)	(3.4	)	(22.7		)	(3.0	)	(9.7		)	(1.8	)
Foreign rate differences	(7.1		)	(1.1	)	(6.2		)	(0.8	)	(20.6		)	(3.8	)
Research and experimentation	0.7			0.1		(5.4		)	(0.7	)	(2.6		)	(0.5	)
Domestic Production Activities Deduction	—			—		—			—		(7.1		)	(1.3	)
Interest on assessments	—			—		—			—		(0.1		)	—
Excess tax benefits	(2.5		)	(0.4	)	(4.0		)	(0.5	)	(4.8		)	(0.9	)
Non-deductible expenses	4.0			0.6		4.6			0.6		2.4			0.5
Transition tax	1.6			0.2		(5.4		)	(0.7	)	44.9			8.4
Re-measurement of Deferred Taxes	(2.0		)	(0.3	)	—			—		(16.2		)	(3.0	)
Global Intangible Low-Taxed Income (GILTI) Tax	7.1			1.1		1.8			0.2		—			—
Other	(0.6		)	(0.1	)	0.2			—		(2.1		)	(0.5	)
Total income tax provision	$	132.8		20.0	%	$	139.8		18.5	%	$	180.0		33.7	%

In 2019, an amended tax return was filed in a foreign jurisdiction for one of the Company’s foreign subsidiaries impacting the amount of undistributed earnings included in the transition tax liability enacted by TCJA. The increase to the transition tax in 2019 is $1.6 which has been included as a component of income tax expense from continuing operations.

The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 31, 2019 there was $7.1 of GILTI tax expense resulting from $0.6 of income tax expense related to activity in 2019 and $6.5 of income tax expense related to the finalization of the 2018 amounts related to GILTI reported in the tax return as agreed upon with the IRS in the course of the Company’s participation in the Internal Revenue Service’s Compliance Assurance Process (“CAP”) program. As of December 31, 2018 there was $1.8 of GILTI tax expense. Tax expense related to GILTI is included as a component of income tax expense from continuing operations.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Significant tax effected temporary differences comprising the net deferred tax asset are as follows:



	2019			2018
Long-term contracts	$	107.5		$	210.2
Post-retirement benefits other than pensions	9.8			9.5
Pension and other employee benefit plans	(88.5		)	(60.4		)
Employee compensation accruals	39.2			36.1
Depreciation and amortization	(117.8		)	(115.1		)
Inventory	0.4			0.5
State income tax credits	108.3			94.1
Accruals and reserves	40.3			46.2
Deferred production	—			(1.8		)
Net operating loss carryforward	0.4			0.4
Interest swap contract	0.2			—
Other	8.6			(2.3		)
Net deferred tax asset	108.4			217.4
Valuation allowance	(10.2		)	(13.2		)
Net deferred tax asset	98.2			204.2

Deferred tax detail above is included in the balance sheet and supplemental information as follows:



	2019			2018
Non-current deferred tax assets	106.5			205.0
Non-current deferred tax liabilities	(8.3		)	(0.8		)
Net non-current deferred tax assets	$	98.2		$	204.2
Total deferred tax asset	$	98.2		$	204.2

The following is a roll forward of the deferred tax valuation allowance at December 31, 2019, 2018 and 2017:



	2019			2018			2017
Balance at January 1	$	13.2		$	15.0		$	13.5
Income tax credits	(3.2		)	(2.2		)	1.6
Depreciation and amortization	0.2			0.1			0.1
Other	—			0.3			(0.2		)
Balance at December 31	$	10.2		$	13.2		$	15.0

The Company continues to maintain $10.2 in valuation allowances primarily against separate company North Carolina income tax credit deferred tax assets and North Carolina state net operating loss carryforwards. It is the Company's opinion that none of these North Carolina state income tax credits will be utilized before they expire and an $8.8 valuation allowance is recorded against the deferred tax asset. Additionally, it is the Company's opinion that none of the $16.0 North Carolina loss carryforwards, resulting in a $0.4 deferred tax asset, will be utilized before they expire and a $0.4 valuation allowance is recorded against the deferred tax asset.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Certain provisions within the TCJA effectively transition the U.S. to a territorial system and eliminates deferral on U.S. taxation for certain amounts of income which is not taxed at a minimum level. At this time, we continue to maintain that earnings of all foreign operating subsidiaries are indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation, inclusive of management actions and plans associated with the 737MAX production halt and slowdown, will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings to fund working capital requirements, service existing obligations, execute M&A transactions, and invest in efforts to secure future business. As a result, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities.

To the extent cash in excess of the needs identified above are generated from a key international operating subsidiary and a dividend is declared, we have completed analysis regarding potential dividend withholding taxes and anticipate that any associated withholding taxes would be immaterial based upon current law. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.

The beginning and ending unrecognized tax benefits reconciliation is as follows:



	2019			2018		2017
Beginning balance at January 1	$	7.2		$	6.7	$	6.3
Gross increases related to current period tax positions	0.4			—		—
Gross increases related to prior period tax positions	—			0.5		0.4
Gross decreases related to prior period tax positions	(2.2		)	—		—
Statute of limitations' expiration	—			—		—
Settlements	—			—		—
Ending balance at December 31	$	5.4		$	7.2	$	6.7

Included in the December 31, 2019 balance was $5.4 in unrecognized tax benefits of which $4.2 would reduce the Company's effective tax rate if ultimately recognized. The Company’s federal audit is effectively complete under the CAP program for the 2018 tax year. The Company will continue to participate in the CAP program for the 2019 and 2020 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.

The Company reports interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2019, and December 31, 2018, there was no accrued interest on the unrecognized tax benefit liability included in the balance sheets and there was no impact of interest on the Company’s unrecognized tax benefit liability during 2019 and 2018.

The Company continues to operate under a tax holiday in Malaysia effective through September 2024. The Company’s 2019 income tax expense reflects $5.7 of Malaysia tax holiday benefit for the year ended December 31, 2019.

Included in the deferred tax assets at December 31, 2019 are $94.1 in Kansas High Performance Incentive Program ("HPIP") Credit and $9.6 in Kansas Research & Development ("R&D") Credit, totaling $103.7 in gross Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas for which $8.9 expires in 2029, $14.6 expires in 2030, $8.7 expires in 2031, $14.6 expires in 2032, $15.2 expires in 2033, $28.8 expires in 2034, and $28.3 expires in 2035. The R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely.

The Company had $74.2 and $13.3 of income tax receivable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other current assets on the balance sheet as well as $6.3 and $5.8 of income tax payable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other current liabilities on the balance sheet. The Company had $5.3 and $3.7 of non-current income tax payable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other liabilities on the balance sheet.

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

21. Equity

Employee Stock Purchase Plan

In April 2017, the stockholders approved the Spirit AeroSystems Holdings, Inc. Employee Stock Purchase Plan (the “ESPP”) with the associated registration statement on Form S-8 filed on September 6, 2017. The ESPP became effective on October 1, 2017. The Compensation Committee of the Board of Directors approved an amended and restated ESPP on January 21, 2020 to allow for dividend reinvestment, among other things. The ESPP is implemented over consecutive six-month offering periods, beginning on April 1 and October 1 of each year and ending on the last day of September and March, respectively. Shares are issued on the last trading day of each six-month offering period. Generally, any person who is employed by the Company, Spirit or by a subsidiary or affiliate of the Company that has been designated by the Compensation Committee may participate in the ESPP.

The maximum number of shares of the Company's Common Stock that may be purchased under the ESPP will be 1,000,000 shares, subject to adjustment for stock dividends, stock splits or combinations of shares of the Company's stock. The per-share purchase price for the Company's Common Stock purchased under the ESPP is 95% of the fair market value of a share of such stock on the last day of the offering period.

Dividends

The Company paid cash dividends of $0.12 per share of Common Stock in each quarter in 2019. The total amount of dividends paid during 2019 was $50.4. On February 6, 2020, the Company announced that its Board of Directors reduced its quarterly dividend to a penny per share to preserve liquidity until B737 MAX production reaches higher levels. Accordingly, on February 6, 2020, the Board declared a $0.01 per share quarterly cash dividend on the outstanding Common Stock of the Company payable on April 9, 2020 to stockholders of record at the close of business on March 20, 2020. The Board regularly evaluates the Company's capital allocation strategy and dividend policy. Any future determination to continue to pay dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions, including the requirements of financing agreements to which we may be a party. No assurance can be given that cash dividends will continue to be declared and paid at historical levels or at all.

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



	For the Twelve Months Ended
	December 31, 2019					December 31, 2018					December 31, 2017
	Income		Shares	Per Share Amount		Income		Shares	Per Share Amount		Loss		Shares	Per Share Amount
Basic EPS
Income available to common shareholders	$	529.7	103.6	$	5.11	$	616.5	108.0	$	5.71	$	354.7	116.8	$	3.04
Income allocated to participating securities	0.4		0.1			0.5		0.1			0.2		0.1
Net income	$	530.1				$	617.0				$	354.9
Diluted potential common shares			1.0					1.0					1.0
Diluted EPS
Net income	$	530.1	104.7	$	5.06	$	617.0	109.1	$	5.65	$	354.9	117.9	$	3.01

Included in the outstanding common shares were 1.4 million, 1.4 million and 1.5 million of issued but unvested shares at December 31, 2019, 2018 and 2017, respectively, which are excluded from the basic EPS calculation.

100

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss, net of tax, is summarized by component as follows:



	December 31, 2019			December 31, 2018
Interest swaps	$	(0.6	)	$	—
Pension	$	(53.1	)	$	(116.7	)
SERP/ Retiree medical	17.1			17.2
Foreign currency impact on long term intercompany loan	(13.1		)	(17.4		)
Currency translation adjustment	(59.5		)	(79.7		)
Total accumulated other comprehensive loss	$	(109.2	)	$	(196.6	)

Amortization or settlement cost recognition of the pension plans’ net gain/(loss) reclassified from accumulated other comprehensive loss and realized into costs of sales and selling, general and administrative on the consolidated statements of operations was ($3.7), $0.3 and 0.3 for the twelve months ended December 31, 2019, 2018 and 2017, respectively.

Noncontrolling Interest

Noncontrolling interest at December 31, 2019 remained unchanged from the prior year at $0.5.

Repurchases of Common Stock

The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. As of December 31, 2019, no treasury shares have been reissued or retired.

On January 27, 2016, the Company announced that its Board of Directors authorized an additional new share repurchase program for the purchase of up to $600.0 of Common Stock (the “2016 Share Repurchase Program”). During the twelve month period ended December 31, 2016, the Company repurchased 14.2 million shares of its Common Stock for $649.6, which consisted of the remaining $50.0 from the prior share repurchase program and approximately all of the $600.0 of the authorized amount of the 2016 Share Repurchase Program.

On November 1, 2016, the Company's Board of Directors authorized a share repurchase program for the purchase of up to $600.0 of Common Stock (the “2017 Share Repurchase Program”). On July 25, 2017, the Company's Board of Directors authorized an increase to the 2017 Share Repurchase Program authorization up to an additional $400.0 of Common Stock. During the twelve month period ended December 31, 2017, the Company repurchased 7.5 million shares of common stock for $502.1.

On January 24, 2018, the Board of Directors approved an increase to the 2017 Share Repurchase Program authorization up to an additional $500.0. On October 24, 2018, the Board of Directors approved an increase to the 2017 Share Repurchase Program authorization up to an additional $800.0. During the twelve month ended December 31, 2018, the Company repurchased 9.3 million shares of common stock for $800.0.

During the twelve month ended December 31, 2019, the Company repurchased 0.8 million shares of its Common Stock for $75.8, which includes $75.0 repurchased under the 2017 Share Repurchase Program. As a result, the total authorization amount remaining under the current share repurchase program is approximately $925.0. Share repurchases are currently on hold pending the outcome of the B737 MAX grounding. The 2020 Amendment imposes additional restrictions on the Company’s ability to repurchase shares.

22. Commitments, Contingencies and Guarantees

Litigation

From time to time, the Company is subject to, and is presently involved in, litigation or other legal proceedings arising in the ordinary course of business.

On February 10, 2020 and February 24, 2020, two separate private securities class action lawsuits were filed against the Company in the U.S. District Court for the Northern District of Oklahoma, its Chief Executive Officer Tom Gentile III, former chief financial officer, Jose Garcia, and former controller (principal accounting officer), John Gilson. Allegations in each lawsuit

101

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

include (i) violations of Section 10(b) and Rule 10b-5 promulgated thereunder by all defendants, and (ii) violations of Section 20(a) of the Exchange Act against the individual defendants. The facts underlying the complaints relate to the accounting process compliance independent review (the “Accounting Review”) discussed in the Company’s January 30, 2020 press release and described under Management's Discussion and Analysis of Financial Condition and Results of Operations - Accounting Review.

Prior to the Company’s January 30, 2020 announcement, the Company voluntarily reported to the SEC the determination that, with respect to the third quarter of 2019, the Company did not comply with its established accounting processes related to potential third quarter contingent liabilities received after the quarter-end. The Company has communicated to the SEC that the Accounting Review is substantially complete. In the event the SEC commences an investigation with respect to these matters, the Company intends to cooperate fully.

While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available, it is the opinion of the Company that none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity.

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.

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.

Commitments

The Company leases equipment and facilities under various non-cancelable finance and operating leases. The finance leasing arrangements extend through 2038. Minimum future lease payments under these leases at December 31, 2019 are as follows:



			Finance
	Operating		Present Value		Interest		Total
2020	$	8.5	$	25.8	$	5.6	$	39.9
2021	$	7.5	$	26.7	$	4.4	$	38.6
2022	$	7.1	$	23.9	$	3.3	$	34.3
2023	$	6.0	$	21.8	$	2.3	$	30.1
2024	$	5.6	$	17.1	$	1.6	$	24.3
2025 and thereafter	$	30.3	$	31.8	$	4.5	$	66.6

Operating lease payments were as follows:

102

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	2019		2018		2017
Minimum rentals	$	15.4	$	14.3	$	14.1
Total	$	15.4	$	14.3	$	14.1

Spirit's aggregate capital commitments totaled $119.9 and $114.9 at December 31, 2019 and December 31, 2018, respectively.

Guarantees

Contingent liabilities in the form of letters of guarantee have been provided by the Company. Outstanding guarantees were $21.5 and $27.3 at December 31, 2019 and December 31, 2018, respectively.

Restricted Cash - Collateral Requirements

The Company was required to maintain $16.4 and $20.2 of restricted cash as of December 31, 2019 and December 31, 2018, respectively, related to certain collateral requirements for obligations under its workers’ compensation programs. Restricted cash is included in "Other assets" in the Company's Consolidated Balance Sheet.

Indemnification

The Company has entered into customary indemnification agreements with its non-employee directors. 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. In addition, the Company has obligations to its current and former officers to provide indemnification for litigation or governmental investigations, including expenses, consistent with the terms of its Bylaws and Certificate of Incorporation.

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 work 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 $8.1 and $41.0 as of December 31, 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 $12.1 and $34.0, as of December 31, 2019 and December 31, 2018, respectively.

The following is a roll forward of the service warranty and extraordinary rework balance at December 31, 2019, 2018 and 2017:

103

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	2019			2018			2017
Balance, January 1	$	104.8		$	166.4		$	163.7
Charges to costs and expenses	(13.9		)	3.2			5.8
Payouts	(1.7		)	(1.2		)	(4.0		)
Impact of 2018 MOA⁽¹⁾	—			(63.8		)	—
Impact of TGI Settlement⁽²⁾	(25.0		)	—			—
Exchange rate	0.5			0.2			0.9
Balance, December 31	$	64.7		$	104.8		$	166.4

_______________________________________


(1)	As part of the 2018 MOA, $63.8 of warranty provision was released, settled against previously held Accounts Receivable, net with no impact to earnings.


(2)	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 was paid in the second quarter of 2019.

Bonds

Since the Company's incorporation, Spirit and its predecessor have periodically utilized City of Wichita issued Industrial Revenue Bonds (“IRBs”) to finance self-constructed and purchased real property at its Wichita site. Tax benefits associated with IRBs include provisions for a ten-year complete property tax abatement and a Kansas Department of Revenue sales tax exemption on all IRB funded purchases. Spirit and its predecessor purchased these IRBs so they are bondholders and debtor / lessee for the property purchased with the IRB proceeds.

Spirit recorded the property net of a finance lease obligation to repay the IRB proceeds on its balance sheet. Gross assets and liabilities associated with these IRBs were $376.2 and $343.5 as of December 31, 2019 and December 31, 2018, respectively.

23. Other (Expense) Income, Net

Other (expense) income, net is summarized as follows:



	For the Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2017
Kansas Development Finance Authority bond	$	3.7		$	3.8		$	3.2
Rental and miscellaneous income	0.2			0.2			1.2
Pension income	19.5			34.3			37.2
Interest income	12.9			8.0			6.4
Loss on foreign currency forward contract and interest rate swaps	(19.0		)	(35.3		)	—
Loss on sale of accounts receivable	(24.7		)	(16.5		)	(3.3		)
Foreign currency losses	(12.3		)	(1.9		)	(0.3		)
Litigation settlement	13.5			—			—
Other	0.4			0.4			—
Total Other (Expense) Income, net	$	(5.8	)	$	(7.0	)	$	44.4

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.

24. Significant Concentrations of Risk

Economic Dependence

104

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The Company’s largest customer (Boeing) accounted for approximately 79%, 79%, and 79% and of the revenues for the periods ended December 31, 2019, 2018, and 2017, respectively. Approximately 40%, 36%, and 44% of the Company's accounts receivable balance at December 31, 2019, 2018, and 2017, respectively, was attributable to Boeing.

The Company’s second largest customer (Airbus) accounted for approximately 16%, 16%, and 16% of the revenues for the periods ended December 31, 2019, 2018, and 2017, respectively. Approximately 41%, 48%, and 38% of the Company's accounts receivable balance at December 31, 2019, 2018, and 2017, respectively, was attributable to Airbus.

Employees

As of December 31, 2019, the Company had approximately 18,200 employees: 15,900 located in the Company's four U.S. facilities, 1,100 located at the U.K. facility, 1,100 located in the Malaysia facility, and 100 located in the France facility.

The numbers reflected for December 31, 2019, do not reflect the work force actions the Company took beginning in January 2020 related to B737 MAX production.

Approximately 89% of the Company’s U.S. employees are represented by five unions and approximately 64% of the Company’s U.K. employees are represented by one union. Approximately 1% of the Company's US employees are represented by an International Brotherhood of Electrical Workers (IBEW) collective bargaining agreement that will expire within one year and approximately 62% of US employees are represented by the International Association of Machinists and Aerospace Workers (IAM) collective bargaining agreement. On January 18, 2020 the Wichita IAM collective bargaining agreement was extended to June 24, 2023. French employees are represented by CFTC (“Confédération Française des Travailleurs Chrétiens or French Confederation of Christian Workers”) and FO (“Force Ouvrière or Labor Force”). None of the Malaysia employees are currently represented by a union.

25. Supplemental Balance Sheet Information

Accrued expenses and other liabilities consist of the following:



	December 31, 2019		December 31, 2018
Accrued expenses
Accrued wages and bonuses	$	35.2	$	48.3
Accrued fringe benefits	125.5		125.0
Accrued interest	3.5		3.5
Workers' compensation	8.7		8.3
Property and sales tax	24.1		25.2
Warranty/extraordinary rework reserve — current	0.5		1.3
Other	42.7		101.5
Total	$	240.2	$	313.1
Other liabilities
Warranty/extraordinary rework reserve — non-current	64.3		103.6
Customer cost recovery	—		2.4
Other	31.5		28.8
Total	$	95.8	$	134.8

26. Segment and Geographical Information

The Company operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Revenue from Boeing represents a substantial portion of our revenues in all segments. Wing Systems also includes significant revenues from Airbus. Approximately 95% of the Company's net revenues for the twelve months ended December 31, 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

105

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

performance is segment operating income before corporate selling, general and administrative expenses, research and development and unallocated cost of sales.

Corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to the Company's operating segments and are not allocated in measuring the operating segments’ profitability and performance and net profit margins. Research and development includes research and development efforts that benefit the Company as a whole and are not unique to a specific segment. Unallocated cost of sales includes general costs not directly attributable to segment operations, such as warranty, early retirement and other incentives. All of these items are not specifically related to the Company’s operating segments and are not utilized in measuring the operating segments’ profitability and performance.

The Company’s Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and overhaul (“MRO”) services. The Fuselage Systems segment manufactures products at the Company's facilities in Wichita, Kansas; Tulsa and McAlester, Oklahoma; San Antonio, Texas; Kinston, North Carolina; and Subang, Malaysia. 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; and San Antonio, Texas.

The Company’s Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces) as well as other miscellaneous structural parts primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place at the Company’s facilities in Tulsa and McAlester, Oklahoma; San Antonio, Texas; 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 twelve months ended December 31, 2019, 2018 and 2017:

106

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)



	Twelve Months Ended December 31, 2019			Twelve Months Ended December 31, 2018			Twelve Months Ended December 31, 2017
Segment Revenues
Fuselage Systems	$	4,206.2		$	4,000.8		$	3,730.8
Propulsion Systems	2,057.8			1,702.5			1,666.2
Wing Systems	1,588.3			1,513.0			1,578.8
All Other	10.8			5.7			7.2
	$	7,863.1		$	7,222.0		$	6,983.0
Segment Operating Income ^{(1, 2)}
Fuselage Systems	$	440.8		$	576.1		$	329.6
Propulsion Systems	404.6			283.5			267.7
Wing Systems	216.0			226.4			205.1
All Other	3.4			0.3			2.0
	1,064.8			1,086.3			804.4
Corporate SG&A ⁽²⁾	(261.4		)	(210.4		)	(204.7		)
Unallocated impact of severe weather event	—			10.0			(19.9		)
Research and development	(54.5		)	(42.5		)	(31.2		)
Unallocated cost of sales⁽³⁾	11.9			(0.2		)	(16.7		)
Total operating income	$	760.8		$	843.2		$	531.9

_______________________________________


(1)	Inclusive of forward losses, changes in estimate on loss programs and cumulative catch-up adjustments. These changes in estimates for the periods ended December 31, 2019, 2018, and 2017 are further detailed in Note 5, Changes in Estimates.

(2)

Prior period information has been reclassified as a result of the Company's adoption of ASU 2017-07 on a retrospective basis in 2018. In accordance with the adoption of this guidance, prior year amounts related to the components of net periodic pension and postretirement benefit cost other than service costs have been reclassified from cost of sales and selling, general, and administrative expense to other (expense) income within the consolidated statement of operation for all periods presented. Accordingly, expenses of $18.1, $7.4, and $7.3 attributable to the Fuselage Systems segment, Propulsion Systems segment, and Wing Systems segment, respectively, were reclassified into segment operating income for the twelve months ended December 31, 2017.


(3)	For 2019, includes $13.9 related to warranty reserves. For 2018, includes charges of $1.1 related to warranty reserves. For 2017, includes charges of $1.8 and $12.7, related to warranty reserves and charges for excess purchases and purchase commitments, respectively.

Most of the Company’s revenue is obtained from sales inside the U.S. However the Company does generate international sales, primarily from sales to Airbus. The following chart illustrates the split between domestic and foreign revenues:



	Year Ended December 31, 2019				Year Ended December 31, 2018				Year Ended December 31, 2017
Revenue Source⁽¹⁾	Net Revenues		Percent of Total Net Revenues		Net Revenues		Percent of Total Net Revenues		Net Revenues		Percent of Total Net Revenues
United States	$	6,566.3	84	%	$	5,967.1	83	%	$	5,722.9	82	%
International
United Kingdom	771.9		10	%	763.3		10	%	740.9		11	%
Other	524.9		6	%	491.6		7	%	519.2		7	%
Total International	1,296.8		16	%	1,254.9		17	%	1,260.1		18	%
Total Revenues	$	7,863.1	100	%	$	7,222.0	100	%	$	6,983.0	100	%

_______________________________________

107

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)


(1)	Net Revenues are attributable to countries based on destination where goods are delivered.

Most of the Company’s long-lived assets are located within the U.S. Approximately 5% of the Company's long-lived assets based on book value are located in the U.K. with approximately another 3% of the Company's total long-lived assets located in countries outside the U.S. and the U.K. The following chart illustrates the split between domestic and foreign assets:



	Year Ended December 31, 2019				Year Ended December 31, 2018				Year Ended December 31, 2017
Asset Location	Total Long-Lived Assets		Percent of Total Long-Lived Assets		Total Long-Lived Assets		Percent of Total Long-Lived Assets		Total Long-Lived Assets		Percent of Total Long-Lived Assets
United States	$	2,079.4	92	%	$	2,003.9	92	%	$	1,939.0	92	%
International
United Kingdom	112.4		5	%	82.1		4	%	82.5		4	%
Other	79.9		3	%	81.6		4	%	83.8		4	%
Total International	192.3		8	%	163.7		8	%	166.3		8	%
Total Long-Lived Assets	$	2,271.7	100	%	$	2,167.6	100	%	$	2,105.3	100	%

27. Quarterly Financial Data (Unaudited)



	Quarter Ended
	December 31, 2019⁽¹⁾		September 26, 2019⁽²⁾		June 27, 2019⁽³⁾		March 28, 2019⁽⁴⁾
Net revenues	$	1,959.3	$	1,919.9	$	2,016.1	$	1,967.8
Gross profit	$	202.0	$	272.3	$	292.9	$	309.5
Operating income	$	95.7	$	206.1	$	226.0	$	233.0
Net income	$	67.7	$	131.3	$	168.0	$	163.1
Earnings per share, basic	$	0.65	$	1.27	$	1.62	$	1.57
Earnings per share, diluted	$	0.65	$	1.26	$	1.61	$	1.55
Dividends declared per common share	$	0.12	$	0.12	$	0.12	$	0.12



	Quarter Ended
	December 31, 2018⁽⁵⁾		September 27, 2018⁽⁶⁾		June 28, 2018⁽⁷⁾		March 29, 2018⁽⁸⁾
Net revenues	$	1,835.3	$	1,813.7	$	1,836.9	$	1,736.1
Gross profit	$	300.7	$	270.6	$	289.7	$	225.1
Operating income	$	243.6	$	222.5	$	217.6	$	159.5
Net income	$	177.6	$	168.8	$	145.2	$	125.4
Earnings per share, basic	$	1.70	$	1.61	$	1.32	$	1.11
Earnings per share, diluted	$	1.68	$	1.59	$	1.31	$	1.10
Dividends declared per common share	$	0.12	$	0.12	$	0.12	$	0.10

______________________________________


(1)	Fourth quarter 2019 earnings include the impact of net unfavorable changes in estimate of $55.2.


(2)	Third quarter 2019 earnings include the impact of net unfavorable changes in estimate of $41.8.


(3)	Second quarter 2019 earnings include the impact of net unfavorable changes in estimate of $10.9.

108

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)


(4)	First quarter 2019 earnings include the impact of net favorable changes in estimate of $0.5.


(5)	Fourth quarter 2018 earnings include the impact of net favorable changes in estimate of $3.5.


(6)	Third quarter 2018 earnings include the impact of net unfavorable changes in estimate of $13.5.


(7)	Second quarter 2018 earnings include the impact of net favorable changes in estimate of $24.9.


(8)	First quarter 2018 earnings include the impact of net unfavorable changes in estimate of $22.6.

28. Acquisitions

Asco

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 “Asco 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”), 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 subject to certain customary closing adjustments, including foreign currency adjustments (the “Asco Acquisition”). The Asco Purchase Agreement is subject to customary closing conditions, including regulatory approvals. On October 28, 2019, the Company and Spirit Belgium entered into an agreement to amend and restate (the “Asco Amendment”) the Asco Purchase Agreement. The Asco Amendment incorporates amendments to the Purchase Agreement agreed among the Parties to date, and reduces the purchase price for the Asco Acquisition from $604 to $420. In addition, the Asco Amendment reduces the Sellers’ indemnification obligations under the Asco Purchase Agreement to $80 (except with respect to damages resulting or arising from the termination of certain commercial agreements), and removes the closing condition precedent that a “Material Adverse Change” in Asco’s business has not occurred since May 1, 2018.

On January 29, 2020, Asco and Spirit entered into an amendment to the Asco Purchase Agreement extending the date upon which the Asco Purchase Agreement will automatically terminate in the event that conditions to the Asco Acquisition are not satisfied or waived is extended from April 4, 2020, to October 1, 2020. In addition, the Amendment changed the closing date for the Acquisition to the last business day of the month that all conditions precedent are satisfied or waived (provided certain notice requirements are met) or as the parties agree.

Acquisition-related expenses were $12.7 for the twelve months ended December 31, 2019 and are included in selling, general and administrative costs on the condensed and consolidated statements of operations.

Bombardier

On October 31, 2019, Spirit and Spirit AeroSystems Global Holdings Limited (“Spirit UK”), wholly owned subsidiaries of the Company, entered into a definitive agreement (the “Bombardier Purchase Agreement”) with Bombardier Inc., Bombardier Aerospace UK Limited, Bombardier Finance Inc. and Bombardier Services Corporation (collectively, the “Bombardier Sellers”) pursuant to which, subject to the satisfaction or waiver of certain conditions, Spirit UK will acquire the outstanding equity of Short Brothers plc (“Shorts”) and Bombardier Aerospace North Africa SAS, and Spirit will acquire substantially all the assets of the maintenance, repair and overhaul business in Dallas, Texas (collectively, the “Bombardier Acquired Business”) for cash consideration of $500 (the “Bombardier Acquisition”).

The Company agreed to procure payment of a special contribution of £100 million (approximately $130) to the Shorts pension scheme after closing and has reached a tentative agreement to delay payment of the special contribution to 2021.

The Bombardier Acquisition, which is expected to close in the first half of 2020, is subject to certain consents, regulatory approvals and customary closing conditions. Closing conditions include, but are not limited to, (i) the absence of certain legal impediments to the consummation of the Bombardier Acquisition, (ii) the receipt of specified third party consents and approvals, including consents from Airbus SE and its subsidiaries, (iii) the receipt of applicable regulatory approvals, and (iv) the absence of a material adverse change to the Bombardier Acquired Business. The Purchase Agreement contains customary representations, warranties and covenants among the parties, including, among others, certain covenants by the Sellers regarding the operation of the Bombardier Acquired Business during the interim period between the execution of the Purchase Agreement and the consummation of the Bombardier Acquisition. The Bombardier Acquisition is not conditioned upon the Company’s receipt of debt financing.

109

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Acquisition-related expenses were $19.6 for the twelve months ended December 31, 2019 and are included in selling, general and administrative costs on the condensed and consolidated statements of operations.

29. 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 company and parent guarantor of the Notes as further detailed in Note 16, Debt;


(ii)	Spirit, as the subsidiary 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.

Condensed Consolidating Statements of Operations and Comprehensive Income

For the Twelve Months Ended December 31, 2019



	Holdings			Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net revenues	$	—		$	7,116.7		$	1,420.5		$	(674.1	)	$	7,863.1
Operating costs and expenses
Cost of sales	—			6,197.0			1,263.5			(674.1		)	6,786.4
Selling, general and administrative	18.1			223.3			20.0			—			261.4
Impact of severe weather event	—			—			—			—			—
Research and development	—			47.0			7.5			—			54.5
Total operating costs and expenses	18.1			6,467.3			1,291.0			(674.1		)	7,102.3
Operating income (loss)	(18.1		)	649.4			129.5			—			760.8
Interest expense and financing fee amortization	—			(91.6		)	(3.9		)	3.6			(91.9		)
Other (expense) income, net	—			0.5			(2.7		)	(3.6		)	(5.8		)
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries	(18.1		)	558.3			122.9			—			663.1
Income tax benefit (provision)	3.9			(120.2		)	(16.5		)	—			(132.8		)
Income (loss) before equity in net income of affiliates and subsidiaries	(14.2		)	438.1			106.4			—			530.3
Equity in net income of affiliates	(0.2		)	—			(0.2		)	0.2			(0.2		)
Equity in net income of subsidiaries	544.5			106.4			—			(650.9		)	—
Net income	530.1			544.5			106.2			(650.7		)	530.1
Other comprehensive income	95.7			95.7			24.5			(120.2		)	95.7
Comprehensive income	$	625.8		$	640.2		$	130.7		$	(770.9	)	$	625.8

110

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Statements of Operations and Comprehensive Income

For the Twelve Months Ended December 31, 2018



	Holdings			Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net revenues	$	—		$	6,487.3		$	1,361.2		$	(626.5	)	$	7,222.0
Operating costs and expenses
Cost of sales	—			5,541.4			1,221.0			(626.5		)	6,135.9
Selling, general and administrative	10.4			182.6			17.4			—			210.4
Impact of severe weather event	—			(10.0		)	—			—			(10.0		)
Research and development	—			37.5			5.0			—			42.5
Total operating costs and expenses	10.4			5,751.5			1,243.4			(626.5		)	6,378.8
Operating income (loss)	(10.4		)	735.8			117.8			—			843.2
Interest expense and financing fee amortization	—			(79.7		)	(5.2		)	4.9			(80.0		)
Other (expense) income, net	—			—			(2.1		)	(4.9		)	(7.0		)
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries	(10.4		)	656.1			110.5			—			756.2
Income tax benefit (provision)	1.9			(122.3		)	(19.4		)	—			(139.8		)
Income (loss) before equity in net income of affiliates and subsidiaries	(8.5		)	533.8			91.1			—			616.4
Equity in net income of affiliates	0.6			—			0.6			(0.6		)	0.6
Equity in net income of subsidiaries	624.9			91.0			—			(715.9		)	—
Net income	617.0			624.8			91.7			(716.5		)	617.0
Other comprehensive loss	(68.1		)	(68.1		)	(26.3		)	94.4			(68.1		)
Comprehensive income	$	548.9		$	556.7		$	65.4		$	(622.1	)	$	548.9

111

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Statements of Operations and Comprehensive Loss

For the Twelve Months Ended December 31, 2017



	Holdings			Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
Net revenues	$	—		$	6,236.4		$	1,362.3		$	(615.7	)	$	6,983.0
Operating costs and expenses
Cost of sales	—			5,592.2			1,218.8			(615.7		)	6,195.3
Selling, general and administrative	12.4			177.5			14.8			—			204.7
Impact of severe weather event	—			19.9			—			—			19.9
Research and development	—			27.8			3.4			—			31.2
Total operating costs and expenses	12.4			5,817.4			1,237.0			(615.7		)	6,451.1
Operating income (loss)	(12.4		)	419.0			125.3			—			531.9
Interest expense and financing fee amortization	—			(41.6		)	(5.7		)	5.6			(41.7		)
Other income (expense), net	—			49.6			0.4			(5.6		)	44.4
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries	(12.4		)	427.0			120.0			—			534.6
Income tax benefit (provision)	4.7			(161.7		)	(23.0		)				(180.0		)
Income (loss) before equity in net income of affiliates and subsidiaries	(7.7		)	265.3			97.0			—			354.6
Equity in net income of affiliates	0.3			—			0.3			(0.3		)	0.3
Equity in net income of subsidiaries	362.3			97.0			—			(459.3		)	—
Net income	354.9			362.3			97.3			(459.6		)	354.9
Other comprehensive income	58.4			58.4			42.2			(100.6		)	58.4
Comprehensive income	$	413.3		$	420.7		$	139.5		$	(560.2	)	$	413.3

112

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Balance Sheet

December 31, 2019



	Holdings		Spirit		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Cash and cash equivalents	$	—	$	2,193.3	$	157.2	$	—		$	2,350.5
Restricted cash	—		0.3		—		—			0.3
Accounts receivable, net	—		565.4		301.2		(320.2		)	546.4
Inventory, net	—		786.8		332.0		—			1,118.8
Contract assets, short-term	—		458.8		69.5		—			528.3
Other current assets	—		93.5		5.2		—			98.7
Total current assets	—		4,098.1		865.1		(320.2		)	4,643.0
Property, plant and equipment, net	—		1,773.0		498.7		—			2,271.7
Right of use assets	—		41.2		7.7		—			48.9
Contract assets, long-term	—		6.4		—		—			6.4
Pension assets	—		424.2		24.9		—			449.1
Investment in subsidiary	1,761.9		838.4		—		(2,600.3		)	—
Deferred income taxes	—		106.3		0.2		—			106.5
Other assets	—		148.8		118.4		(186.8		)	80.4
Total assets	$	1,761.9	$	7,436.4	$	1,515.0	$	(3,107.3	)	$	7,606.0
Liabilities
Accounts payable	$	—	$	977.1	$	401.4	$	(320.2	)	$	1,058.3
Accrued expenses	—		210.0		30.2		—			240.2
Profit sharing	—		76.9		7.6		—			84.5
Current portion of long-term debt	—		48.4		1.8		—			50.2
Operating lease liabilities, short-term	—		5.3		0.7		—			6.0
Advance payments, short-term	—		21.6		—		—			21.6
Contract liabilities, short-term	—		158.3		—		—			158.3
Forward loss provision, short-term	—		83.9		—		—			83.9
Deferred revenue and other deferred credits, short-term	—		14.5		0.3		—			14.8
Deferred grant income liability — current	—		—		3.6		—			3.6
Other current liabilities	—		29.3		10.0		—			39.3
Total current liabilities	—		1,625.3		455.6		(320.2		)	1,760.7
Long-term debt	—		2,974.7		95.6		(86.2		)	2,984.1
Operating lease liabilities, long-term	—		36.0		7.0		—			43.0
Advance payments, long-term	—		333.3		—		—			333.3
Pension/OPEB obligation	—		35.7		—		—			35.7
Contract liabilities, long-term	—		356.3		—		—			356.3
Forward loss provision, long-term	—		163.5		—		—			163.5
Deferred grant income liability — non-current	—		9.2		19.8		—			29.0
Deferred revenue and other deferred credits, long-term	—		30.4		4.0		—			34.4
Deferred income taxes	—		—		8.3		—			8.3
Other non-current liabilities	—		190.1		6.3		(100.6		)	95.8
Total equity	1,761.9		1,681.9		918.4		(2,600.3		)	1,761.9
Total liabilities and shareholders’ equity	$	1,761.9	$	7,436.4	$	1,515.0	$	(3,107.3	)	$	7,606.0

113

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Balance Sheet

December 31, 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	—		307.0		19.7		—			326.7
Investment in subsidiary	1,238.0		699.0		—		(1,937.0		)	—
Deferred income taxes	—		188.0		17.0		—			205.0
Other assets	—		169.1		110.5		(196.4		)	83.2
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, short-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, long-term	—		28.8		2.4		—			31.2
Deferred income taxes	—		—		0.8		—			0.8
Other non-current liabilities	—		223.3		12.1		(100.6		)	134.8
Total equity	1,238.0		1,158.1		779.0		(1,937.0		)	1,238.1
Total liabilities and shareholders’ equity	$	1,238.0	$	5,548.4	$	1,391.0	$	(2,491.5	)	$	5,685.9

114

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Statements of Cash Flows

For the Twelve Months Ended December 31, 2019



	Holdings				Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments		Total
Operating activities
Net cash provided by operating activities	$	—			$	733.3		$	189.4				$	922.7
Investing activities
Purchase of property, plant and equipment	—				(184.0		)	(48.2		)			(232.2		)
Other	—				0.2			(7.9		)			(7.7		)
Net cash used in investing activities	—				(183.8		)	(56.1		)	—		(239.9		)
Financing activities
Proceeds from issuance of debt	—				250.0			—			—		250.0
Proceeds from revolving credit facility					900.0								900.0
Principal payments of debt	—				(12.5		)	(0.9		)	—		(13.4		)
Collection on (repayment of) intercompany debt	—				49.4			(49.4		)	—		—
Payments on term loan	—				(16.6		)	—			—		(16.6		)
Payments on revolving credit facility					(100.0		)						(100.0		)
Taxes paid related to net share settlement awards	—				(12.9		)	—			—		(12.9		)
Proceeds from issuance of ESPP stock	—				2.6			—			—		2.6
Proceeds (payments) from subsidiary for purchase of treasury stock	75.8				(75.8		)	—			—		—
Purchase of treasury stock	(75.8		)		—			—			—		(75.8		)
Proceeds (payments) from subsidiary for dividends paid	50.4				(50.1		)	(0.3		)	—		—
Dividends paid	(50.4		)		—			—			—		(50.4		)
Other					0.9			—			—		0.9
Net cash provided by (used in) financing activities	—				935.0			(50.6		)	—		884.4
Effect of exchange rate changes on cash and cash equivalents	—				—			5.9					5.9
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period	—			—	1,484.5			88.6			—		1,573.1
Cash, cash equivalents, and restricted cash, beginning of period	—				725.5			68.6			—		794.1
Cash, cash equivalents, and restricted cash, end of period	$	—			$	2,210.0		$	157.2		$	—	$	2,367.2

115

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Statements of Cash Flows

For the Twelve Months Ended December 31, 2018



	Holdings			Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments		Total
Operating activities
Net cash provided by operating activities	$	—		$	643.1		$	126.8		$	—	$	769.9
Investing activities
Purchase of property, plant and equipment	—			(230.5		)	(40.7		)			(271.2		)
Proceeds from sale of assets	—			2.8			0.6			—		3.4
Other	—			(0.5		)	0.5			—		—
Net cash used in investing activities	—			(228.2		)	(39.6		)	—		(267.8		)
Financing activities
Proceeds from issuance of debt	—			1,300.0			—			—		1,300.0
Principal payments of debt	—			(5.8		)	(0.9		)	—		(6.7		)
Collection on (repayment of) intercompany debt	—			75.9			(75.9		)	—		—
Payments on term loan	—			(256.3		)	—			—		(256.3		)
Payments on bonds	—			(300.0		)	—			—		(300.0		)
Debt issuance and financing costs	—			(23.2		)	—			—		(23.2		)
Taxes paid related to net share settlement awards	—			(15.6		)	—			—		(15.6		)
Proceeds from issuance of ESPP stock	—			2.1			—			—		2.1
Proceeds (payments) from subsidiary for purchase of treasury stock	805.8			(805.8		)	—			—		—
Purchase of treasury stock	(805.8		)	—			—			—		(805.8		)
Proceeds (payments) from subsidiary for dividends paid	48.0			(48.0		)	—			—		—
Dividends paid	(48.0		)	—			—			—		(48.0		)
Net cash used in financing activities	—			(76.7		)	(76.8		)	—		(153.5		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—					—
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period	—			338.2			10.4			—		348.6
Cash, cash equivalents, and restricted cash, beginning of period	—			387.3			58.2			—		445.5
Cash, cash equivalents, and restricted cash, end of period	$	—		$	725.5		$	68.6		$	—	$	794.1

116

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

Condensed Consolidating Statements of Cash Flows

For the Twelve Months Ended December 31, 2017



	Holdings			Spirit			Non-Guarantor Subsidiaries			Consolidating Adjustments		Total
Operating activities
Net cash provided by operating activities	$	—		$	450.5		$	123.2		$	—	$	573.7
Investing activities
Purchase of property, plant and equipment	—			(241.4		)	(31.7		)			(273.1		)
Proceeds from sale of assets	—			0.4			—			—		0.4
Other	—			(0.1		)	—			—		(0.1		)
Net cash used in investing activities	—			(241.1		)	(31.7		)	—		(272.8		)
Financing activities
Principal payments of debt	—			(1.2		)	(1.6		)	—		(2.8		)
Collection on (repayment of) intercompany debt	—			54.9			(54.9		)	—		—
Payments on term loan	—			(25.0		)	—			—		(25.0		)
Debt issuance and financing costs	—			(0.9		)	—			—		(0.9		)
Taxes paid related to net share settlement awards	—			(14.2		)	—			—		(14.2		)
Proceeds from financing under the New Markets Tax Credit Program	—			7.6			—			—		7.6
Proceeds (payments) from subsidiary for purchase of treasury stock	496.3			(496.3		)	—			—		—
Purchase of treasury stock	(496.3		)	—			—			—		(496.3		)
Proceeds (payments) from subsidiary for dividends paid	47.1			(47.1		)	—			—		—
Dividends paid	(47.1		)	—			—			—		(47.1		)
Net cash used in financing activities	—			(522.2		)	(56.5		)	—		(578.7		)
Effect of exchange rate changes on cash and cash equivalents	—			—			5.6			—		5.6
Net (decrease) increase in cash, cash equivalents, and restricted cash for the period	—			(312.8		)	40.6			—		(272.2		)
Cash, cash equivalents, and restricted cash, beginning of period	—			700.1			17.6			—		717.7
Cash, cash equivalents, and restricted cash, end of period	$	—		$	387.3		$	58.2		$	—	$	445.5

30. Subsequent Events

2020 MOA

On February 6, 2020, Boeing and the Company entered into the 2020 MOA providing for the Company to deliver to Boeing 216 B737 MAX shipsets in 2020. The 2020 MOA provided that an advance payment that the Company received from Boeing in the amount of $123.0 during the third quarter of 2019 will be repaid by offset against the purchase price for year 2022 shipset deliveries. In addition, the 2020 MOA provided that Boeing will pay $225 to the Company in the first quarter of 2020, consisting of (i) $70 in support of the Company's inventory and production stabilization, of which $10 will be repaid by the Company in 2021, and (ii) $155 as an incremental pre-payment for costs and shipset deliveries over the next two years. The 2020 MOA also extended B737 MAX pricing terms through 2033 (previously, the pricing was through December 31, 2030). The parties will execute amendments to their underlying long-term contracts to incorporate the 2020 MOA on or before 60 calendar days following the B737 MAX U.S. Federal Aviation Administration ungrounding. The full text of the 2020 MOA will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2020, subject to certain omissions of confidential portions.

117

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Consolidated Financial Statements — (Continued)

($, €, and RM in millions other than per share amounts)

The 2020 Amendment, 2020 DDTL and Supplemental Indenture

On February 24, 2020, the Company entered into the 2020 Amendment, the 2020 DDTL and the Supplemental Indenture. For additional information, please see Note 16, Debt.

FMI Acquisition

On January 10, 2020, the Company acquired Fiber Materials, Inc. (FMI) for $120. The fair value determination of the acquired assets and liabilities is in work as of the report date. FMI is based in Biddeford, Maine, and has more than 200 employees at two facilities. FMI's main operations focus on multidirectional reinforced composites that enable high-temperature applications such as thermal protection systems, re-entry vehicle nose tips, and rocket motor throats and nozzles. Acquiring FMI aligns with the Company’s strategic growth objectives to diversify its customer base and expand the current defense business. Operating results for this acquisition will be included in the Company’s Consolidated Statements of Operations from the date of acquisition and reflected in segment reporting in accordance with the nature of FMI’s individual contracts.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management with the participation of our President and Chief Executive Officer (principal executive officer) and Senior Vice President and Chief Financial Officer (principal financial officer) has evaluated the effectiveness of our disclosure controls and procedures and has concluded that, because of the material weakness in our internal control over financial reporting discussed below, these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) were not effective as of December 31, 2019. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In light of the material weakness discussed below, the Company performed additional analysis and other post-closing procedures related to claims and assertions and other subjective elements and key judgments of our estimate at completion process ("EAC process"), including direct confirmation with key customers of outstanding claims included within our program estimates, to ensure our consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance of the reliability of our financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets;

(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company's receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and

118

Table of Contents

(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on our assessment as of December 31, 2019, we identified a material weakness in our internal control related to our EAC process that supports the Company’s financial reporting process. Specifically, the material weakness related to the failure of controls over the completeness, existence and valuation of certain accounts contained within the program EAC process, including contingent liabilities, as a result of instances of non-compliance with our existing policies and controls. The policies require that customer claims and assertions are incorporated in the margin estimated at completion upon receipt of the information, whether received orally or written. Given that approximately seventy-six percent of the Company’s contracts recognize revenue as “over time” contracts in accordance with U.S. GAAP, the instance of non-compliance is a critical item the Company must address. As a result of such non-compliance, the Company concluded that it should have recorded an incremental contingent liability of less than $8.0 million for the three month period ending September 26, 2019. We do not believe this amount is material, either quantitatively or qualitatively, to our consolidated financial statements as of and for the three-month period ending September 26, 2019. Although this matter did not result in a material misstatement of the Company’s third quarter 2019 consolidated financial statements or any other previously issued financial statements, the error, and our evaluation of the deficiencies, led us to conclude that a material weakness exists.

Because of the material weakness, management concluded that the Company did not maintain effective internal controls over financial reporting as of December 31, 2019, based on criteria in Internal Control - Integrated Framework issued by COSO.

Remediation Plan and Efforts with Respect to Material Weaknesses

Our management has developed a plan to remediate the material weakness in our internal control over financial reporting as follows:


•	Management changes.


•	Enhance training around the appropriate treatment of claims and assertions and other subjective elements and key judgments of our EAC process to reinforce the existing written Company policies. This training will focus on control owners within the EAC process, including program, accounting and executive leadership.

•

Reassess processes and design of controls to ensure that all customer claims and assertions are identified and evaluated in accordance with established Company policies and procedures. This remediation step will include validation and reconciliation of claims data with our key customers and retention of this data in a centralized claims repository to facilitate the completeness of our accounting for claims and assertions.

Our management expects the remediation plan to extend over multiple financial reporting periods throughout 2020.

During the course of the remediation of existing processes and controls, implementation of additional processes and controls and testing of the operating effectiveness of such remediated and newly implemented controls and additional processes, we may identify additional control deficiencies that could give rise to other material weaknesses, in addition to the material weakness described above. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness or determine to modify certain of the remediation measures.

Change in Internal Control Over Financial Reporting

Except for the matters discussed in this Item 9A, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

119

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Spirit AeroSystems Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Spirit AeroSystems Holdings, Inc. internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Spirit AeroSystems Holdings, Inc. (the Company) has not maintained effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in controls related to the Company’s Estimate-at-Completion process.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Spirit AeroSystems Holdings, Inc. as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report dated February 28, 2020, which expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

120

Table of Contents

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Wichita, Kansas

February 28, 2020

121

Table of Contents

Item 9B. Other Information

None.

122

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information concerning the executive officers of Spirit is included in Part I of this Annual Report on Form 10-K and is incorporated by reference herein. The information otherwise required by Items 401, 405, 406, and 407(c)(3), (d)(4), and (d)(5) of Regulation S-K will be provided in Spirit Holdings’ proxy statement for its 2020 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year (the “2020 Proxy Statement”) and is incorporated by reference herein.

The Company has adopted a Code of Conduct (the “Code”) and a Finance Code of Professional Conduct that applies to the Company’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and persons performing similar functions. Copies of the Code and Finance Code of Professional Conduct are available on the Company’s website at http://investor.spiritaero.com/govdocs, and any waiver from the Code or Finance Code of Professional Conduct will be timely disclosed on the Company’s website or a Current Report on Form 8-K, as will any amendments to the Code or Finance Code of Professional Conduct.

Item 11. Executive Compensation

The information required by Item 402 and Item 407(e)(4) and (e)(5) of Regulation S-K will be provided in the 2020 Proxy Statement and is incorporated by reference herein.

Pursuant to the rules and regulations of the SEC under the Exchange Act, the information under Item 407(e)(5) incorporated by reference from the 2020 Proxy Statement shall not be deemed to be “soliciting material,” or to be “filed” with the Commission, or subject to Regulation 14A or 14C or the liabilities of Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning the securities authorized for issuance under equity compensation plans included in Part II, Item 5 of this Annual Report on Form 10-K is incorporated by reference herein. The information required by Item 403 of Regulation S-K will be provided in the 2020 Proxy Statement and is incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Items 404 and 407(a) of Regulation S-K will be provided in the 2020 Proxy Statement and is incorporated by reference herein.

Item 14. Principal Accounting Fees and Services

The information required by Item 9(e) of Schedule 14A will be provided in the 2020 Proxy Statement and is incorporated by reference herein.

123

Table of Contents

Part IV

*Item 15. Exhibits and Financial Statement Schedules



Article I. Exhibit Number	Section 1.01 Exhibit	Incorporated by Reference to the Following Documents
2.1	Asset Purchase Agreement, dated as of February 22, 2005, between Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) and The Boeing Company	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 2.1
2.2	First Amendment to Asset Purchase Agreement, dated June 15, 2005, between Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) and The Boeing Company	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 2.2
2.3	Asset Purchase Agreement, between Spirit AeroSystems Inc., Triumph Aerostructures - Tulsa LLC and Triumph Group, Inc., dated as of December 8, 2014	Current Report on Form 8-K (File No. 001-33160), filed January 6, 2015, Exhibit 2.1
2.4	Amendment 1 to Asset Purchase Agreement, between Spirit AeroSystems, Inc., Triumph Aerostructures - Tulsa, LLC and Triumph Group, Inc., dated as of December 30, 2014	Current Report on Form 8-K (File No. 001-33160), filed January 6, 2015, Exhibit 2.2
3.1	Third Amended and Restated Certificate of Incorporation of Spirit AeroSystems Holdings, Inc.	Current Report on Form 8-K (File No. 001-33160), filed May 1, 2017, Exhibit 3.1
3.2	Seventh Amended and Restated By Laws of Spirit AeroSystems Holdings, Inc.	Current Report on Form 8-K (File No. 001-33160), filed July 27, 2018, Exhibit 3.2
4.1	Form of Class A Common Stock Certificate	Amendment No. 5 to Registration Statement on Form S-1/A (File No. 333-135486), filed November 17, 2006, Exhibit 4.1
4.7	Indenture dated as of June 1, 2016, governing the 3.850% Senior Notes due 2026, by and among Spirit, the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A.	Current Report on Form 8-K (File No. 001-33160), filed June 7, 2016, Exhibit 4.1
4.8	Form of 3.850% Senior Note due 2026	Current Report on Form 8-K (File No. 001-33160), filed June 7, 2016, Exhibit 4.2
4.9	Supplemental Indenture, dated December 5, 2016, governing the 3.850% Senior Notes due 2026	Annual Report on Form 10-K (File No. 001-33160), filed February 10, 2017, Exhibit 4.9
4.10	Indenture, dated as of May 30, 2018, among Spirit AeroSystems, Inc., Spirit AeroSystems Holdings, Inc. and the Bank of New York Mellon Trust Company,.	Current Report on Form 8-K (File No. 001-33160), filed May 30, 2018, Exhibit 4.1
4.11	Form of Senior Floating Rate Note due 2021	Current Report on Form 8-K (File No. 001-33160), filed May 30, 2018, Exhibit 4.2
4.12	Form of 3.950% Senior Note due 2023	Current Report on Form 8-K (File No. 001-33160), filed May 30, 2018, Exhibit 4.3
4.13	Form of 4.600% Senior Note due 2028	Current Report on Form 8-K (File No. 001-33160), filed May 30, 2018, Exhibit 4.4
4.14	Second Supplemental Indenture, dated as of February 24, 2020, among Spirit AeroSystems, Inc., Spirit AeroSystems Holdings, Inc., Spirit AeroSystems North Carolina, Inc., and The Bank of New York Mellon Trust Company, N.A., as Trustee.	Current Report on Form 8-K (File No. 001-33160), filed February 25, 2020, Exhibit 4.1
4.15	Description of Spirit AeroSystems Holdings, Inc. Securities Registered under Section 12 of the Exchange Act.	*

124

Table of Contents



Article I. Exhibit Number	Section 1.01 Exhibit	Incorporated by Reference to the Following Documents
10.1	Form of Indemnification Agreement	Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-135486), filed August 29, 2006, Exhibit 10.14
10.2†	Spirit AeroSystems Holdings, Inc. Amended and Restated Deferred Compensation Plan, As Amended	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 6, 2011, Exhibit 10.34
10.3†	Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan	Registration Statement on Form S-8 (File No. 333-195790), filed May 8, 2014, Exhibit 10.1.
10.4†	First Amendment to the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, dated January 25, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.1
10.5†	Second Amendment to the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, dated October 23, 2019	*
10.6†	Employment Agreement between Spirit AeroSystems, Inc. and Samantha Marnick, effective as of February 22, 2006 and annual Executive Compensation Letter, dated May 3, 2013	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 2, 2014, Exhibit 10.1
10.7†	Employment Agreement between Spirit AeroSystems, Inc. and Duane Hawkins, effective as of June 17, 2013	Annual Report on Form 10-K (File No. 001-33160), filed February 13, 2015, Exhibit 10.44
10.8†	Amendment to Employment Agreement between Spirit Aerosystems, Inc. and Duane Hawkins, effective as of June 17, 2013	Annual Report on Form 10-K (File No. 001-33160), filed February 13, 2015, Exhibit 10.45
10.9†	Employment Agreement, dated as of February 13, 2016, between Spirit AeroSystems, Inc. and Thomas C. Gentile III	Current Report on Form 8-K (File No. 001-33160), filed February 16, 2016, Exhibit 10.1
10.10†	Employment Agreement between Spirit AeroSystems, Inc. and Ron Rabe, effective as of June 9, 2015	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2015, Exhibit 10.4
10.11†	Employment Agreement between Spirit AeroSystems, Inc., and Stacy Cozad, effective as of January 4, 2016	Annual Report on Form 10-K (File No. 001-33160), filed February 12, 2016, Exhibit 10.61
10.12†	Employment Agreement between Spirit AeroSystems, Inc. and Bill Brown, effective as of May 5, 2014	Annual Report on Form 10-K (File No. 001-33160), filed February 9, 2018, Exhibit 10.17
10.13†	Long-Term Incentive Program under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, as amended and restated effective January 25, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.3

125

Table of Contents



10.14†	Long-Term Incentive Program under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Plan, as amended and restated effective January 23, 2019	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.1
10.15†	Short-Term Incentive Program under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, as amended and restated effective January 25, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.4
10.16†	Director Stock Program under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, effective April 25, 2018	Annual Report on Form 10-K (File No. 001-33160), filed February 8, 2019, Exhibit 10.20
10.17†	Spirit AeroSystems Holdings, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 25, 2017 (filed as Exhibit 10.5 to the Annual Report on Form 10-K (File No. 001-33160), filed with the Securities and Exchange Commission on February 10, 2017)	Annual Report on Form 10-K (File No. 001-33160), filed February 10, 2017, Exhibit 10.5
10.18†	Employee Stock Purchase Plan	Registration Statement on Form S-8 (File No. 333-220358), filed September 6, 2017, Exhibit 4.2
10.19†	Amended and Restated Employee Stock Purchase Plan, effective January 21, 2020	*
10.20†	Form of Time-Based Restricted Stock Award Agreement	*
10.21†	Form of Performance-Based Restricted Stock Award Agreement	*
10.22†	Retirement and Consulting Agreement and General Release, dated June 7, 2016, between Spirit AeroSystems, Inc. and Larry A. Lawson	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 5, 2016, Exhibit 10.3
10.23†	Retirement and Consulting Agreement and General Release, dated November 20, 2018, between Spirit AeroSystems, Inc. and Sanjay Kapoor	Annual Report on Form 10-K (File No. 001-33160), filed February 2, 2019, Exhibit 10.26
10.24†	Employment Agreement between Spirit AeroSystems, Inc., and Jose Garcia, effective as of January 9, 2019	Annual Report on Form 10-K (File No. 001-33160), filed February 2, 2019, Exhibit 10.27
10.25†	Second Amended and Restated Credit Agreement, dated as of July 12, 2018, among Spirit AeroSystems Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents named therein	Current Report on Form 8-K (File No. 001-33160), filed July 13, 2018, Exhibit 10.1
10.26††	General Terms Agreement (Sustaining and others), dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.)	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.24
10.27††	Hardware Material Services General Terms Agreement, dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.)	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.25

126

Table of Contents



10.28††	Ancillary Know-How Supplemental License Agreement, dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.)	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.26
10.29††	Sublease Agreement, dated as of June 16, 2005, among The Boeing Company, Boeing IRB Asset Trust and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.)	Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.27
10.30††	Special Business Provisions (Sustaining), as amended through February 6, 2013, between The Boeing Company and Spirit AeroSystems, Inc.	Annual Report on Form 10-K (File No. 001-33160), filed February 19, 2014, Exhibit 10.17
10.31††	Amendment 9 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems Inc., dated as of September 4, 2014	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2014, Exhibit 10.1
10.32††	Amendment 10 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems Inc., dated as of September 26, 2014	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2014, Exhibit 10.2
10.33††	Amendment 2, dated March 4, 2011, to General Terms Agreement (Sustaining and Others) between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2012, Exhibit 10.2
10.34††	Memorandum of Agreement, between The Boeing Company and Spirit AeroSystems, Inc., made as of March 9, 2012, amending Special Business Provisions (Sustaining)	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2012, Exhibit 10.4
10.35††	Memorandum of Agreement (737 MAX Non-Recurring Agreement), between The Boeing Company and Spirit AeroSystems, Inc., made as of April 7, 2014, amending Spirit’s long-term supply agreement with Boeing	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2014, Exhibit 10.2
10.36††	Memorandum of Agreement (Pricing Agreement), between The Boeing Company and Spirit AeroSystems, Inc., made as of April 8, 2014, amending Spirit’s long-term supply agreement with Boeing	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2014, Exhibit 10.3
10.37††	Amendment 11 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of March 10, 2015	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2015, Exhibit 10.1
10.38††	Amendment 12 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of April 9, 2015	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2015, Exhibit 10.1
10.39††	Amendment 13 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of January 4, 2016	Annual Report on Form 10-K (File No. 001-33160), filed February 12, 2016, Exhibit 10.57
10.40††	Amendment 14 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of April 21, 2015	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2015, Exhibit 10.2
10.41††	Amendment 17 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of December 23, 2015	Annual Report on Form 10-K (File No. 001-33160), filed February 12, 2016, Exhibit 10.58

127

Table of Contents



10.42††	Amendment 20 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of November 1, 2015	Annual Report on Form 10-K (File No. 001-33160), filed February 12, 2016, Exhibit 10.59
10.43††	Amendment 21 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of May 9, 2016	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 5, 2016, Exhibit 10.4
10.44††	Amendment 22 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of November 2, 2016	Annual Report on Form 10-K (File No. 001-33160), filed February 10, 2017, Exhibit 10.53
10.45††	Amendment 23 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of December 16, 2016	Annual Report on Form 10-K (File No. 001-33160), filed February 10, 2017, Exhibit 10.54
10.46††	Amendment 24 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of December 20, 2016	Annual Report on Form 10-K (File No. 001-33160), filed February 10, 2017, Exhibit 10.55
10.47††	Amendment 25 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of March 16, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.7
10.48††	Amendment 26 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of March 23, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.8
10.49††	Amendment 27 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of March 31, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 5, 2017, Exhibit 10.9
10.50††	Amendment 28 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of June 22, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 4, 2017, Exhibit 10.1
10.51††	Amendment 29 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of July 20, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 4, 2017, Exhibit 10.2
10.52††	Amendment 30 to Special Business Provisions (SBP) MS-65530-0016, dated September 22, 2017, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.2
10.53††	Amendment 31 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of October 18, 2017	Annual Report on Form 10-K (File No. 001-33160), filed February 9, 2018, Exhibit 10.59
10.54††	Amendment 32 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of November 15, 2017	Annual Report on Form 10-K (File No. 001-33160), filed February 9, 2018, Exhibit 10.60
10.55††	Amendment 33 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of November 30, 2017	Annual Report on Form 10-K (File No. 001-33160), filed February 9, 2018, Exhibit 10.61
10.56††	Amendment 34 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of February 23, 2018	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 3, 2018, Exhibit 10.1
10.57††	Amendment 35 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of April 18, 2018	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2018, Exhibit 10.4

128

Table of Contents



10.58††	Amendment 36 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of June 20, 2018	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2018, Exhibit 10.5
10.59††	Amendment 37 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of August 17, 2018	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2018, Exhibit 10.1
10.60††	Collective Resolution Memorandum of Understanding between the Boeing Company and Spirit AeroSystems, Inc., dated as of August 1, 2017	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 4, 2017, Exhibit 10.3
10.61††	Amendment 38 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of November 1, 2018	Annual Report on Form 10-K (File No. 001-33160), filed February 2, 2019, Exhibit 10.67
10.62††	Amendment 39 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of November 2, 2018	Annual Report on Form 10-K (File No. 001-33160), filed February 2, 2019, Exhibit 10.68
10.63††	Collective Resolution 2.0 Memorandum of Agreement between the Boeing Company and Spirit AeroSystems, Inc., dated as of December 21, 2018	Annual Report on Form 10-K (File No. 001-33160), filed February 2, 2019, Exhibit 10.69
10.64††	Amendment 40 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of January 30, 2019	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.5
10.65††	Amendment 41 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of March 29, 2019	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.6
10.66††	Memorandum of Agreement between the Boeing Company and Spirit AeroSystems, Inc., 737 Production Rate Adjustments, dated as of April 12, 2019.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.1
10.67††	Amendment 43 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of May 22, 2019.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.2
10.68††	Amendment 44 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of July 19, 2019.	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2019, Exhibit 10.1
10.69††	Amendment 45 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of October 3, 2019.	*
10.70††	Amendment 46 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of October 3, 2019.	*

129

Table of Contents



10.71††	B787 General Terms Agreement BCA-65520-0032between The Boeing Company and Spirit AeroSystems, Inc., conformed to incorporate the General Terms Agreement, dated June 16, 2005, Amendment 1 thereto, dated June 19, 2009, and Amendment 2 thereto, dated May 12, 2011	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.3



Article I. Exhibit Number	Section 1.01 Exhibit	Incorporated by Reference to the Following Documents
10.72††	B787 Special Business Provisions BCA-MS-65530-0019, dated August 20, 2012, between The Boeing Company and Spirit AeroSystems, Inc., conformed to incorporate the Special Business Provisions, dated June 16, 2005, and Amendments 1 through 19 thereto	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.4
10.73††	Amendment 20 to B787 Special Business Provisions BCA-MS-65530-0019, dated June 5, 2013, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.5
10.74††	Amendment 21 to B787 Special Business Provisions BCA-MS-65530-0019, dated July 1, 2014, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.6
10.75††	Amendment 22 Revision 1 to B787 Special Business Provisions BCA-MS-65530-0019, dated December 4, 2014, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.7
10.76††	Amendment 23 to B787 Special Business Provisions BCA-MS-65530-0019, dated August 3, 2015, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.8
10.77††	Amendment 24 to B787 Special Business Provisions BCA-MS-65530-0019, dated December 16, 2015, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.9
10.78††	Amendment 25 to B787 Special Business Provisions (SBP) BCA-MS-65530-0019, dated September 22, 2017, between The Boeing Company and Spirit AeroSystems, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed November 3, 2017, Exhibit 10.10
10.79††	Amendment 26 to B787 Special Business Provisions (SBP) BCA-MS-65530-0019, dated December 14, 2017, between The Boeing Company and Spirit AeroSystems, Inc.	Annual Report on Form 10-K (File No. 001-33160), filed February 9, 2018, Exhibit 10.71
10.80††	Amendment 27 to B787 Special Business Provisions BCA-MS-65530-0019, between The Boeing Company and Spirit AeroSystems, Inc., dated as of August 17, 2018	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2018, Exhibit 10.2
10.81††	Amendment 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	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.4
10.82††	Amendment 29 to B787 Special Business Provisions (CBP) BCA-MS-65530-0019, between the Boeing Company and Spirit AeroSystems, Inc., dated as of May 14, 2019.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.3

130

Table of Contents



10.83††	Amendment 30 to B787 Special Business Provisions (CBP) BCA-MS-65530-0019, between the Boeing Company and Spirit AeroSystems, Inc., dated as of August 12, 2019.	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2019, Exhibit 10.2
10.84††	Amendment 31 to B787 Special Business Provisions (CBP) BCA-MS-65530-0019, between the Boeing Company and Spirit AeroSystems, Inc., dated as of October 3, 2019.	*
10.85	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 AeroSystems Belgium Holdings BVBA and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2018, Exhibit 10.3
10.86	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	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.2
10.87	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	Quarterly Report on Form 10-Q (File No. 001-33160), filed May 1, 2019, Exhibit 10.3
10.88	Letter Agreement, dated May 3, 2019, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V., dated May 1, 2018 (as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.4
10.89	Amended and Restated Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V., dated May 14, 2019 (as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.5
10.90	Letter Agreement, dated June 3, 2019, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V. (as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.6
10.91	Letter Agreement, dated July 14, 2019, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V.(as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed July 31, 2019, Exhibit 10.7
10.92	Amended and Restated Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V., dated October 28, 2019 (as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2019, Exhibit 10.3
10.93	Letter Agreement, dated January 29, 2020, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V.(as amended), by and between Christian Boas, Emilie Boas, DREDA, Sylvie Boas, Spirit AeroSystems Belgium Holdings BVBA, and Spirit AeroSystems Holdings, Inc.	*

131

Table of Contents



10.94††	Agreement for the Sale and Purchase of (1) the Entire Issued Share Capital of Short Brothers plc and Bombardier Aerospace North Africa SAS and (2) Certain Other Assets, dated October 31, 2019, by and between Bombardier Inc., Bombardier Aerospace UK Limited, Bombardier Finance Inc., Bombardier Services Corporation, Spirit AeroSystems Global Holdings Limited, and Spirit AeroSystems, Inc.	*
10.95	First Amendment to the Second Amended and Restated Credit Agreement, dated as of February 24, 2020, among Spirit AeroSystems, Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent and collateral agent.	Current Report on Form 8-K (File No. 001-33160), filed February 25, 2020, Exhibit 10.1
10.96	Delayed Draw Term Loan Credit Agreement, dated as of February 24, 2020, among Spirit AeroSystems, Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, Spirit AeroSystems North Carolina, Inc., as subsidiary guarantor, and the lenders party thereto, Bank of America, N.A., as administrative agent.	Current Report on Form 8-K (File No. 001-33160), filed February 25, 2020, Exhibit 10.2
21.1	Subsidiaries of Spirit AeroSystems Holdings, Inc.	*
23.1	Consent of Ernst & Young LLP	*
31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002	*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002	*
Article I. Exhibit Number	Section 1.01 Exhibit	Incorporated by Reference to the Following Documents
32.1	Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002	**
32.2	Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002	**
101.INS@	XBRL Instance Document	*
101.SCH@	XBRL Taxonomy Extension Schema Document	*
101.CAL@	XBRL Taxonomy Extension Calculation Linkbase Document	*
101.DEF@	XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB@	XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE@	XBRL Taxonomy Extension Presentation Linkbase Document	*

_______________________________________


†	Indicates 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


*	Filed herewith


**	Furnished herewith

132

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wichita, State of Kansas on February 28, 2020.



		SPIRIT AEROSYSTEMS HOLDINGS, INC.

		By:		/s/ Mark J. Suchinski
				Mark J. Suchinski Senior Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.



Signature	Title	Date

/s/ Thomas C. Gentile III	Director, President and Chief Executive	February 28, 2020
Thomas C. Gentile III	Officer (Principal Executive Officer)

/s/ Mark J. Suchinski	Senior Vice President and Chief Financial	February 28, 2020
Mark J. Suchinski	Officer (Principal Financial Officer)

/s/ Damon Ward	Interim Corporate Controller	February 28, 2020
Damon Ward	(Principal Accounting Officer)

/s/ Robert Johnson	Director, Chairman of the Board	February 28, 2020
Robert Johnson

/s/ Stephen Cambone	Director	February 28, 2020
Stephen Cambone

/s/ Charles Chadwell	Director	February 28, 2020
Charles Chadwell

/s/ Irene M. Esteves	Director	February 28, 2020
Irene M. Esteves

/s/ Paul Fulchino	Director	February 28, 2020
Paul Fulchino

/s/ Richard Gephardt	Director	February 28, 2020
Richard Gephardt

/s/ Ronald Kadish	Director	February 28, 2020
Ronald Kadish

/s/ John L. Plueger	Director	February 28, 2020
John L. Plueger

/s/ Laura Wright	Director	February 28, 2020
Laura Wright

133

Confidential Execution version

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 [*****].

Dated October 31, 2019

________________________________________

(1) BOMBARDIER INC.

(2) BOMBARDIER AEROSPACE UK LIMITED

(3) BOMBARDIER FINANCE INC.

(4) BOMBARDIER SERVICES CORPORATION

AND

(5) SPIRIT AEROSYSTEMS GLOBAL HOLDINGS LIMITED

AND

(6) SPIRIT AEROSYSTEMS, INC.

AGREEMENT

for the sale and purchase of

(1) the entire issued share capital of Short Brothers plc

and Bombardier Aerospace North Africa SAS

and

(2) certain other assets

LONDON:618810.5N

CFD-#31168153-V6 2

LONDON:618810.5N

CFD-#31168153-v6

Contents

Clause Page


1	Definitions and interpretation....................................................................2


2	Agreement to sell the Sale Shares and MRO Business..........................28


3	Consideration...........................................................................................30


4	Conditions................................................................................................32


5	[Reserved]................................................................................................38


6	MRO Business Receivables and MRO Business Payables.....................38


7	MRO Contracts.........................................................................................39


8	Completion................................................................................................41


9	The Warranties..........................................................................................43


10	Specific Indemnities and other indemnification provisions........................45


11	[*****]..........................................................................................................49


12	Relevant Claims against the Sellers..........................................................49


13	Non-competition provisions and use of names..........................................49


14	Misallocation..............................................................................................53


15	BI’s guarantee............................................................................................53


16	UK Buyer’s Guarantor’s guarantee............................................................54


17	BI to act as Sellers’ representative............................................................56


18	Dealing with and voting on the Sale Shares..............................................56


19	Release and payment in respect of outstanding Guarantees....................57


20	Entire agreement.......................................................................................57


21	Effect of Completion..................................................................................58


22	No general right of termination..................................................................58


23	Further assurances...................................................................................58


24	Confidentiality............................................................................................59


25	Announcements........................................................................................60


26	Provision of information............................................................................61


27	Public Disclosure Obligations...................................................................61


28	Severance.................................................................................................62


29	No set off..................................................................................................62


30	Payments.................................................................................................62


31	Alterations................................................................................................63


32	Counterparts............................................................................................63


33	Costs........................................................................................................63

LONDON:618810.5N

CFD-#31168153-v6 i


34	Transfer Taxes..........................................................................................63


35	Agreement binding...................................................................................64


36	Rights of third parties...............................................................................64


37	Withholdings and gross-up.......................................................................64


38	Notices......................................................................................................66


39	Assignment...............................................................................................68


40	Governing law...........................................................................................68


41	Jurisdiction................................................................................................68


42	Service of process....................................................................................69

[*****]

Schedule 3 The Warranties.................................................................................76

Schedule 4 Competition Approvals....................................................................116

Schedule 5 Completion......................................................................................117

Schedule 6 Limitation on the liability of the Sellers............................................125

Schedule 7 Pre-Completion Conduct and Undertakings...................................136

[*****]

CFD-#31168153-v6 ii

LONDON:618810.5N

THIS AGREEMENT is dated October 31, 2019 and is made between:


(1)	BOMBARDIER INC. (Company No. 8369470), a company incorporated under the laws of Canada whose registered office is at 800, boulevard René-Lévesque West, Montréal, Québec, H3B 1Y8, Canada (BI);


(2)	BOMBARDIER AEROSPACE UK LIMITED (company registration number 02873601), a company incorporated in England and Wales whose registered office is at Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB, United Kingdom (BAUK);


(3)	BOMBARDIER FINANCE INC. (company registration number 134209238), a company incorporated in Canada whose registered office is at 800, boulevard René-Lévesque West, Montréal, Québec, H3B 1Y8, Canada (BFI);


(4)	BOMBARDIER SERVICES CORPORATION (file number 2288053), a company incorporated in the United States of America whose head office is at head office at One Learjet Way, Wichita, KS 67209, United States of America (BSC);


(5)	SPIRIT AEROSYSTEMS GLOBAL HOLDINGS LIMITED (company registration number 11330860) a company incorporated in England and Wales whose registered office is at Tower Bridge House, St Katherine’s Way, London E1W 1AA, United Kingdom (the UK Buyer); and


(6)	SPIRIT AEROSYSTEMS, INC. (company registration number 3778057), a Delaware corporation whose principal place of business is at 3801 South Oliver Street, Wichita, KS 67210, United States of America (in the context of clause 16 of this Agreement, the UK Buyer’s Guarantor and, in all other contexts and as purchaser of the MRO Business, the US Buyer),

each a party, and together, the parties.

WHEREAS:


(A)	BAUK is the owner of all the issued Shorts Shares (as defined below).


(B)	BI and BFI together own all the issued BANA Shares (as defined below).


(C)	BSC operates and is able to procure the transfer of the MRO Business (as defined below) on the terms hereof.


(D)	BAUK, BI and BFI wish to sell and the Buyer wishes to purchase the Sale Shares (as defined below), and BSC wishes to sell and the US Buyer wishes to purchase the MRO Business.


(E)	BAUK, BI and BFI have agreed to sell and the UK Buyer has agreed to buy the Sale Shares on the terms and subject to the conditions of this Agreement, and BSC has agreed to sell and the US Buyer has agreed to buy the MRO Business, on the terms and subject to the conditions of this Agreement.

NOW IT IS HEREBY AGREED as follows:


1	Definitions and interpretation


1.1	In this Agreement:

2018 SBPS Valuation means the triennial actuarial valuation of the Short Brothers Pension Scheme as at 31 December 2018 to be carried out in accordance with the provisions of Part 3 of the Pensions Act 2004 and which has to be finalised by the statutory deadline of 31 March 2020

A220 Agreements means the A220 GTA and the A220 STAs

A220 GTA means the Restated General Terms Agreement entered into among BI, CSALP and CSAMGP on 1 July 2018

A220 GTA Transfer Agreement means the (partial) novation from BI to Shorts of, and the amendment to, the A220 GTA

A220 STAs means:


(a)	Restated Specific Terms Agreement W.P. 6.5 Outer Wing entered into between CSALP and BI on 1 July 2018;


(b)	Restated Specific Terms Agreement WO 6.21 Mid-Fuselage entered into between CSALP and BI on 1 July 2018; and


(c)	Specific Terms Agreement WP 6.22 Center Wing Box entered into between CSALP and BI on 1 July 2018

A220 STAs Transfer Agreement means the novation from BI to Shorts of, and the amendment to, the A220 STAs

A320 Neo TR Indemnity has the meaning given to it in clause 10.5

Accounting Standards means:


(a)	in respect of Shorts, the Financial Reporting Standard 101 Reduced Disclosure Framework;


(b)	in respect of BANA, generally accepted accounting principles in Morocco; and


(c)	in respect of the Atlantic Audited Combined Statement of Financial Position, International Financial Reporting Standards

Accounts Date means 31 December 2018

Affiliate means, in relation to any undertaking, any subsidiary or holding company of that undertaking, and any subsidiary of any such holding company from time to time

Agreement means this sale and purchase agreement

Airbus means Airbus SE and its subsidiaries (each an Airbus Entity)

Airbus Consent means the consent of Airbus referred to in clause 4.1(f)

[*****}

Atlantic Business means the aerostructures business conducted by the Sale Group and the MRO Business

Atlantic Audited Combined Statement of Financial Position means the audited combined financial statements (including the combined statements of income and the combined balance sheet) as at the Accounts Date for the Atlantic Business located in folder 2.5.1 of the Clean Team Data Room

BANA means Bombardier Aerospace North Africa SAS, details of which are set out in Part B of Schedule 1

BANA Accounts means BANA’s annual audited report and financial statements for the financial year ended on the Accounts Date

BANA Purchase Price means the BI BANA Purchase Price and the BFI BANA Purchase Price

BANA Shares means the entire issued share capital of BANA, comprised of the BI BANA Shares and the BFI BANA Shares

BANA Tax Deed means the tax deed of covenant in the agreed form relating to BANA

Basis of Preparation means the principles set out in the Atlantic Audited Combined Statement of Financial Position with respect to the preparation and presentation of the Atlantic Audited Combined Statement of Financial Position, including as to their form and content and the accounting practices and policies applicable to such Atlantic Audited Combined Statement of Financial Position

Basket has the meaning given to it in paragraph 1.2 of Schedule 6

BAUK’s Bank Account means such account as BAUK notifies to the UK Buyer at least fifteen Business Days prior to Completion

BEIS means the Department for Business, Energy and Industrial Strategy of the UK Government

BEIS Agreement means the repayable investment agreement entered into between The Secretary of State for Business, Enterprise and Regulatory Reform (as superseded by The Secretary of State for BEIS), Shorts and BI dated 28 April 2009 as amended from time to time

BFI BANA Purchase Price has the meaning given to it in clause 3.1(c)

BFI BANA Shares means the shares in BANA held by BFI, details of which are set out in Part B of Schedule 1

BFI’s Bank Account means such account as BFI notifies to the UK Buyer at least fifteen Business Days prior to Completion

BI BANA Purchase Price has the meaning given to it in clause 3.1(b)

BI BANA Shares means the shares in BANA held by BI, details of which are set out in Part B of Schedule 1

BI Guaranteed Parties has the meaning given to it in clause 15.1

BI’s Bank Account means such account as BI notifies to the UK Buyer at least fifteen Business Days prior to Completion

BI’s Guarantee has the meaning given to it in clause 15.1

BI IP License Agreement means the agreement to be entered into on Completion regarding the licence of Intellectual Property Rights related to the Atlantic Business from BI to Shorts in the agreed form

Bombardier CIF means the common investment fund known as the Bombardier Trust (UK) which is currently governed by rules made on 24 September 2004 (effective from 1 June 2004) as amended from time to time

Bombardier Transport DB Schemes has the meaning given to it in paragraph 15.1 of Part A of Schedule 3

Bombardier Transport RPS Participation means the participation in the Railways Pension Scheme by Bombardier Transportation UK Ltd

BSC’s Bank Account means such account as BSC notifies to the UK Buyer at least fifteen Business Days prior to Completion

Business Day means a day other than a Saturday or Sunday on which banks are ordinarily open for the transaction of normal banking business in London (United Kingdom), Montréal (Canada) and New York (United States)

Buyer Misallocated Asset has the meaning given to it in clause 14.1

Buyer Public Disclosure Obligations has the meaning given to it in clause 27.2

Buyers’ Group means the Buyers and each company which is for the time being (whether on or after the date of this Agreement) an Affiliate of each Buyer including, following Completion, the Sale Group Companies

Buyer’s Relief means a Buyer’s Relief under a Tax Deed

Buyers’ Solicitors means Sullivan & Cromwell LLP of 1 New Fetter Lane, London EC4A 1AN

Buyers’ Fundamental Warranties means the warranties set out in paragraphs 1-5 of Part C of Schedule 3 to be given by the Buyers to the Sellers on the date of, and immediately prior to Completion of, this Agreement

Buyers’ Warranties means the warranties set out in Part C of Schedule 3 to be given by the Buyers to the Sellers on the date of this Agreement

Buyers’ W&I Policy means any warranty and indemnity policy taken out by the Buyers in respect of the Transaction

Buyers means the UK Buyer and the US Buyer

CA 2006 means the United Kingdom Companies Act 2006

CIF Trustee means the trustee of the Bombardier CIF from time to time

Claim means any claim, demand, complaint, action, application, suit, cause of action, order, charge, indictment, prosecution, assessment, reassessment or judgment

Clean Team Data Room means all correspondence, documents and other information made available by the Sellers for inspection by the Buyers and their advisers in the “Project Atlantic - Bidder Dataroom (Clean Team)” section of the Data Room as appeared at 23.59 Greenwich Mean Time on 28 October 2019, as listed in the Data Room Index attached to the Disclosure Letter and verified by BI and the US Buyer (and as retained on USB data sticks deliverable to the Buyers by the Sellers as soon as reasonably practicable after the date of this Agreement)

Code means the United States Internal Revenue Code of 1986, as amended

Commercially Reasonable Endeavours means endeavours that a person desirous of achieving a result would reasonably use in similar circumstances to try to achieve that result; provided, however, that “Commercially Reasonable Endeavours” shall not be deemed to require a person to undertake extraordinary or unreasonable measures, including the payment of amounts in excess of normal to pay from a commercial point of view in the context of the Transaction or the envisaged result

Competition Approval means the approvals or notifications which are required to be obtained from or made to any Competition Authority in France, Morocco and such other jurisdictions as are set out in Schedule 4 in connection with the transactions contemplated in this Agreement

Competition Authority means the competent enforcers of competition Laws or merger control rules in the jurisdictions listed in the definition of Competition Approval and Schedule 4

Completion means completion of the sale and purchase of the Sale Shares and the MRO Business by the performance by the parties of their respective obligations under clause 8.2 and Schedule 5

Completion Date means such date (not being after the Long Stop Date) which is ten Business Days after the date on which the Conditions (other than Conditions 4.1(n), 4.1(o) and 4.1(p)) have been satisfied or waived

Conditions has the meaning given to it in clause 4.1

Confidentiality Agreement means the non-disclosure agreement entered into between BI and Spirit Aerosystems, Inc., in anticipation of sharing certain confidential information relating to the Atlantic Business, on June 7, 2019, as amended on July 23, 2019

Contracts means all contracts entered into by or on behalf of BI, the Sale Group Companies or, in respect of the MRO Business only, BSC, exclusively in the ordinary course of the Atlantic Business on or before Completion which remain to be performed (in whole or part) at Completion and Contract shall be construed accordingly

Contribution Notice has the meaning given to it in clause 11.1

Conversion Rate means with respect to a particular currency for a particular day the spot rate of exchange (the closing mid-point) for that currency into sterling, US dollars or any other currency on such date as published in the London edition of the Financial Times first published thereafter or, where no such rate is published in respect of that currency for such date, at the rate quoted by the Bank of England as at the close of business in London as at such date

CSALP means Airbus Canada Limited Partnership, formerly known as CSeries Aircraft Limited Partnership, a limited partnership existing under the laws of Québec, duly acting and represented by its general managing partner, CSAMGP, and having a place of business in the city of Mirabel, province of Québec, Canada

CSAMGP means Airbus Canada Managing GP Inc., formerly known as CSeries Aircraft Managing GP Inc., a Canadian corporation, having a place of business in the city of Mirabel, province of Québec, Canada

CTA 2010 means the United Kingdom Corporation Tax Act 2010

Customs Filings means import and export declarations and all Inward Processing Relief (IPR) related filings (for example, authorisation, scrap and waste reports, and bill of discharge reports)

Data Protection Legislation means:


(a)	where applicable to the Atlantic Business, the GDPR, the United Kingdom’s Data Protection Act 2018 and other Laws and regulations of the European Union and the United Kingdom relating to the processing of Personal Data, privacy and interception of communications to the extent applicable in the United Kingdom;


(b)	where (a) does not apply, the corresponding Laws and regulations of each jurisdiction in which any Sale Group Company or the MRO Business operates; and


(c)	where applicable to the parties or to the Atlantic Business, the related guidance and codes of practice issued by the United Kingdom's Information Commissioner or any other data privacy regulator of each jurisdiction in which any Sale Group Company or the MRO Business operates

Data Room means all correspondence, documents and other information made available by the Sellers for inspection by the Buyers and their advisers in the Clean Team Data Room, the Non Clean Team Data Room and the Outside Counsel Data Room as appeared at 23.59 Greenwich Mean Time on 28 October 2019, as listed in the Data Room Index attached to the Disclosure Letter and verified by BI and the US Buyer (and as retained on USB data sticks deliverable to the Buyers by the Sellers as soon as reasonably practicable after the date of this Agreement)

Data Room Index means the index detailing the contents of the Data Room, in the agreed form

DB Pension Schemes has the meaning given to it in paragraph 15.1 of Part A of Schedule 3

De Minimis Economic Impact means either:


(a)	a requirement that any member of the Buyers’ Group divest any business with annual revenue of not more than US$150,000,000; or


(b)	any requirement pursuant to which the Buyers’ Group would be obliged to incur any costs (including, but not limited to, legal fees and other professional fees, costs and expenses of not more than US$25,000,000)

Disclosure Letter means the letter of the same date as this Agreement from the Sellers to the Buyers disclosing certain matters in relation to the Sellers’ Warranties

Disguised Remuneration Provisions means Part 7A ITEPA 2003

Effective Time means 00:01 am (Dallas time) on the Completion Date

Encumbrance means:


(a)	any mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, claim, right, interest or preference granted to any third party, or any other encumbrance or security interest of any kind (or an agreement or commitment to create any of the same); and


(b)	with regard to the Sale Shares, any agreement in relation to voting, purchase, repurchase or transfer of the Sale Shares

Existing Subsidy has the meaning given to it in paragraph 9.2 of Schedule 3

Facilities has the meaning given to it in paragraph 8.2 of Schedule 3

FIRPTA Withholding Certificate has the meaning given to it in clause 37.5

FSMA means the United Kingdom Financial Services and Markets Act 2000

Future Subsidy means any subsidy or grant for which application has been made by any Sale Group Company or, in respect of the MRO Business, BSC

GDPR means Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016, as it applies in the United Kingdom from time to time, including as retained, amended, extended or re-enacted on or after the day on which the United Kingdom ceases to be a member state of the European Union and ceases to be subject to any transitional arrangements which substantively treat the United Kingdom as a member state of the European Union

Government Official means any official, officer, employee, or representative of, or any person acting in an official capacity for or on behalf of, any Governmental Authority, and includes any official or employee of any entity directly or indirectly 50 per cent. or more owned or controlled by any Governmental Authority, and any officer or employee of a public international organisation

Governmental Authority means any governmental, administrative, judicial or regulatory body, authority or organisation by which any part of the Atlantic Business is or was regulated pursuant to any applicable Laws

Governmental Order means any order, judgement, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Authority

Group means in relation to a person, that person and each company which is for the time being an Affiliate of that person

Guarantee means any guarantee, indemnity, suretyship, letter of comfort, covenant or other assurance, security or right of set off given or undertaken by a person to secure or support the obligations (actual or contingent) of any other person and whether given directly or by way of counter indemnity to any other person who has provided a Guarantee

Hire Date has the meaning given to it in paragraph 1 of Schedule 12

HMRC means Her Majesty’s Revenue and Customs of the United Kingdom

HMT has the meaning given to it in paragraph 21.2 of Schedule 3

holding company means a holding company (as defined by section 1159 CA 2006) or a parent undertaking (as defined by section 1162 CA 2006)

Information Technology means technology devices, computers, computer programs, applications, middleware, firmware, microcode or other software (whether in source code or object code or other format), servers, networks, workstations, routers, hubs, circuits, switches, data communications lines, all other information and communications technology, equipment and infrastructure, all manuals relating to it and all associated documentation

INI means Invest Northern Ireland, part of the Northern Ireland Department for the Economy, a department of the devolved Northern Ireland Executive

INI 2009 Agreement means the financial assistance agreement entered into between INI, Shorts and BI dated 9 July 2009 as amended from time to time

INI 2016 Agreement means the financial assistance grant entered into between INI and Shorts dated 20 December 2016 (and as amended on 27 September 2017)

INI 2019 Agreement means the financial assistance grant entered into between INI and Shorts dated 7 March 2019

INI Agreements means INI 2009 Agreement, INI 2016 Agreement and INI 2019 Agreement

Insolvency Event means the occurrence of any of the following insofar as it would reasonably be expected to have a materially financially adverse impact on the Sale Group and the MRO Business when taken as a whole:


(a)	any Seller or any Sale Group Company stopping or suspending payment of all its debts, or admitting its inability to, pay its debts as they fall due;


(b)	any acceleration of the obligations of any member of the Sellers’ Group under any bank facility or bond or any acceleration of monies payable by a member of the Sellers’ Group or a Sale Group Company (as applicable) under the BEIS Agreement;


(c)	a moratorium being declared in respect of all indebtedness of any Seller or any Sale Group Company;


(d)	any action, proceedings, procedure or step being taken by a Seller or any Sale Group Company in relation to:


(i)	the suspension of payments, a moratorium of any indebtedness, winding up, dissolution, administration or reorganisation (using a voluntary arrangement, scheme of arrangement or otherwise) of any Seller or any Sale Group Company;


(ii)	the composition, compromise, assignment or arrangement with any creditor of any Seller or any Sale Group Company; or


(iii)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Seller or any Sale Group Company or any of such entity’s assets; or


(e)	any event occurring in relation to any Seller or any Sale Group Company that is analogous to those set out in paragraphs (a) to (d) above, in any jurisdiction

Intellectual Property Rights means copyrights, (including, without limitation, rights in Software), patents, trademarks, trade names, service marks, business names (including, without limitation, internet domain names), design rights, database rights, rights in undisclosed or confidential information (such as know-how, trade secrets and inventions (whether patentable or not)), and all other intellectual property or similar proprietary rights of whatever nature (whether registered or not and including, without limitation, applications to register or rights to apply for registration) which may now or in the future subsist anywhere in the world

IP License Agreements means the BI IP License Agreement and the Shorts IP License Agreement

Irkut Contracts means:


(a)	the agreement between Irkut Corporation and Shorts, dated 5 June 2012, for development works on design, development and certification of certain nacelles for the MC-21-200 and MC- 21-300 aircraft; and


(b)	the related agreement between United Technologies Corporation and Shorts, dated 11 June 2012

ITA means the United Kingdom Income Tax Act 2007

ITEPA means the United Kingdom Income Tax (Earnings and Pensions) Act 2003

KoM means the Government of the Kingdom of Morocco, represented by the Minister of Economy and Finance and by the Minister of Industry, Trade and New Technologies of Morocco

Lauak Option Agreement has the meaning given to it in paragraph 14.25 of Schedule 3

Law means any law (including common law or civil law), statutes, by laws, rules, regulations, orders, ordinances, treaties, notices, directions, decrees, judgments, awards or requirements, in each case of any Governmental Authority, which have the force of law or are binding on the relevant person (and Laws shall be construed accordingly)

Long Stop Date means one (1) year from the date of signing this Agreement

Losses means all claims, liabilities, damages, losses (excluding indirect or consequential losses), costs and expenses, including reasonable legal and professional fees, costs and expenses

MAC Insolvency Event means the occurrence of any of the following insofar as it would reasonably be expected to have a materially financially adverse impact on the Sale Group and the MRO Business when taken as a whole:


(a)	BI stopping or suspending payment of all its debts, or admitting its inability to, pay its debts as they fall due;


(b)	any acceleration of the obligations of BI under any bank facility or bond;


(c)	a moratorium being declared in respect of all indebtedness of BI;


(d)	any petition being presented by BI or Shorts in relation to:


(i)	the winding up or dissolution of BI or Shorts; or


(ii)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of BI or Shorts; or

any event occurring in relation to BI that is analogous to those set out in paragraphs (a) to (d) above, in any jurisdiction

Management Accounts means the management accounts for the Atlantic Business as at the Management Accounts Date and for the period between the Accounts Date and the Management Accounts Date, located in folder 2.5.2 of the Non Clean Team Data Room

Management Accounts Date means 31 July 2019

Material Adverse Change means:


(a)	total loss of or material damage to:

[*****]

where the destruction or damages to of such site prevents operation of the relevant factory for a continuous period of 3 calendar months (except where a claim has been notified to the relevant insurer and it is reasonable to assume that the loss or damage is covered by insurance);


(b)	any inability to conduct any design, development, testing, production, distribution, sale or repair of any wing, fuselage, flap or nacelle from the location(s) noted above in (a), for a continuous period of 3 calendar months (except where a claim has been notified to the relevant insurer and it is reasonable to assume that the inability to conduct work is covered by insurance); or


(c)	a MAC Insolvency Event

Material Contracts means those Contracts:


(a)	having a value or involving expenditure to or by the Sale Group Companies or BSC (in respect of the MRO Business) in aggregate of an amount equal to or in excess of 1 per cent. of the 2018 aggregate revenues of the Sale Group and the MRO Business shown in the Atlantic Audited Combined Statement of Financial Position;

(b)

involving aggregate payments to or by the Sale Group Companies or BSC (in respect of the MRO Business) of an amount equal to or in excess of 0.5 per cent. of the 2018 aggregate revenue of the Sale Group and the MRO Business shown in the Atlantic Audited Combined Statement of Financial Position or more and which involve rights or obligations of the Sale Group Companies or BSC (in respect of the MRO Business) that may reasonably extend beyond one (1) year following the Completion Date and which cannot be terminated by the

relevant Sale Group Companies or BSC (in respect of the MRO Business) without penalty or less than six (6) months’ notice; or


(c)	the termination of which would reasonably be expected to have a Material Adverse Effect on the Atlantic Business (and which include, for the avoidance of doubt, the A220 Agreements)

MHI Agreement means the purchase and supply agreement reflecting the MHI Termsheet to be entered into between Shorts and Mitsubishi Heavy Industries, Ltd. (or its affiliate or nominee)

MHI Termsheet means the termsheet agreed between BI and Mitsubishi Heavy Industries, Ltd. on 25 June 2019

Military Contract has the meaning given to it in paragraph 11.3 of Schedule 3

MOU Agreement means the memorandum of undertaking entered into between KoM and BI (represented by Bombardier Aerospace) dated 16 November 2011 as amended from time to time

MRO Bill of Sale and Assignment and Assumption Agreement has the meaning given to it in clause 2.4

MRO Books and Records means all books, files, registers, documents, literature, correspondence, papers and other records of BSC (wherever situated and whether recorded in computerised form or otherwise) used exclusively in relation to the MRO Business and which are in existence as at the Completion Date, but excluding any of the same as are required by Law to be retained by BSC

MRO Business means the component/maintenance repair and overhaul business operated in Dallas, United States of America by BSC, comprising the MRO Sale Assets and the MRO Sale Liabilities

MRO Business Payables means all amounts payable by or owed by BSC with respect to the period after Completion for goods and/or services supplied to BSC or otherwise payable by or owed by BSC with respect to the period after Completion exclusively in connection with the carrying on of the MRO Business

MRO Business Receivables means all amounts receivable by or owing to BSC with respect to the period after Completion for goods and/or services supplied by BSC or otherwise receivable by or owing to BSC with respect to the period after Completion exclusively in connection with the carrying on of the MRO Business

MRO Contracts means Contracts entered into by or on behalf of BSC which are yet to be fully performed relating exclusively to the MRO Business (but excluding the MRO Lease and the MRO Employee Plans) and MRO Contract shall be construed accordingly, including, but not limited to, those Contracts contained at folder 2.1.1.2 of the Clean Team Data Room

MRO Employee Plans means any benefit or compensation plan, program, policy, practice, agreement, contract, arrangement or other obligation, whether or not in writing and whether or not funded, in each case, which is sponsored or maintained by, or required to be contributed to, or with respect to which any potential liability is borne by BSC for the benefit of the MRO Employees, including, but are not limited to, the Bombardier Aerospace Corporation Retirement Plan, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), employment, consulting, retirement, severance, termination or change in control agreements, deferred compensation, equity-based, incentive, bonus, pension, supplemental retirement, profit sharing, insurance, medical, welfare, fringe or other benefits or remuneration of any kind

MRO Employees means the persons employed by BSC principally in connection with the MRO Business and identified in a document to be agreed between BSC and the US Buyer at least 30 Business Days prior to Completion

MRO Intellectual Property Rights means any Intellectual Property Rights that relate exclusively to the MRO Business

MRO Inventories means the following, wherever situated, as at the Completion Date in respect of the MRO Business:


(a)	all stocks of components, partly finished or partly-repaired goods which are in the course of conversion, repair or assembly by BSC into finalised products for supply in the course of the MRO Business or are held by BSC exclusively for such purpose;


(b)	all stocks of packaging materials and of maintenance or other spare parts, components and accessories held by BSC for use or supply exclusively in the course of the MRO Business; and


(c)	all stocks of engineering and other non-trading items (including spare parts, materials, components and accessories) held by BSC exclusively for use in the course of the MRO Business

MRO Know-how means all information not publicly known relating to the MRO Business, owned by BSC and exclusively used, or required to be used, in, or in connection with, the MRO Business, held in any form (including that comprised in or derived from design drawings, prototypes, models, discoveries, improvements, data, formulae, specifications, component lists, instructions, manufacturing technology manuals, brochures, catalogues, processes, process descriptions and all other technical information and materials)

MRO Lease means, collectively, that certain Agreement of Lease dated November 18, 2008, between BSC and DCT Pinnacle LP, as amended by that certain First Amendment to Lease dated April 26, 2011 and that certain Second Amendment to Lease dated October 25, 2018

MRO Movable Property and Equipment means all plant, machinery, equipment, fixtures and fittings, furniture and other like items (whether fixed or moveable) which are used exclusively by BSC in the MRO Business as at the Completion Date

MRO Prepaid Expenses means, with respect to the period after Completion, prepaid expenses, security deposits, advance charges paid or made by BSC for the purposes of or in connection with the MRO Business as at the Completion Date that relate exclusively to the period after Completion

MRO Property means BSC’s leasehold interest in the property which is leased by BSC pursuant to the MRO Lease

MRO Purchase Price has the meaning given to it in clause 3.1(d)

MRO Purchase Price Allocation has the meaning given to it in clause 3.5

MRO Purchase Price Initial Allocation has the meaning given to it in 3.5

MRO Purchase Price Initial Allocation Change Request has the meaning given to it in 3.5

MRO Sale Assets means all right, title and interest of BSC in, to and under all of the following assets, property and undertaking, as at the Effective Time:


(a)	the MRO Movable Property and Equipment;


(b)	all the MRO Inventories;


(c)	the benefit of all MRO Contracts;


(d)	all the MRO Books and Records;


(e)	the goodwill of the MRO Business;


(f)	the benefit of all MRO Prepaid Expenses;


(g)	the benefit of the MRO Business Receivables;


(h)	the MRO Intellectual Property Rights;


(i)	the MRO Know-How;


(j)	the MRO Property;


(k)	the MRO Transferred Information Technology; and


(l)	all other assets, property and undertaking used or held by BSC for use exclusively in the MRO Business

MRO Sale Liabilities means all obligations and liabilities (whether actual, prospective or contingent, whether statutory, contractual or otherwise and whether or not of a pecuniary nature) which arise exclusively from or in relation to the conduct of the MRO Business or which are otherwise exclusively attributable to the MRO Business or any of the MRO Sale Assets, in each case arising after Completion (but not arising prior to Completion), but excluding any obligation or liability relating to or arising under any MRO Employee Plan; provided, however, that any obligation or liability shall only be an MRO Sale Liability to the extent that it:


(a)	arises out of, results from, is based on or relates to the period from and after Completion; and


(b)	does not arise out of or result from, is not based on or does not relate to, any breach or non- compliance by BSC or any other member of the Sellers’ Group of any obligation in relation to the conduct of the MRO Sale Business and the US Buyer shall neither assume nor be under any obligation to pay, perform or discharge any debt, obligation or liability of BSC that is not an MRO Sale Liability

MRO Transferred Information Technology means Information Technology owned by BI or BSC and used exclusively by BSC in the MRO Business as at the Completion Date

New Trading Agreements means the agreements reflecting the New Trading Agreements Termsheet to be entered into on Completion governing the relationship between the Sellers’ Group and the Atlantic Business

New Trading Agreements Termsheet means the termsheet relating to the New Trading Agreements in the agreed form

NIAECC means N.I. Advanced Engineering Competence Centre Limited, a private company limited by guarantee incorporated in Northern Ireland

Nonassignable Contract has the meaning given to it in clause 7.2

Non Clean Team Data Room means all correspondence, documents and other information made available by the Sellers for inspection by the Buyers and their advisers in the “Project Atlantic - Bidder Dataroom (Non Clean Team)” section of the Data Room as appeared at 23.59 Greenwich Mean Time on 28 October 2019, as listed in the Data Room Index attached to the Disclosure Letter and as retained on USB data sticks held and verified by BI and the US Buyer (and as retained on USB data sticks deliverable to the Buyers by the Sellers as soon as reasonably practicable after the date of this Agreement)

Notice has the meaning given to it in clause 38.1

Notified Address has the meaning given to it in clause 38.1(c)

Novation (and Amendment) of the BEIS Agreement means the novation from BI to the UK Buyer, and, if applicable, the accession of the US Buyer as guarantor of and/or amendment to, the BEIS Agreement, together with such amendments as the Buyers, acting reasonably, may agree with BEIS

Novation (and Amendment) of the INI 2009 Agreement means the novation from BI to the UK Buyer of, and, if applicable, the accession of the US Buyer as guarantor of and/or the amendment to, the INI 2009 Agreement, together with such amendments as the Buyers, acting reasonably, may agree with INI

Novation of the MOU Agreement means the novation from BI to the UK Buyer of, and, if applicable, the accession of the US Buyer as guarantor of the MOU Agreement, together with such amendments as the Buyers, acting reasonably, may agree with the KoM

OFAC has the meaning given to it in paragraph 22.2 of Schedule 3

Organisational Documents means articles of association, by-laws or comparable governing documents, as applicable to the relevant entity

Outside Counsel Data Room means all correspondence, documents and other information made available by the Sellers for inspection by the Buyers and their advisers in the “Project Atlantic

(Outside Counsel only)” section of the Data Room as appeared at 23.59 Greenwich Mean Time on 28 October 2019, as listed in the Data Room Index attached to the Disclosure Letter and verified by BI and the US Buyer (and as retained on USB data sticks deliverable to the Buyers by the Sellers as soon as reasonably practicable after the date of this Agreement)

Pension Scheme Agreement means the agreed recovery plan and schedule of contributions (within the meaning of Part 3 of the United Kingdom Pensions Act 2004) in connection with the 2018 SBPS Valuation entered into between Shorts and the Pension Scheme Trustee relating to the Shorts Brothers Pension Scheme prior to Completion and on a basis consistent with the Pension Scheme MOU

Pension Scheme Amount has the meaning given to it in clause 3.4(a)

Pension Scheme MOU means the memorandum of understanding in connection with the Short Brothers Pension Scheme entered into between BI, the UK Buyer and the Pension Scheme Trustee on or about the date of this Agreement

Pension Scheme Trustee means, in respect of the Short Brothers Pension Scheme, Short Brothers Pension Trustee Limited and, in respect of the Bombardier Aerospace Shorts Executive Benefits Scheme, Bombardier Aerospace Shorts Executive Benefits Trustee Limited

Pensions Regulator means the regulator of work-based pensions schemes in the United Kingdom, pursuant to the United Kingdom Pensions Act 2004

Permits means all permits, licences (including import/export licences), certifications, approvals, registrations, consents, authorisations, accreditations, franchises, variances, exemptions and orders issued or granted by a Governmental Authority, industry body or pursuant to any third party accreditation process that are required for the operation of the Atlantic Business in the places and in the manner as presently conducted in all material respects as at the date hereof (including, but not limited to:


(a)	any required pursuant to Environmental Law (as defined in paragraph 13.1 of Schedule 3);


(b)	Repair Station Permits;


(c)	any such permits required for “dual use” and/or military purposes; and


(d)	any permit in the absence of which a customer would be entitled to refuse to accept any product produced by the Atlantic Business)

Permitted Method has the meaning given to it in clause 38.2

Personal Data has the meaning given to that term in the GDPR

Policies has the meaning given to it in paragraph 16.1 of Schedule 3

Pre-Completion Reorganisation means the re-organisation of the Atlantic Business to, amongst other things, remove certain entities and assets which are not to be transferred to the Buyers with the Atlantic Business

Pre-Completion Steps means certain actions, as set out in the Pre-Completion Steps Plan, to be taken by the Sellers’ Group in relation to Pre-Completion Reorganisation

Pre-Completion Steps Plan means the steps plan in relation to the Pre-Completion Reorganisation to be prepared by the Sellers and agreed by the Buyers, acting reasonably, after the date of this Agreement

Pre-Completion Undertakings means the undertakings given by the Sellers as set out in Schedule 7

Press Release has the meaning given to it in clause 25.1

Proceedings has the meaning given to it in clause 41.1(a)

Processor means any third party appointed by a Sale Group Company or, in respect of the MRO Business, by BSC, to process Personal Data (within the meaning of the Data Protection Legislation)

Product Defect Indemnity has the meaning given to it in clause 10.4

Properties means the properties, details of which are set out Schedule 11

Public Announcement has the meaning given to it in clause 25.1

Purchase Price has the meaning given to it in clause 3.2

recognised investment exchange shall bear the meaning set out in section 285(1) of FSMA

Recovery Amount has the meaning given to it in paragraph 9.1 of Schedule 6

Relevant Claim means any Claim by a Buyer or the Sellers:


(a)	under or in connection with or arising out of this Agreement or any matters which are the subject of this Agreement; or


(b)	in respect of any non-contractual obligations arising out of or in connection with this Agreement, whether for damages or compensation,

other than any Claim under or in respect of the Tax Deed, the Product Defect Indemnity, the A320 Neo TR Indemnity, the New Trading Agreements, the IP Licence Agreements or the TSA

Relevant Period has the meaning given to it in clause 13.3

Relief means any loss, relief, allowance, exemption, set-off, deduction, credit, debit, charge, expense or other relief relating to any Tax or to the computation, reduction or elimination of income, profits or gains of any description or from any source for the purposes of any Tax and any right to a repayment of Tax

Repair Station Permit means any permit, certificate, certificate of authorisation, certificate of compliance, authorisations, licences, approvals of and registrations issued by a Governmental Authority to BSC authorising the activities of the MRO Business, including, but not limited to a US Federal Aviation Administration (FAA) 14CFR145 Repair Station Certificate and EASA Part145 Maintenance Organisation Certificate

Representatives means, in relation to any person, its directors, officers, employees, agents, advisers, accountants and consultants

Restricted Person has the meaning given to it in clause 13.2

Sale Companies means Shorts and BANA and Sale Company mean either of them

Sale Group means the Sale Companies and the Subsidiaries and Sale Group Company means any of them

Sale Shares means the Shorts Shares and the BANA Shares

Sanctions has the meaning given to it in paragraph 21.2 of Schedule 3

Securities Laws means all applicable securities Laws in all provinces of Canada (in the case of BI) and all applicable federal and state securities Laws of the United States (in the case of the Buyers) and the respective rules, regulations, blanket orders and blanket rulings under such Laws together with applicable published policies, policy statements and notices of the Securities Regulators

Securities Regulators means the applicable securities commission or securities regulatory authority in all provinces of Canada (in the case of BI) and the federal and state securities regulators of the United States (in the case of the Buyers) and Securities Regulator means any one of them (as the context requires)

Seller means:


(a)	in respect of the Shorts Shares, BAUK;


(b)	in respect of the BANA Shares, BI and BFI; and


(c)	in respect of the MRO Business, BSC

Seller Misallocated Asset has the meaning given to it in clause 14.2

Seller Public Disclosure Obligations has the meaning given to it in clause 27.1

Seller Relief means a Seller Relief under a Tax Deed

Sellers' Atlantic Guarantees means those Guarantees entered into by a Seller or a member of the Sellers’ Group in connection exclusively with the Atlantic Business and provided in the Data Room in folder 2.1.3 of the Clean Team Data Room (but for the avoidance of doubt, excluding any obligation of a member of the Seller’s Group under the BEIS Agreement, the INI 2009 Agreement, the MOU Agreement or the A220 Agreements)

Sellers’ Fundamental Warranties means the Warranties in paragraphs 1 and 2.1 to 2.7 (inclusive) of Part A of Schedule 3 and paragraphs 1 and 2.1 of Part B of Schedule 3 to be given by the relevant Sellers to the Buyers on the date of, and immediately prior to Completion of, this Agreement

Sellers’ Group means BI and each company which is for the time being an Affiliate of BI, including each other Seller and, prior to Completion, each Sale Group Company (but excluding any Sale Group Company following Completion)

Sellers’ Material Warranties means the Sellers’ Fundamental Warranties and the Warranties at paragraphs 4.2, 10.2, 10.3, 17.1, 17.2, 17.3, 21.2, 21.3, and 21.4 in Part A and paragraph 2.2 of Part B of Schedule 3

Sellers’ Solicitors means Norton Rose Fulbright LLP of 3 More London Riverside, London SE1 2AQ

Sellers’ Warranties means the warranties set out in Part A and Part B of Schedule 3 to be given by the relevant Sellers to the Buyers on the date of this Agreement and Sellers’ Warranty means any of them

Senior Employee means any person whose annual salary is in excess of US$85,000 (or the equivalent in another currency)

Shared Contracts means those contracts contained in folder 2.1.2.6 of the Clean Team Data Room

Shorts means Short Brothers plc, details of which are set out in Part A of Schedule 1

Shorts Accounts means Shorts’ annual accounts (as defined in section 471 CA 2006) for the financial year ended on the Accounts Date

Shorts IP License Agreement means the agreement to be entered into on Completion regarding the licence of Intellectual Property Rights related to the Atlantic Business from Shorts to BI in the agreed form

Shorts Purchase Price has the meaning given to it in clause 3.1(a)

Shorts Shares means the entire issued share capital of Shorts

Shorts Tax Deed means the tax deed of covenant relating to Shorts and its Subsidiaries

Software means any computer program, application, middleware, firmware, microcode and other software, including operating systems, software implementations of algorithms, models and methodologies, in each case, whether in source code, object code or other form or format, including libraries, subroutines and other components thereof, and all documentation relating thereto

Specific Indemnities means the indemnities given by the Sellers in favour of the Buyers as set out in clauses 10.1, 10.2, 10.3, 10.6 and 10.7

Straddle Period means a period of account for the purposes of the relevant Tax that begins on or before and ends after Completion

Subsidiaries means the companies and undertakings specified in Part C of Schedule 1 and

Subsidiary means any of them

subsidiary means a subsidiary undertaking (as defined by section 1162 CA 2006) or a subsidiary (as defined by section 1159 CA 2006)

Surviving Provisions means clauses 20 (Entire Agreement), 24 (Confidentiality), 25 (Announcements), 27 (Public Disclosure Obligations), 36 (Rights of Third Parties), 37.6 (Notices), 40 (Governing Law) and 41 (Jurisdiction)

Tax means:


(a)	all forms of tax, levy, duty, charge, contribution, impost, withholding or other amount whenever created or imposed and whether of the United Kingdom or elsewhere, payable to or imposed by any Tax Authority; and


(b)	all charges, interest, penalties and fines incidental or relating to any Tax falling within paragraph (a) above or which arise as a result of the failure to pay any Tax on the due date or to comply with any obligation relating to Tax

Tax Authority means HMRC or any other revenue, customs, fiscal, governmental, statutory, state or provincial authority, body or person responsible for the administration and/or collection of Tax, whether of the United Kingdom or elsewhere

Tax Benefit has the meaning given to it in paragraph 9.2 of Schedule 6

Tax Claim means any claim in respect of the Tax Warranties or a claim by the UK Buyer under or in respect of a Tax Deed

Tax Deeds means the BANA Tax Deed and the Shorts Tax Deed

Tax Deed Claim means a claim under a Tax Deed

Tax Warranties means the warranties set out in paragraphs 7.1(o), 7.1(r), 7.1(s), paragraph 15.4 (but only to the extent relating to Tax) and paragraph 20 of Schedule 3

Third Party Claim has the meaning given to it in paragraph 8.1 of Schedule 6

Trade Debts means amounts owing by way of trade credit in the ordinary course of trading as a result of goods and/or services supplied

Transaction means the sale of the Sale Shares and the sale of the MRO Business to the US Buyer

Transaction Documents means this Agreement and all documents to be entered into pursuant to this Agreement

Transferred MRO Employees has the meaning given to it in paragraph 1 of Schedule 13

Transfer Taxes means all transfer, sales, use, sales and use, registration, stamp, and recording Taxes and similar Taxes and fees (including UK stamp duty and stamp duty reserve tax and sales and use Tax levied in the United States but excluding any VAT and Taxes imposed on or with respect to any income or gains of a Seller) imposed on or arising out of this Agreement or the transactions it provides for

TSA means the transitional services agreement to be entered into between BI or a member of Sellers’ Group and the Buyers and/or the Sale Group Companies on Completion

TSA Principles means the principles relating to the TSA as contained in Schedule 14

TUPE means the United Kingdom Transfer of Undertakings (Protection of Employment) Regulations 2006

UK Buyer's Bank Account means such account as the UK Buyer notifies to BI at least fifteen Business Days prior to Completion

UK Buyer’s Guarantor’s Guarantee has the meaning given to it in clause 16.1

UK Buyer’s Tax Group means the UK Buyer and any other company (including the Sale Group Companies in respect of any period or part period after Completion only) or companies which are treated as a member of the same group as, or otherwise connected or associated in any way with, the UK Buyer for any Tax purpose from time to time

US Buyer's Bank Account means such account as the US Buyer notifies to BI at least fifteen Business Days prior to Completion

UK Company has the meaning given to it in paragraph 20.11 of Schedule 3

VAT means value added tax, sales tax, use tax, goods and services tax or any equivalent tax on the supply, importation or acquisition of goods or the supply of services

Warranties means the Sellers’ Warranties and the Buyers’ Warranties and Warranty means any of them.

Working Hours means 9.30 a.m. to 5.30 p.m. (local time) in the relevant location on a Business Day


1.2	In this Agreement, unless the context requires otherwise:


(a)	a document expressed to be in the agreed form means a document in a form which has been agreed by the parties on or before the execution of this Agreement and signed or initialled by them or on their behalf for the purposes of identification;


(b)	the table of contents table and the headings are inserted for convenience only and do not affect the interpretation of this Agreement;


(c)	references to clauses and Schedules are to clauses of and Schedules to this Agreement, references to this Agreement include its Schedules, and references to a part or paragraph are to a part or paragraph of a Schedule to this Agreement;


(d)	references to this Agreement or any other document or to any specified provision of this Agreement or any other document are to this Agreement, that document or that provision as from time to time amended in accordance with the terms of this Agreement or that document or, as the case may be, with the agreement of the relevant parties;


(e)	words importing the singular include the plural and vice versa, words importing a gender include every gender, and references to a person include an individual, corporation, partnership, any unincorporated body of persons and any government entity;


(f)	references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term;


(g)	references to time are to London time (except as otherwise stated);


(h)	the rule known as the ejusdem generis rule shall not apply and, accordingly, words introduced by words and phrases such as "include", "including", "other" and "in particular" shall not be given a restrictive meaning or limit the generality of any preceding words or be construed as being limited to the same class as the preceding words where a wider construction is possible;


(i)	the word "company" shall be deemed to include any partnership, undertaking or other body of persons, whether incorporated or not incorporated and whether now existing or formed after the date of this Agreement;


(j)	references to dollars, USD, US$ or $ are to the lawful currency of the United States of America, references to GBP, £ or sterling are to the lawful currency of the United Kingdom, and

references to EUR, € or euro are to the lawful basic unit of currency among participating member states of the European Union; and


(k)	if any monetary sum is expressed in a currency other than US$, the amount of that monetary sum shall be translated into US$ at the Conversion Rate at the close of business in London on the Business Day immediately preceding the date on which the translation of such monetary sum is required.


1.3	In this Agreement, references to something occurring in the ordinary course of business shall, without prejudice to the generality of the term, not include:


(a)	anything which relates to or involves the making or receiving of a distribution or deemed distribution for Tax purposes;


(b)	the acquisition, disposal or supply, whether actual or deemed, of any asset, goods, service or facility for an actual amount which is less than the consideration deemed to be received for Tax purposes;


(c)	a company ceasing to be associated with any person for the purposes of any Tax;


(d)	the failure to deduct, charge, recover or account for Tax;


(e)	any transaction or arrangement (or series of transactions or arrangements) which has or had no commercial or business purpose other than the deferral, reduction or avoidance of a liability to Tax;


(f)	anything which results in a liability for Tax which is primarily the liability of another person (other than another Sale Group Company or a member of the UK Buyer’s Tax Group) becoming a liability of any Sale Group Company;


(g)	anything which results in the issue of an accelerated payment notice or counteraction notice under the general anti-abuse rule; and


(h)	any Sale Group Company changing its residence for Tax purposes


1.4	In this Agreement, unless the context requires otherwise, a reference to any statute or statutory provision (whether of the United Kingdom or elsewhere) includes:


(a)	any subordinate legislation (as defined by section 21(1) Interpretation Act 1978) made under it; and


(b)	any provision which it has superseded or re-enacted (with or without modification), and any provision superseding it or re-enacting it (with or without modification), before or on the date of this Agreement, or after the date of this Agreement except to the extent that the liability of any party is thereby increased or extended.


2	Agreement to sell the Sale Shares and MRO Business

Sale Shares


2.1	Each of BAUK, BI and BFI shall sell to the UK Buyer the Sale Shares owned by it and the UK Buyer shall buy from BAUK, BI and BFI the Sale Shares with full title guarantee and free from all Encumbrances.


2.2	Title to, beneficial ownership of, and any risk attaching to, the Sale Shares shall pass on and with effect from Completion together with all associated rights and benefits (including all rights to dividends) attaching or accruing to them on or after Completion.


2.3	Each of BAUK, BI and BFI irrevocably waives any right of pre-emption conferred on it by the Organisational Documents of the relevant Sale Group Company or otherwise over any of the Sale Shares.

MRO Business

2.4

BSC shall sell to the US Buyer and the US Buyer shall buy from BSC, as a going concern, the MRO Business, pursuant to the bill of sale and assignment and assumption agreement in the agreed form, as set out in Schedule 8 (the MRO Bill of Sale and Assignment and Assumption Agreement). The US Buyer and BSC agree that the only warranties given concerning the MRO Business are contained exclusively in this Agreement and that, except to the extent required to comply with the Laws, regulations and/or formalities of execution of the jurisdictions in which the MRO Sale Assets are located, the MRO Bill of Sale and Assignment and Assumption Agreement shall not impose any obligation on BSC that is inconsistent with or additional to the obligations of BSC under this Agreement.

2.5

On the terms and subject to the conditions set out in this Agreement, at Completion, the US Buyer shall assume and become liable for, and from and after Completion, the US Buyer shall satisfy, discharge and perform as and when due, and hold BSC harmless against, the payment and performance of, the MRO Sale Liabilities. On and from Completion the US Buyer shall pay to BSC on demand an amount equal to all Losses suffered or incurred by BSC or any member of the Sellers’

Group which relate to the payment and performance of the MRO Sale Liabilities with respect to the period after Completion.


2.6	On the terms and subject to the conditions set out in this Agreement, at Completion, BSC shall sell to the US Buyer and the US Buyer shall buy from BSC, free from all Encumbrances:


(a)	the MRO Sale Assets (other than the MRO Property and the MRO Contracts) free from all Encumbrances and with full title guarantee;


(b)	the MRO Property on and subject to the terms set out or referred to in Schedule 9; and


(c)	the benefit (subject to the burden) of the MRO Contracts on and subject to the terms set out in clause 6.4.


2.7	Title to and beneficial ownership of:


(a)	the MRO Contracts (subject to the terms set out in clause 6.4) and all other MRO Sale Assets (other than the MRO Property as described below) shall pass on Completion after execution by the US Buyer and BSC of the MRO Bill of Sale and Assignment and Assumption Agreement; and


(b)	the MRO Property shall pass on Completion after (i) execution by the US Buyer and BSC of the MRO Bill of Sale and Assignment and Assumption Agreement and (ii) receipt of the consent specified in Schedule 9.


2.8	The MRO Sale Assets (other than MRO Sale Assets held for resale in the ordinary course of Seller’s business) constitute the entire operating assets of a separate division, branch or identifiable segment of BSC’s business within the meaning of Texas Tax Code § 151.304(b)(2) and 34 Tex. Admin. Code

§ 3.316(d). BSC and the US Buyer intend for the sale and transfer of the MRO Sale Assets (other than assets held for resale in the ordinary course of BSC’s business and items that are treated as motor vehicles for Texas sales tax purposes) pursuant to this Agreement to be exempt from any and all Transfer Taxes by reason of the occasional sale exemption provided under Tex. Tax Code

151.304 and 34 Tex. Admin. Code § 3.316.


2.9	The risk in respect of the MRO Property and all the other MRO Sale Assets shall pass to the US Buyer as from Completion or as otherwise expressly set out in this Agreement.

General


2.10	Subject to clause 6.4 in relation to the MRO Contracts and Schedule 9 in relation to the MRO Property, the UK Buyer shall not be obliged to complete the purchase of any of the Sale Shares and the US Buyer shall not be obliged to complete the purchase of the MRO Business unless the purchase of all the Sale Shares and the MRO Business is completed simultaneously.


3	Consideration


3.1	The consideration for the sale of the Sale Shares and the MRO Business shall, subject to the following provisions of this clause 3, be the payment by or on behalf of the Buyers of the Purchase Price in cash to the Sellers, which shall be comprised of payments:


a.	to BAUK for the Shorts Shares (Shorts Purchase Price);


b.	to BI for the BI BANA Shares (BI BANA Purchase Price);


c.	to BFI for the BFI BANA Shares (BFI BANA Purchase Price); and


d.	to BSC for the MRO Business (MRO Purchase Price).


3.2	The Purchase Price shall be US$500,000,000.

Payment of the Purchase Price and scheme funding


3.3	At Completion, the Buyers shall pay the Purchase Price in the manner specified in clause 30, such that any amount payable under this clause 3.3:


a.	in respect of the BFI BANA Shares shall be paid to BFI;


b.	in respect of the BI BANA Shares shall be paid to BI;


c.	in respect of the MRO Business shall be paid to BSC; and


d.	in respect of the Shorts Shares shall be paid to BAUK.


3.4	At Completion, the UK Buyer shall procure that:


a.	Shorts is put in funds to enable Shorts to pay to the Short Brothers Pension Scheme an amount either equal to £100,000,000 (the Pension Scheme Amount), or such lesser amount as is agreed by the Buyer, BI and the Pension Scheme Trustee; and


b.	Shorts pays the Pension Scheme Amount to the Short Brothers Pension Scheme.

3.5

The MRO Purchase Price (including any MRO Sale Liabilities and any other items that are treated as consideration for the MRO Property for United States federal income tax purposes) shall be allocated to and among the MRO Property and the restrictive covenant set forth in clause 13 in accordance with the rules under Section 1060 of the Code and the Treasury Regulations promulgated thereunder (the MRO Purchase Price Allocation). The MRO Purchase Price Allocation shall be binding on the parties hereto for all purposes, including the filing of all Tax returns (including, but not limited to United States Internal Revenue Service Form 8594) or other returns and the preparation of all financial statements and other documents and records and the parties hereto shall take no position and cause their Affiliates to take no position inconsistent with such allocation for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required by applicable Law or pursuant to a “determination” within the meaning of Section 1313(a) of the Code. Within thirty (30) days after Completion, the US Buyer shall prepare and deliver or cause to be prepared and delivered to BSC, an initial draft of its IRS Form 8594 (the MRO Purchase Price Initial Allocation).

3.6

Within forty-five (45) days after the date of receipt by BSC of the MRO Purchase Price Initial Allocation, BSC shall deliver to the US Buyer a written request for changes to the MRO Purchase Price Initial Allocation; provided, however that such request for changes shall be limited to such items and amounts not initially reflected in the Purchase Price allocation conducted in accordance with clause 3.9 (MRO Purchase Price Initial Allocation Change Request). If BSC does not provide an MRO Purchase Price Initial Allocation Change Request within such 45-day period, then the parties shall be deemed to have agreed to the MRO Purchase Price Initial Allocation delivered by the Buyer and the MRO Purchase Price Initial Allocation shall become the definitive MRO Purchase Price Allocation. If BSC delivers a MRO Purchase Price Initial Allocation Change Request, the parties shall undertake in good faith to resolve the issues raised in such request. The MRO Purchase Price Allocation will be used, amongst others, for purposes relating to Transfer Taxes and VAT.

3.7

In the event that any adjustment is required to be made to the MRO Purchase Price Allocation as a result of any adjustment to the MRO Purchase Price pursuant to this Agreement, the US Buyer shall prepare or cause to be prepared, and shall provide to BSC, a MRO Purchase Price Allocation reflecting such adjustment. Such revised MRO Purchase Price Allocation shall be subject to review and resolution of timely raised disputes in the same manner as the MRO Purchase Price Initial Allocation. Each of BSC and the US Buyer shall file or cause to be filed a revised IRS Form 8594 reflecting such adjustments as so finalized for its taxable year that includes the event or events giving rise to such adjustment, and (except as required by future revised MRO Purchase Price Allocation) shall take no position and cause their Affiliates to take no position inconsistent with such allocation

for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required by applicable Law or pursuant to a “determination” within the meaning of Section 1313(a) of the Code; provided, however, that nothing contained herein shall prevent BSC or US Buyer from settling any proposed deficiency or adjustment by any Governmental Authority based upon or arising out of the allocation hereunder, and neither BSC nor US Buyer shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Authority challenging the allocation hereunder.

3.8

All real and personal property Taxes or similar ad valorem Taxes (or other Taxes calculated on an annual basis) levied with respect to the MRO Business for a Straddle Period, whether imposed or assessed before or after the date of Completion, shall be allocated ratably to the period that ends on and includes the date of Completion (which shall be the responsibility of the Sellers), and the period that begins after the date of Completion (which shall be the responsibility of the US Buyer) based on the number of days in the Straddle Period that are included in each period.


3.9	Prior to Completion, the parties shall, acting reasonably, use all reasonable endeavours to agree the apportionment of the Purchase Price among the Sale Group Companies and the MRO Business as soon as reasonably practicable after the date of this Agreement and in any event prior to 31 December 2019.


4	Conditions


4.1	The sale of the Sale Shares and the MRO Business under this Agreement shall be conditional on the satisfaction or (where capable of waiver, in whole or in part) waiver of the following conditions (Conditions) in accordance with the terms of this Agreement:


a.	to the extent they relate to Shorts, the consent of The Secretary of State for BEIS having been obtained (in form and substance satisfactory to the Sellers and to the US Buyer, each acting reasonably) to:


i.	the transactions contemplated by this Agreement; and


ii.	the Novation (and Amendment) of the BEIS Agreement;


b.	to the extent they relate to Shorts, the consent of INI having been obtained (in form and substance reasonably satisfactory to the Sellers and to the US Buyer, each acting reasonably) to:


i.	the transactions contemplated by this Agreement; and


ii.	the Novation (and Amendment) of the INI 2009 Agreement, including the full release of BI under the INI 2009 Agreement;


c.	to the extent they relate to BANA, the consent of KoM having been obtained (in form and substance reasonably satisfactory to the Sellers and to the US Buyer, each acting reasonably) to:


i.	the transactions contemplated by this Agreement; and


ii.	the Novation of the MOU Agreement, including the full release of BI under the MOU Agreement;


d.	each of the Competition Approvals having been obtained or being deemed to have been obtained (in form and substance reasonably satisfactory to the Sellers and to the US Buyer, each acting reasonably) in accordance with applicable Law;


e.	the Pension Scheme Agreement having been executed by Shorts and the Pension Scheme Trustee in accordance with the terms of the Pension Scheme MOU;


f.	the unconditional consent or waiver of Airbus having been received (in form and substance satisfactory to the Sellers and to the US Buyer, each acting reasonably) in relation to the transactions contemplated by this Agreement under each contract entered into by Airbus relating to the Atlantic Business (and such consent not having been withdrawn) (the Airbus Consent);


g.	the TSA (in form and substance satisfactory to the Sellers and to the Buyers, each acting reasonably on the basis of the TSA Principles) having been executed by the parties thereto such that it enters into full force and effect on and from Completion;


h.	the MHI Agreement (in form and substance satisfactory to the Sellers and to the Buyers, each acting reasonably on the basis of the MHI Termsheet) having been executed by the parties thereto such that it enters into full force and effect on and from Completion;


i.	the New Trading Agreements (in form and substance satisfactory to the Sellers and to the Buyers, each acting reasonably on the basis of the New Trading Agreements Termsheet) having been executed by the parties thereto immediately prior to Completion such that they enter into full force and effect on and from Completion;


j.	the IP License Agreements (in form and substance satisfactory to the Sellers and to the Buyers, each acting reasonably on the basis of drafts provided prior to the date of this

Agreement) having been executed by the parties thereto immediately prior to Completion such that they enter into full force and effect on and from Completion;


k.	[*****]

in respect of that certain facilities agreement, dated as of June 17, 2011, as amended and extended through March 27, 2019, by and among, inter alios, Bombardier Inc., as obligor, and National Bank of Canada, as administrative agent, an amendment, consent or waiver (in form and substance satisfactory to the Sellers and to the Buyer, each acting reasonably) agreed by BI and the majority banks under such facilities agreement, in respect of the transactions contemplated by this Agreement, except to the extent that such amendment, consent or waiver is not otherwise required;

the A220 GTA Transfer Agreement (in form and substance satisfactory to the Sellers and to the US Buyer, each acting reasonably) and the A220 STAs Transfer Agreement (in form and substance satisfactory to the Sellers and to the US Buyer, each acting reasonably) having been executed by the parties thereto immediately prior to Completion such that they enter into full force and effect on and from Completion;

there not being in effect on the Completion Date any order, judgment or injunction issued by a court of competent jurisdiction restricting Completion of the Transaction (and, to the extent such order, judgment or injunction is in effect on the date which would have been the Completion Date but for such order, judgment or injunction having been issued, the parties shall use Commercially Reasonable Endeavours to procure that such order, judgment or injunction is revoked, rescinded or countermanded within 20 Business Days of the date which would have been the Completion Date, after which the parties shall proceed to Completion);


o.	no Material Adverse Change having occurred between the date of this Agreement and Completion; or


p.	no intervention notice having been issued under the Enterprise Act 2002 in relation to the transactions contemplated by this Agreement.


4.2	The Buyers and the relevant Sellers undertake to use their respective Commercially Reasonable Endeavours to ensure that the Conditions set out in clause 4.1(a) to 4.1(c) and 4.1(e) to 4.1(m) are

satisfied as soon as possible after the date of this Agreement and in any event by no later than the Long Stop Date.


4.3	The Buyers and the Sellers will use their respective Commercially Reasonable Endeavours to procure that each of the Competition Approvals is obtained in each case as soon as reasonably practicable after the date of this Agreement. Without limitation to the foregoing:


a.	as soon as practicable after the date of this Agreement, subject to the requirements in sub- clause (b) below, the Buyers and, if applicable, the relevant Seller, shall:


i.	make, or cause to be made, all such filings, notifications and submissions required to be made for the purposes of obtaining the Competition Approvals;


ii.	progress all such filings, notifications and submissions with the relevant Competition Authorities with all due diligence and, insofar as is reasonably possible, in accordance with any applicable time limits prescribed by such Competition Authorities; and


iii.	provide all such information which is required by the relevant Competition Authorities and, insofar as is reasonably possible, in accordance with any applicable time limits prescribed by such Competition Authorities;

subject to compliance at all times with applicable Laws and the other provisions of this Agreement, BI and the relevant Seller shall (and shall procure that all other members of the Sellers’ Group shall) co-operate in a timely manner with the Buyers and provide the Buyers with all necessary information and supply such assistance as is reasonably requested in connection with obtaining any of the Competition Approvals;


c.	subject to compliance at all times with applicable Laws and the other provisions of this Agreement, the Buyers shall:


i.	give BI and its legal counsel a reasonable opportunity to comment on drafts of any filings, notifications, submissions or correspondence (other than that of an administrative nature), which it intends to make to any Competition Authority;


ii.	submit any filings, notifications, submissions or correspondence (other than that of an administrative nature) only after having taken into account the reasonable comments of BI and its legal counsel (such comments not to be unreasonably withheld or delayed);


iii.	communicate with any Competition Authority (other than on matters of an administrative nature) only after prior notice to BI (and taking into account any reasonable comments

and requests of BI and its legal counsel, such comments not to be unreasonably withheld or delayed);


iv.	provide BI promptly with all notices and information supplied to or filed with or received from any Competition Authority; and


v.	allow persons nominated by BI to attend any formal meetings with the relevant Competition Authority, whether in person, by telephone or by other means,

provided in each case, that neither on the one hand the Buyers nor on the other hand BI and the relevant Seller shall be obliged to disclose to each other any information of a commercially sensitive nature relating to their own businesses (it being understood that any documentation provided by any party pursuant to this clause 4.3(c) may consequently be redacted in order to avoid communication of business secrets or other proprietary information of that party); and


vi.	provide BI with reasonable updates on the status of obtaining the Competition Approvals.

4.4

Where necessary to remove any impediment, restriction, or condition that prevents the fulfilment of the Condition relating to obtaining Competition Approvals, the Buyers agree to use their Commercially Reasonable Endeavours to offer and agree to accept, in each such jurisdiction, any remedy that is required to obtain such Competition Approval that does not have in excess of a De Minimis Economic Impact. In this regard, and without prejudice to the generality of the foregoing, promptly after any Competition Authority has reasonably expressed, formally or informally, to either of the Buyers, any concern about the impact of the Transaction, the Buyers shall promptly inform BI and its legal advisers and keep them informed in advance of the measures that the Buyers are considering to take, or the commitments that it is considering to propose, in order to resolve these concerns (as the case may be).


4.5	If at any time any party becomes aware of a fact or circumstance that is reasonably expected to prevent or materially delay any of the Conditions being satisfied, it shall promptly notify the other parties (where permitted by Law).


4.6	Each party shall give notice to the other parties (in accordance with clause 37.6) that a relevant Condition has been satisfied (or, where capable of waiver, in whole or in part, waived) within two Business Days of becoming aware of that fact.

4.7

If any Condition is not satisfied or (where capable of waiver in whole or in part) waived on or before the Long Stop Date then this Agreement shall terminate (except for the Surviving Provisions which shall remain in full force and effect) and no party shall have any Claim under this Agreement of any nature against the other parties or their respective Affiliates (except in respect of any rights and liabilities which have accrued before termination (including, without limitation, under any of the Surviving Provisions)). If the Sellers terminate this Agreement because the Condition set out in clause 4.1(k) is not satisfied or waived by the Long Stop Date then the [*****].


4.8	Notwithstanding the provisions of clause 4.6, if at any time before Completion:


a.	the Buyers become aware of:


i.	any fact or matter (other than a fact or matter fairly disclosed to the Buyers in the Disclosure Letter) which would either constitute a breach of the Sellers’ Material Warranties or constitute a breach of such Sellers’ Material Warranties if such Sellers’ Material Warranties were repeated on the Completion Date by reference to the facts or circumstances then existing; or


ii.	any breach by the Sellers of the Pre-Completion Undertakings, which breach has or would have a material adverse effect on the Atlantic Business and has not been remedied prior to the Completion Date,

then the Buyers may, if the diminution in value of the Atlantic Business as a result of such breach exceeds US$150,000,000: (i) terminate this Agreement by notice in writing to the Sellers; or (ii) proceed to Completion without prejudice to its right to make a Claim under this Agreement.


4.9	The Sellers shall procure that, pending Completion or the earlier termination of this Agreement in accordance with its terms, each Sale Group Company and BSC (in respect of the MRO Business) shall comply with the Pre-Completion Undertakings.

4.10

The US Buyer shall procure that, prior to Completion (and following Completion as necessary), it shall use all reasonable endeavours to effect and complete the transfer to the US Buyer or replacement in the name of the US Buyer of any Repair Station Permit and BSC shall, subject to compliance at all times with applicable Laws and the other provisions of this Agreement, use Commercially Reasonable Endeavours to co-operate with the US Buyer and provide the US Buyer with all necessary information and supply such assistance as is reasonably requested in connection with obtaining such Repair Station Permits.


5	[Reserved]


6	MRO Business Receivables and MRO Business Payables


6.1	Following Completion:


a.	the US Buyer shall be solely entitled to collect for its own account, and to enforce for its own benefit all securities for, the MRO Business Receivables; and


b.	BSC shall be entitled to (and shall be entitled to collect) for its own account all receipts, rents, periodical payments and other payments receivable in respect of or otherwise owing by any third party in connection with the MRO Business which relate or are otherwise attributable to any period of time before the Completion Date,

and each of the US Buyer and BSC shall, at the request of the other, cooperate with and support the other, acting reasonably, in collecting amounts due to them under this clause 6.1.


6.2	If, at any time after Completion:


a.	any Seller (or any other member of the Sellers’ Group) receives any monies in respect of the MRO Business Receivables, such Seller shall pay (or procure payment) in cash to the US Buyer as soon as practicable the amount recovered; or


b.	the US Buyer (or any other member of the Buyers’ Group) receives any monies in respect of receivables relating to the MRO Business in relation to the period prior to Completion, the US Buyer shall pay (or procure payment) in cash to BSC as soon as practicable the amount recovered.


6.3	Following Completion, the US Buyer shall be solely responsible for and shall pay the MRO Business Payables. The US Buyer shall have no responsibility for, or be required to pay, any payables relating to the MRO Business in relation to the period prior to Completion.

6.4

If, at any time after Completion, BI or BSC receives any invoice or other demand or request for payment of any MRO Business Payable, BI or BSC shall promptly notify the US Buyer of the details of such demand or request, and the US Buyer shall negotiate and settle such MRO Business Payable directly with the MRO Business’s counterparty. BI or BSC shall, if the US Buyer so requests and at the US Buyer’s direction and cost, negotiate or challenge the terms of any MRO Business Payable and shall grant to the US Buyer the conduct of any consequential claim or proceedings in connection with any MRO Business Payable.

6.5

Where any charges or outgoings paid or incurred, or any payments received, in respect of the MRO Business or any of the MRO Assets are of a periodic nature and relate or are otherwise attributable to a period of time commencing before but ending after the Completion Date, such amount shall be apportioned on a time basis between BSC and the US Buyer so that such part of the relevant charges, outgoings or payments as is attributable to the period ended at the Completion Date shall be borne by or belong to BSC and such part of the relevant charges, outgoings or payments as is attributable to the period commencing at the Completion Date shall be borne by or belong to the US Buyer. Each of the US Buyer and BSC shall, at the request of the other, cooperate with and support the other in apportioning the amounts due to them under this clause 6.5.


7	MRO Contracts


7.1	In respect of each MRO Contract:


a.	this Agreement shall constitute BSC’s agreement to assign such MRO Contract (in relation to the period following Completion) to the US Buyer, which assignment shall take effect, and the US Buyer shall accept such assignment from Completion upon execution and delivery of the MRO Bill of Sale and Assignment and Assumption Agreement;

the US Buyer shall carry out, perform and discharge all obligations arising under such MRO Contract to the extent that they are due to be discharged after Completion and pay to BSC on demand an amount equal to all Losses suffered or incurred by BSC which arise as a result of or in connection with any failure by the US Buyer to do so (provided that the US Buyer shall have no responsibility for, or be required to, carry out, perform or discharge any obligations under any MRO Contract that were required to be discharged prior to Completion); and


c.	the US Buyer shall and BSC shall, on or as soon as practicable after Completion, give notice to any MRO Contract counterparty as the US Buyer may elect in the agreed form of the assignment of such MRO Contract to the US Buyer (in relation to the period following Completion),

provided that if such assignment would constitute an event of default under the relevant MRO Contract, such MRO Contract shall not be assigned under this clause 7.1 and clause 7.2 shall apply to such MRO Contract.


7.2	To the extent that any MRO Contract to be assigned pursuant to the terms of clause 7.1 is not capable of being assigned without the consent of a third party or if such assignment or attempted assignment would constitute a breach thereof or a violation of any Law (any such MRO Contract being referred to herein as a Nonassignable Contract), nothing in this Agreement shall constitute an assignment

or an attempted assignment thereof prior to the time at which all consents necessary for such assignment shall have been obtained. BSC shall use Commercially Reasonable Endeavours to obtain the consent to the assignment of any Nonassignable Contracts and the US Buyer shall reasonably cooperate with BSC’s efforts to obtain such consent. To the extent that such consents are not obtained, if and to the extent requested by the US Buyer, BSC shall, during the term of the affected Nonassignable Contract, hold its interest in the Nonassignable Contract in trust for the US Buyer absolutely (so far as is permitted by Law) and the US Buyer shall (if such agency or sub- contracting is permissible under the Nonassignable Contract and permitted by Law), as BSC’s agent or sub-contractor, perform (in relation to the period following Completion) all such obligations of BSC thereunder or in connection therewith or (if such agency or sub-contracting is not permissible under the MRO Contract or permitted by Law) BSC shall use Commercially Reasonable Endeavours to:


a.	provide to the US Buyer the benefits (in relation to the period following Completion) under any such Nonassignable Contract,


b.	cooperate in any reasonable and lawful arrangement designed to provide such benefits (in relation to the period following Completion) under such Nonassignable Contract to the Buyer, and


c.	enforce, at the written request of the US Buyer, for the account of the Buyer, any rights of BSC under the affected Nonassignable Contract in relation to the period following Completion (including the right to elect to terminate such Nonassignable Contract in accordance with the terms thereof upon the direction of the US Buyer).


7.3	The Buyer shall reasonably cooperate with BSC in order to enable BSC to provide the benefits contemplated by clause 7.2 to the US Buyer. The Buyer shall perform the obligations of BSC arising under the affected Nonassignable Contracts in relation to the period following Completion, but only if and to the extent that BSC provides to the Buyer the benefits thereof pursuant to this clause 7.3.


7.4	BSC and the US Buyer shall notify each other forthwith on receipt of any notice from a counterparty that it does not consent to an assignment or novation of its MRO Contract or that its consent to such assignment or novation will be subject to any terms or conditions.


7.5	The provisions of Schedule 13 shall apply in relation to the transfer of the MRO Employees.


8	Completion


8.1	Completion shall take place on the Completion Date at the offices of the Sellers’ Solicitors or at such other place or places as the parties may agree on or prior to the Completion Date.


8.2	At Completion:


a.	BAUK shall do those things listed in paragraph 1 of Part A of Schedule 5;


b.	BI shall do those things listed in paragraph 1 of Part A and paragraph 1 of Part B of Schedule 5;


c.	BFI shall do those things listed paragraph 1 of Part B of Schedule 5;


d.	BSC shall do those things listed in paragraph 1 of Part C of Schedule 5;


e.	the UK Buyer shall do those things listed in paragraph 2 of Part A of Schedule 5 and paragraph 2 of Part B of Schedule 5; and


f.	the US Buyer shall do those things listed in and paragraph 2 of Part C of Schedule 5.


8.3	If BI, BAUK, BFI or BSC fails or is unable to comply with any of its obligations under clause 8.2 and Schedule 5 on the Completion Date then the Buyers may:


a.	defer Completion (by notice from either Buyer to BI) to a date (being a Business Day) not less than 10 nor more than 20 Business Days after that date (in which case the provisions of this clause 8.3 and clause 8.5 shall apply to Completion as so deferred); or


b.	proceed to Completion so far as practicable but without prejudice to the Buyers’ rights where the relevant Seller has not complied with its obligations under this Agreement.


8.4	If either Buyer fails or is unable to comply with any of its obligations under clause 8.2 and Schedule 5 on the Completion Date then BI may:


a.	defer Completion (by notice to the Buyers) to a date (being a Business Day) not less than 10 nor more than 20 Business Days after that date (in which case the provisions of this clause

1.and clause 8.5 shall apply to Completion as so deferred); or


b.	proceed to Completion so far as practicable but without prejudice to the Sellers’ rights where the Buyer has not complied with its obligations under this Agreement


8.5.	If the relevant party fails or is unable to comply with any of its obligations under:


a.	paragraphs 1(a)(i), 1(a)(ii) and 1(a)(iv) of Part A of Schedule 5 in the case of BAUK;


b.	paragraphs 1(a)(i), 1(a)(ii) and 1(a)(iii) of Part B of Schedule 5 in the case of BI;


c.	paragraphs 1(a)(i), 1(a)(ii) and 1(a)(iii) of Part B of Schedule 5 in the case of BFI;


d.	paragraph 1(a)(i) of Part C of Schedule 5 in the case of BSC;


e.	paragraphs 2(a)(vii), 2(b) and 2(b) of Part A of Schedule 5, paragraph 2(b) and 2(d) of Part B of Schedule 5 in the case of the UK Buyer; or


f.	paragraph 2(c) of Part C of Schedule 5 in the case of the US Buyer,

on any date to which Completion is deferred in accordance with clause 8.3(a) or clause 8.4(a), as applicable, the Buyers shall, in addition to their rights in clauses 8.3(a) and 8.3(b), or, as applicable, BI shall, in addition to its rights under clauses 8.4(a) and 8.4(b), have the right to terminate this Agreement on such date by notice to BI (in the case of termination by the Buyers) or by notice to the Buyers (in the case of termination by BI).

8.6.

If this Agreement is terminated in accordance with clause 8.5, all rights and obligations of the Sellers and the Buyers under this Agreement shall end (except for rights and obligations under the Surviving Provisions which shall remain in full force and effect), provided that nothing in this clause 8.6 shall limit any rights or obligations of any party under this Agreement which have accrued before termination.


9	The Warranties


9.1	Each of the Sellers’ Warranties is given by:


(a)	BAUK, insofar only as the applicable Warranty relates to Shorts, the Subsidiaries and the Shorts Shares;


(b)	BI and BFI, insofar only as the applicable Warranty relates to BANA and the BANA Shares; and


(c)	BSC, insofar only as the applicable Warranty relates to the MRO Business,

and none of the Sellers shall have any liability in respect of any of the other Sellers’ Warranties.


9.2	Subject to clause 9.1, each of BAUK, BI, BFI and BSC severally warrants to the Buyers that:


(a)	each of such Sellers’ Warranties is true, accurate and not misleading as at the date of this Agreement; and


(b)	each of such Sellers’ Fundamental Warranties will be true and accurate immediately prior to Completion by reference to the facts and circumstances then existing as if references in such

Sellers’ Fundamental Warranties to the date of this Agreement were references to immediately prior to the Completion Date.


9.3	Each of the Buyers warrants severally to the Sellers that:


(a)	each of the Buyers’ Warranties is true, accurate and not misleading as at the date of this Agreement; and


(b)	each of the Buyers’ Fundamental Warranties will be true and accurate immediately prior to Completion by reference to the facts and circumstances then existing as if references in such Buyers’ Fundamental Warranties to the date of this Agreement were references to immediately prior to the Completion Date.

9.4

The Sellers’ Warranties are qualified by those matters fairly disclosed in the Disclosure Letter and for this purpose ‘fairly disclosed’ means disclosed in such manner and with sufficient detail as to enable a reasonable buyer to identify the nature and scope of the matter concerned. No warranty or representation is given as to the accuracy or completeness of any statement (including any statement of opinion) contained in the Disclosure Letter.


9.5	The Sellers’ Warranties are further qualified by the documents and information contained in the Data Room details of which are set out in the Data Room Index, to the extent such information was fairly disclosed.

9.6

In each Sellers’ Warranty, where any statement is qualified as being made "so far as the Sellers are aware" or any similar expression, such statement shall be deemed to refer to the actual knowledge or awareness of Kelly Gill, Pier-Olivier Calestagne, and Christian Poupart as at the date of this Agreement, having made all reasonable enquiries of Michael Ryan, Colin Thompson (in relation to legal matters), Stephen Addis (in relation to engineering and business development in Belfast), Jonathan Connell (in relation to operations in Belfast), Stephen Orr (in relation to BANA), Ciara Kennedy (in relation to supply chain), Paul Worthington (in relation to financial matters), Colette Eastwood (in relation to environmental matters) and Marc Rousseau (in relation to tax), it being agreed that in giving such statements or responding to such enquiries, no liability shall be incurred personally by any of these named individuals, save in the case of any such individual’s dishonesty, fraud, wilful misconduct or wilful concealment.


9.7	Each of the paragraphs in Schedule 3:


(a)	shall be construed as a separate and independent Warranty; and


(b)	unless expressly provided in this Agreement, shall not be limited by reference to any other paragraph in Schedule 3 or by any other provision of this Agreement,

and the Buyers shall have a separate Claim and right of action in respect of every breach of a Warranty.


9.8	The Warranties shall not in any respect be extinguished or affected by Completion.

9.9

Each of BI, BAUK, BFI and BSC agrees with the Buyers (for itself and as trustee for each Sale Group Company and each Sale Group Company's directors, officers, employees and agents) to waive any right or Claim which it may have in respect of any misrepresentation or error in or omission from any information or opinion supplied or given by any Sale Group Company and/or any of its directors, officers, employees or agents in the course of negotiating this Agreement or in preparing the Disclosure Letter, and that any such right or Claim shall not constitute a defence to any Relevant Claim or Specific Indemnity Claim (or other Claim for indemnification pursuant to the Product Defect Indemnity or the A320 Neo TR Indemnity) by the Buyer.


9.10	Neither Buyer shall be entitled to make a Relevant Claim (other than in respect of a Specific Indemnity) after Completion where the matter giving rise to the Relevant Claim was in the actual knowledge of the Buyers and/or any of their advisers as at the date of this Agreement.


10	Specific Indemnities and other indemnification provisions


10.1	The provisions of Schedule 13 relating to environmental indemnities shall be incorporated into this Agreement.

10.2

The Sellers irrevocably undertake to indemnify and keep indemnified the Buyers and the Buyers’ Group after Completion against any Losses, costs or expenses arising before, on or after Completion in connection with the Bombardier Transport DB Schemes, the Bombardier Transport RPS Participation or any other “occupational pension scheme” which is not a “money purchase scheme” (as such terms are defined in the Pension Schemes Act 1993) operated by the Sellers or the Sellers’ Group prior to Completion whether such Losses, costs or expenses arise pursuant to the powers of the Pensions Regulator or otherwise and, for the avoidance of doubt, including any claims made under section 75 or section 75A of the Pensions Act 1995 provided that this indemnity shall not apply in respect of the DB Pension Schemes.


10.3	The Sellers shall indemnify and hold the Buyers harmless from and against any Loss which the Buyer or any member of the Buyer’s Group may suffer or incur in respect of any claim after Completion,

made under or in respect of any liability or obligation of BASR, other than any arising out of the provision of services by BASR to Shorts after Completion.


10.4	The Sellers shall on demand indemnify and hold the Buyers harmless from:

any Loss relating to or arising from a quality, delivery, disruption or warranty claim by an Atlantic Business customer or end user as a result of any action taken by a Seller, a member of the Sellers’ Group, or the Atlantic Business prior to Completion including, without limitation, Losses arising from defects in a product specification and/or design defects in products (or component parts thereof) shipped on or prior to the Completion Date, Losses arising from design and workmanship defects or flaws performed or arising before or on the Completion Date, and warranty costs associated with design flaws or workmanship for designs and production performed prior to the Completion Date and any contractual terms dispute relating to design or production performed prior to the Completion Date; and]


b.	any Loss arising from design and manufacturing defects or the Airworthiness Directives issued in accordance with Commission Regulation (EC) No. 1321/2014 (Annex I, M.A.301) with respect to the Trent 700 nacelle and related component parts,

(the Product Defect Indemnity).


10.5	The Sellers shall on demand indemnify and hold the Buyers harmless from any Loss relating to or arising from any claim made by any person for any sum relating to quality, delivery, performance, disruption or warranty in respect of the A320 Neo TR programme (the A320 Neo TR Indemnity).


10.6	BAUK shall on demand indemnify and hold the UK Buyer and Shorts harmless against fifty (50) per cent of any Loss arising from:


a.	[*****]


b.	[*****]; and/or


c.	any claim for breach of contract arising out a claim for unpaid or underpaid holiday pay, provided always that:


i.	the Buyer shall procure that Shorts uses Commercially Reasonable Endeavours to minimise any Losses arising within the scope of this indemnity (including, but limited to, using Commercially Reasonable Endeavours to comply with all legal requirements in relation to the payment of holiday pay as soon as practicable);


ii.	this clause 10.6 shall only apply to the extent that the UK Buyer has given written notice to the Seller of the relevant Losses (or claims underlying the relevant Losses) within eighteen (18) months of the Completion Date; and


iii.	BAUK will not have any liability under this clause 10.6 if the aggregate liability is less than [*****].


10.7	The Sellers shall on demand indemnify and hold the Buyers and Shorts harmless against fifty (50) per cent of any Loss arising from:


a.	[*****];


b.	any failure to comply with information and consultation obligations pursuant to TUPE (as that term is defined in the Lauak Option Agreement) in relation to any relevant transfer under TUPE arising from the exercise of the Option (as that term is defined in the Lauak Option Agreement); and

c.Article 4 of the Lauak Option Agreement, provided always that:


i.	the Buyers shall procure that Shorts uses Commercially Reasonable Endeavours to minimise any Losses arising within the scope of this indemnity (including, but limited to, using Commercially Reasonable Endeavours to [*****], and to comply with all information and consultation obligations;


ii.	the indemnity in this clause 10.7 shall not apply to Losses arising from claims for unlawful discrimination;


iii.	the indemnity in clause 10.7(a) shall only apply to the extent that [*****] occurs no later than sixty (60) days following exercise of the Option (as that term is defined in the Lauak Option Agreement);


iv.	without limitation to sub-paragraph 10.7(c)(iii) above the indemnity in this clause 10.7 shall only apply to the extent that the Buyers have given written notice to the Seller of the relevant Losses (or claims underlying the relevant Losses) within twenty four (24) months of the Completion Date;


v.	the Seller’s liability pursuant to this clause 10.7 shall be capped at [*****]; and


vi.	the Seller will not have any liability under this clause 10.7 if the aggregate liability is less than [*****].


10.8	In respect of clauses 10.4 and 10.5 above, notwithstanding any other provision of this Agreement:


a.	the Buyers shall procure that Shorts uses Commercially Reasonable Endeavours to mitigate any Losses arising to the Buyers’ Group under the Product Defect Indemnity or the A320 Neo TR Indemnity;


b.	the Sellers shall have no liability pursuant to the Product Defect Indemnity or the A320 Neo TR Indemnity to the extent that the relevant Loss is covered under a policy of insurance;


c.	the Buyers and Shorts shall not settle or admit liability in respect of any Loss relating to the Product Defect Indemnity or the A320 Neo TR Indemnity without the prior written consent of the Sellers;


d.	the Buyers and Shorts shall notify the Sellers of any matter they consider reasonably likely to give rise to a Claim under the Product Defect Indemnity or the A320 Neo TR Indemnity and shall: (i) keep the Sellers fully informed; and (ii) take such steps as the Sellers may reasonably request to dispute and resist any such Claim;


e.	the Buyers and Shorts shall provide copies of any relevant document the Sellers may require to consider, dispute and resist any Claim made in relation to the Product Defect Indemnity or the A320 Neo TR Indemnity and shall provide access to employees of Shorts for the purposes of investigating the relevant Claim;


f.	if any litigation should arise in relation to any Claim pursuant to the Product Defect Indemnity or the A320 Neo TR Indemnity, the Sellers may take over conduct of such litigation (at their

cost) and the Buyers and Shorts shall provide such assistance as they shall reasonably require;


g.	the Buyers must give the Sellers notice in writing of any Claim under the Product Defect Indemnity or the A320 Neo TR Indemnity by no later than the date falling three years after the Completion Date;


h.	a Claim under the Product Defect Indemnity or the A320 Neo TR Indemnity may not be brought to the extent that the Claim is included in a provision in the Accounts or the Atlantic Audited Statement of Financial Position; and

if, after any of the Sellers has made any payment under those clauses 10.4 or 10.5, the recipient of that payment recovers from a third party (including any Tax Authority) (whether by payment, discount, credit, relief or otherwise) a cash sum which is referable to that payment and was not taken into account in calculating the amount of that payment, the relevant Buyer or Shorts shall forthwith repay (or procure the repayment) to the relevant Seller of an amount equal to the lesser of (i) the sum paid by the relevant Seller and (ii) the amount recovered after having deducted the reasonable costs of obtaining the sum and tax on receiving it to the relevant Buyer or relevant Sale Group Company.

10.9

Where any Relief arising from any payment under this clause 10 generates or otherwise gives rise to such a reduction in cash Tax payable by the UK Buyer or any member of the UK Buyer’s Tax Group in the ten years following Completion which would not otherwise have arisen, the Buyer shall make such adjusting payments to the Sellers as are necessary to reflect that reduction in cash Tax (to the extent that the Relief in question is not a Seller Relief that has already been applied for the benefit of the Sellers or a member of the Sellers’ Group under this Agreement or a Tax Deed).


11	[*****]


11.1	[*****]


12	Relevant Claims against the Sellers

The provisions of Schedule 6 shall apply in relation to the liability of each Seller in respect of any Relevant Claim or Tax Deed Claim, to the extent provided for in that Schedule.


13	Non-competition provisions and use of names


13.1	In this clause, the following definitions have the following meanings:

[*****]

Sellers’ Group Trade Marks means any trade marks, service marks, trade names or internet domain names, in each case whether registered or unregistered, and including any applications for the grant of any such rights and all rights or forms of protection having equivalent or similar effect anywhere in the world owned or used by BI or any member of the Sellers’ Group, in connection with the carrying on of the Atlantic Business only, at or prior to Completion, but excluding any of the foregoing that are either owned by a Sale Group Company or form part of the MRO Intellectual Property Rights

Permitted Activity means:


a.	the design, development, testing, production, distribution, sale or manufacturing of components or parts (Relevant Activity) and the provision of maintenance, repair, overhaul and modification services for: [*****]


b.	any activity presently being carried out by any member of the Sellers’ Group (other than a Sale Group Company) at, or in the two years prior to, the date of this Agreement in respect of [***], including: [***]

Prohibited Area means [*****]

Restricted Business means any [*****]

13.2

BI undertakes to the Buyers that it shall not, and shall procure that no member of the Sellers’ Group (for so long as each member remains part of the Sellers’ Group)(in the context of this clause 10, a Restricted Person) shall, without the prior written consent of the Buyers (such consent not to be unreasonably withheld or delayed), directly or indirectly whether by itself, in connection with, or through its employees or agents or third parties:


a.	for a period of [*****] years from Completion carry on, be interested in or otherwise engaged in any Restricted Business in the Prohibited Area in competition with any Sale Group Company, save that nothing in this clause 13.2(a) shall operate to prohibit BI or any member of the Sellers’ Group from:


i.	carrying on, being interested in or otherwise engaged in any Permitted Activity (whether directly or indirectly and whether alone or jointly with any other person or as adviser, agent or manager of any other person);


ii.	holding up to five per cent of the shares of any company or group, the shares of which are listed or dealt in on a recognised investment exchange; or


iii.	from acquiring or owning any direct or indirect interest in any company or group, part of whose revenue is derived from a Restricted Business, provided that either:


(A)	the annual revenue derived by that company and its Group from a Restricted Business is 10% or less of the aggregate annual revenue of such Group; or

(B)

if the annual revenue derived by that company and its Group from a Restricted Business is above 10% of the aggregate annual revenue of that Group, that within 18 months of that company’s acquisition by the Sellers (or any member of the Sellers’ Group), the Sellers (or the relevant member of the Sellers’ Group) reduce or sell such of that Group’s business such that the aggregate annual revenue of that Group derived from a Restricted Business will become 10% or less of the aggregate annual revenue.

for a period of three years from Completion solicit or entice away or endeavour to solicit or entice away from any Sale Group Company or the MRO Business or offer employment to any Senior Employee employed or otherwise engaged by that Sale Group Company or the MRO Business at Completion, whether or not that person would commit any breach of their contract of employment by reason of leaving the service of that Sale Group Company save that this clause 13.2(b) shall not apply where a person responds to a general advertisement published in a newspaper, magazine, trade or other publication, or on a website, or where any person initiates contact with BI or any member of the Sellers’ Group with regards to employment or where such person is contacted by a recruitment agency, provided that:


i.	neither a Restricted Person nor any representative of such person specifically encouraged such recruitment agency to approach the relevant person or such individual to initiate contact with BI or any member of the Sellers’ Group; and


ii.	such advertisement or recruitment agency is not targeted at any of the Senior Employees.


13.3	[*****]

13.4

The Buyers shall procure that each Sale Group Company shall as soon as reasonably practicable and in any event within 6 months of the Completion Date (the Relevant Period) cease to use or display in any manner whatsoever the Sellers’ Group Trade Marks or any similar mark, name, design or logo wherever the same are used, it being acknowledged and agreed in each case that during any such Relevant Period the Sale Group Companies shall be entitled to continue to use the Sellers’ Group Trade Marks for the purpose specified in the relevant paragraph above in the same manner and to the same extent that the Sellers’ Group Trade Marks were used before Completion and on

terms that the Sale Group Companies cease using the Sellers’ Group Trade Marks for such purpose prior to or upon the expiry of the applicable Relevant Period in accordance with the provisions of this clause.

13.5

Subject to clause 13.4, the Buyers undertake to procure that neither they nor any Affiliate nor any member of the Buyers’ Group shall at any time after Completion represent itself or hold itself out as being in any way connected with any member of the Sellers’ Group, and BI undertakes to procure that neither it nor any member of the Sellers’ Group shall at any time after Completion represent itself or hold itself out as being in any way connected with the Buyers, any Affiliate of the Buyers or any member of the Buyers’ Group, in each case except as connected via any of the Transaction Documents.

13.6

The Sellers agree with the Buyers that the restrictive covenants in clause 13.2 are reasonable and necessary for the protection of the value of the Sale Shares and the MRO Business and that having regard to that fact those covenants do not work harshly on any party to this Agreement. While those restrictions are considered by the parties to be reasonable in all the circumstances, it is agreed that if any of those restrictions, by themselves or taken together, are adjudged by a court of competent jurisdiction to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the Buyer but would be adjudged by such court of competent jurisdiction reasonable if part or parts of their wording were deleted or amended or qualified, or if the periods referred to were reduced or the range of products and/or services or area dealt with were reduced in scope, then the relevant restriction or restrictions shall apply with such modification or modifications as may be necessary to make it or them valid and effective.


14	Misallocation

14.1

If, following Completion, any property, right or asset (including any contract) not forming part of the Sale Group or the MRO Business is found to have been transferred to either Buyer or to a Sale Group Company in error (whether directly or indirectly and including as a result of implementation of the Pre-Completion Steps Plan) (a Buyer Misallocated Asset), the relevant Buyer shall transfer, or procure that the relevant member of the relevant Buyer’s Group transfers, for nominal consideration, such Buyer Misallocated Asset (and any related liability) as soon as practicable to such member of the Sellers’ Group as is nominated by BI.

14.2

If, following Completion, there is discovered to be any property, right or asset (including any contract) owned by any member of the Sellers’ Group which was either: (i) primarily used in or essential to the operation of the Atlantic Business; or (ii) otherwise essential to the operation of a Sale Group Company or the MRO Business, but was in each case not transferred or made available to either

Buyer or a Sale Group Company at Completion pursuant to the provisions of any Transaction Document (including pursuant to the TSA) (a Seller Misallocated Asset), the Sellers shall transfer, or procure the transfer of, for nominal consideration, such Seller Misallocated Asset (and any related liability) as soon as practicable to such member of the relevant Buyers’ Group as may be nominated by the relevant Buyer, it being understood that the Sellers shall not be required to transfer any asset provided or offered to be provided pursuant to the TSA at any time.


15	BI’s guarantee

15.1

In consideration of the Buyers entering into this Agreement, BI unconditionally and irrevocably guarantees to the Buyers the due and punctual performance of all the obligations and liabilities of BAUK, BFI and BSC (each a BI Guaranteed Party and together, the BI Guaranteed Parties) under or otherwise arising out of or in connection with this Agreement or the Tax Deeds, including but not limited to any liabilities arising in connection with the Specific Indemnities, the Product Defect Indemnity and the A320 Neo TR Indemnity or by virtue of any matter giving rise to a Relevant Claim or Tax Deed Claim, and undertakes to keep the Buyers fully indemnified against any Loss which the Buyers or any member of either Buyer’s Group (provided that such Loss shall not be met more than once) may suffer or incur as a result of any failure or delay by BI Guaranteed Parties in the performance of any of such obligations and liabilities (BI’s Guarantee).


15.2	The liability of BI under BI’s Guarantee in respect of each failure or delay by BI Guaranteed Parties in the performance of any their obligations and liabilities under this Agreement shall be limited to the extent that the relevant BI Guaranteed Party would have been liable under or in connection with this Agreement for such failure or delay.

15.3

If any obligation or liability of a BI Guaranteed Party expressed to be the subject of BI’s Guarantee is not, or ceases to be, valid or enforceable against that BI Guaranteed Party (in whole or in part) on any ground whatsoever, BI shall nevertheless be liable to the Buyer in respect of that purported obligation or liability as if the same were fully valid and enforceable and BI were the principal debtor in respect thereof.


15.4	The liability of BI under BI’s Guarantee shall not be discharged or affected in any way by:


a.	either Buyer compounding or entering into any compromise, settlement or arrangement with the BI Guaranteed Parties, any co-guarantor or any other person; or


b.	any variation, extension, increase, renewal, determination, release or replacement of any of the Transaction Documents; or

either Buyer granting any time, indulgence, concession, relief, discharge or release to the BI Guaranteed Party, any co-guarantor or any other person or realising, giving up, agreeing to any variation, renewal or replacement of, releasing, abstaining from or delaying in taking advantage of or otherwise dealing with any securities from or other rights or remedies which it may have against any Seller, any co-guarantor or any other person.


15.5	Neither Buyer shall not be obliged to take steps to enforce any rights or remedy against a BI Guaranteed Party or any other person before enforcing BI’s Guarantee.


15.6	BI’s Guarantee is in addition to any other security or right now or hereafter available to the Buyers and is a continuing security notwithstanding any entering into liquidation, administration or insolvency or steps being taken by any person with a view to any of those things or other incapacity of any BI Guaranteed Party or BI or any change in the ownership of either of them.


16	UK Buyer’s Guarantor’s guarantee

16.1

In consideration of the Sellers entering into this Agreement, the UK Buyer’s Guarantor unconditionally and irrevocably guarantees to the Sellers the due and punctual performance of all the obligations and liabilities of the UK Buyer under or otherwise arising out of or in connection with this Agreement or the Tax Deeds, including but not limited to any liabilities arising by virtue of any breach of the Buyers’ Warranties by the UK Buyer, and undertakes to keep the Sellers fully indemnified against any Loss which the Sellers or any member of the Sellers’ Group (provided that such Loss shall not be met more than once) may suffer or incur as a result of any failure or delay by the UK Buyer in the performance of any of such obligations and liabilities (UK Buyer’s Guarantor’s Guarantee).


16.2	The liability of the UK Buyer’s Guarantor under the UK Buyer’s Guarantor’s Guarantee in respect of each failure or delay by the UK Buyer in the performance of any its obligations and liabilities under this Agreement shall be limited to the extent that the UK Buyer would have been liable under or in connection with this Agreement for such failure or delay.

16.3

If any obligation or liability of the UK Buyer expressed to be the subject of the UK Buyer’s Guarantor’s Guarantee is not, or ceases to be, valid or enforceable against the UK Buyer (in whole or in part) on any ground whatsoever, the UK Buyer’s Guarantor shall nevertheless be liable to the Sellers in respect of that purported obligation or liability as if the same were fully valid and enforceable and the UK Buyer’s Guarantor was the principal debtor in respect thereof.


16.4	The liability of the UK Buyer’s Guarantor under the UK Buyer’s Guarantor’s Guarantee shall not be discharged or affected in any way by:


a.	the Sellers compounding or entering into any compromise, settlement or arrangement with the UK Buyer, any co-guarantor or any other person; or


b.	any variation, extension, increase, renewal, determination, release or replacement of any of the Transaction Documents; or

the Sellers granting any time, indulgence, concession, relief, discharge or release to the UK Buyer, any co-guarantor or any other person or realising, giving up, agreeing to any variation, renewal or replacement of, releasing, abstaining from or delaying in taking advantage of or otherwise dealing with any securities from or other rights or remedies which it may have against the UK Buyer, any co-guarantor or any other person.


16.5	The Sellers shall not be obliged to take steps to enforce any rights or remedy against the Buyer or any other person before enforcing the UK Buyer’s Guarantor’s Guarantee.

16.6

The UK Buyer’s Guarantor’s Guarantee is in addition to any other security or right now or hereafter available to the Sellers and is a continuing security notwithstanding any entering into liquidation, administration or insolvency or steps being taken by any person with a view to any of those things or other incapacity of the UK Buyer or the UK Buyer’s Guarantor or any change in the ownership of either of them.


17	BI to act as Sellers’ representative


17.1	Until the last date on which it may be necessary for the Buyers (on the one hand) and the Sellers (on the other hand) to have dealings with each other in respect of their rights and obligations under this Agreement, notices and communications given by or to BI in relation to this Agreement shall be deemed to be given by or to the Sellers or the Seller to which they relate.


17.2	The Sellers agree that:


a.	the Buyers shall be entitled to rely on this clause 17 in dealing with BI and shall not be liable to any of the other Sellers by reason of dealing with BI on behalf of the Sellers or any of them as contemplated herein; and


b.	where any provision of this Agreement requires the consent or approval of the Sellers, the consent or approval of BI shall be deemed to constitute the consent or approval of the relevant Seller(s).


18	Dealing with and voting on the Sale Shares


18.1	Each of BI, BAUK and BFI hereby declares that it shall, from the date of Completion and thereafter for so long as it remains the registered holder of any of the Sale Shares:


a.	hold the Sale Shares and the dividends and other distributions of profits or surplus or other assets declared, paid or made in respect of them after Completion and all rights arising out of or in connection with them on trust for the UK Buyer and its successors in title; and


b.	deal with and dispose of the Sale Shares and all such dividends, distributions and rights as the UK Buyer or any such successor may direct.

18.2

Effective from Completion to the day on which the Buyer or its nominee is entered in the register of members of the Sale Group Companies as the holder of the Sale Shares, each of BI, BAUK and BFI hereby appoints the UK Buyer as its lawful attorney for the purpose of doing any act or thing which BI or the relevant Seller could, as a member of the Sale Group Companies, do (including receiving notices of and attending and voting at all meetings of the Sale Group Companies). For such purpose, each of BI, BAUK and BFI authorises:


a.	the Sale Group Companies to send any notices in respect of the Sale Shares to the Buyer; and


b.	the UK Buyer to complete in such manner as it thinks fit consents to short notice and any other document required to be signed by BI, BAUK or BFI (as applicable) in its capacity as a member of the Sale Group Companies.


19	Release and payment in respect of outstanding Guarantees

19.1

The Buyers and each Seller shall use Commercially Reasonable Endeavours to secure, with effect from Completion, the release of the Sellers and other members of the Sellers’ Group, without cost to the Sellers or the relevant member of the Sellers’ Group, from the Sellers’ Atlantic Guarantees (including, if required, offering its own Guarantee or commitment, on terms acceptable to the guaranteed, in substitution for the existing Guarantee or other commitment or liability of the relevant member of the Sellers’ Group).


19.2	The Buyers shall and shall procure that any Sale Group Company (following Completion) shall:


a.	perform on its own behalf or procure the performance of any commitment or obligation secured by such Sellers’ Atlantic Guarantee after Completion; and


b.	pay to BI on demand (for itself and as trustee for each member of the Sellers’ Group) an amount equal to all Losses which it or any member of the Sellers’ Group may suffer or incur in respect of any claim, made under or in respect of any such Sellers’ Atlantic Guarantees after Completion.


20	Entire agreement


20.1	Each party acknowledges and agrees for itself (and as agent for each of its respective Affiliates (including, after Completion, the Sale Group and MRO Business in respect of the Buyers)) that:


a.	the Transaction Documents constitute the entire agreement between the parties and supersede any prior agreement, understanding, undertaking or arrangement between the parties relating to the subject matter of the Transaction Documents;


b.	by entering into the Transaction Documents, they do not rely on any statement, representation, assurance or warranty of any person (whether a party to the Transaction Documents or not and whether made in writing or not and including any financial model included in the Data Room) other than as expressly set out in the Transaction Documents;

the only recourse, rights or remedies available to any party in connection with the sale of the Sale Shares and MRO Business, the Atlantic Business or the Transaction Documents shall be solely for breach of contract except as otherwise expressly provided for in this Agreement or the Transaction Documents (including the New Trading Agreements and the IP Licences) and the Buyers shall, and shall procure that following Completion the Sale Group and MRO Business shall not, bring any claim against the Sellers’ Group in respect of the Atlantic Business otherwise than pursuant to the Transaction Documents (including the New Trading Agreements and the IP License Agreements); and


d.	nothing in this clause 20, and no other limitation in this Agreement, shall exclude or limit any liability for fraud or fraudulent misrepresentation by any Seller.


21	Effect of Completion

All provisions of this Agreement shall so far as they are capable of being performed or observed continue in full force and effect notwithstanding Completion except in respect of those matters then already performed and Completion shall not constitute a waiver of any of the Buyers’ rights in relation to this Agreement.


22	No general right of termination

The Buyers shall not be entitled to terminate or rescind this Agreement by reason of any Relevant Claim or for any other reason other than in the circumstances set out in clause 3.8 and clause 8.5.


23	Further assurances

23.1

Each Seller shall execute or, so far as it is reasonably able, procure that any member of the Sellers’ Group or any necessary third party shall execute all such documents and/or do or, so far as each is reasonably able, procure the doing of, such acts and things as each Buyer shall after Completion reasonably require to give effect to this Agreement and any documents entered into pursuant to it and to seek to give to the Buyers the full benefit of all the provisions of this Agreement and any other Transaction Document (including, but not limited to, the transfer of all contracts relating to the Atlantic Business and any other Seller Misallocated Asset, save as set out otherwise in this Agreement).


23.2	Each party shall bear its own cost in connection with any action taken pursuant to clause 23.1.


24	Confidentiality


24.1	The Confidentiality Agreement shall cease to have any force or effect from Completion.


24.2	Each party shall, and shall procure that:


a.	prior to Completion each member of its Group from time to time shall keep confidential all information provided to it by or on behalf of any other party or otherwise obtained by or in connection with this Agreement which relates to another party or any member of any other party’s Group; and


b.	if, after Completion, a party or its Group holds Confidential Information relating to another party or any person or entity affiliated with that party, it shall keep that information confidential and:


i.	use that Confidential Information only as required under, or as necessary to fulfil their obligations under, the Transaction Documents (including, but not limited to, the New Trading Agreements and the IP License Agreements); or


ii.	if not required to be used pursuant to clause 24.2(b)(i), to the extent reasonably practicable, shall return that information to each relevant party or destroy it, in each case without retaining copies (save as permitted by Law).


24.3	Nothing in this clause 24 prevents any announcement being made or Confidential Information being disclosed:


a.	in accordance with clause 25 or clause 27 below; or

to the extent required by Law or a Governmental Authority, provided that a party required to disclose Confidential Information (other than to a Tax Authority) shall promptly notify the other parties, where reasonably practicable and where permitted by Law, before disclosure occurs, and cooperate with the other parties regarding the timing and content of such disclosure or any action which the other parties may reasonably elect to take to challenge the validity of such requirement.


24.4	Nothing in this clause 24 shall prevent disclosure of Confidential Information by any party:


a.	to the extent that the information is in or comes into the public domain other than as a result of a breach of any undertaking or duty of confidentiality by any person; or


b.	to that party’s professional advisers, but before any disclosure to any such person the relevant party shall procure that he is made aware of the terms of this clause 24 and shall use its best endeavours to procure that such person adheres to those terms as if that person were bound by the provisions of this clause 24.


24.5	Nothing in this clause 24 shall prevent the Buyers’ Group from using Confidential Information owned by a Sale Group Company after Completion as permitted by applicable Law or to enforce its remedies under this Agreement.


24.6	For the purposes of this clause 24, Confidential Information means:

any non-public information pertaining to or concerning the Atlantic Business, the Sale Group Companies, the Sellers, the Buyers’ Group or their respective Affiliates, including all budgets, forecasts, analyses, financial results, costs, processes, drawings, blueprints, margins, wages and salaries, business opportunities and other business activities, all supplier and customer lists, price lists, all non-public Intellectual Property Rights, including trade secrets, unfiled patents, technical expertise and know how, documentation, including standard terms and agreements and all other information which, by its nature, or by the nature of the circumstances surrounding its disclosure, ought in good faith to be treated as confidential; but excluding


b.	information that: (i) is or was independently developed by a party or its representatives without the use of any Confidential Information; (ii) is publicly available, other than as a result of a disclosure in contravention of this Agreement (except that where any part of such information

is publicly available, but a compilation of information which includes such part is not publicly available, then such compilation will not be treated as being publicly available and will be treated as Confidential Information under this Agreement); and (iii) is made available to a party or its representatives on a non-confidential basis from a third party.


25	Announcements

25.1

The parties shall ensure that any announcement, circular or public communication (each a Public Announcement) concerning the Transaction complies with applicable Laws, including Securities Laws, and that the press release issued in respect of the execution of this Agreement shall be the press release in the agreed form (Press Release). Subject to clause 25.2, no Public Announcement concerning the existence or content of this Agreement or any other Transaction Document shall be made by any party (or any of their Affiliates) which goes materially beyond the terms of the Press Release without the prior written approval of each of the other parties (such approval not to be unreasonably withheld, delayed or conditioned).

25.2

Clause 25.1 does not apply to any Public Announcement if, and to the extent that, in the reasonable opinion of the disclosing party, it is required to be made by the rules of any stock exchange or any governmental, regulatory or supervisory body or court of competent jurisdiction to which the party (or the relevant member of its Group) making the Public Announcement is subject, whether or not any of the same has the force of Law, provided that any Public Announcement shall, so far as is practicable and permitted by Law, be made only after consultation with the other parties.


26	Provision of information


26.1	The Buyers shall provide the Sellers with such documents, records, correspondence, accounts and/or other information as the Sellers shall reasonably request in relation to any Sale Group Company in respect of any period or part period ending on or prior to Completion within 15 Business Days of such request.


26.2	Nothing in clause 26.1 shall oblige the Buyers or any Sale Group Company to provide any documentation, records, correspondence, accounts and/or other information which is or contains, in the reasonable opinion of either Buyer, information which is of material commercial sensitivity to either Buyer or the Buyers’ Group, or where it would be in breach of any Laws or duty of confidentiality.


27	Public Disclosure Obligations

27.1

The parties acknowledge and agree that BI is a Canadian public company subject to continuous disclosure obligations and that the transactions contemplated by this Agreement and the other Transaction Documents may trigger public disclosure obligations pursuant to Securities Laws to which BI is subject, including the preparation and public filing of certain Transaction Documents, press releases, material change reports and business acquisition reports, in each case in the reasonable opinion of BI (collectively, Seller Public Disclosure Obligations). The Buyers agree to provide to BI any information regarding the Buyers which is held by them and is, in the reasonable opinion of BI, required in order for BI to meet the Seller Public Disclosure Obligations, and BI agrees to consult with the Buyers in advance of BI making a public disclosure in connection with the Seller Public Disclosure Obligations (where practicable to do so and where permitted by Law).

27.2

The parties acknowledge and agree that Spirit Aerosystems Holdings, Inc. is a company publicly traded on the New York Stock Exchange and subject to continuous disclosure obligations and that the transactions contemplated by this Agreement and the other Transaction Documents may trigger public disclosure obligations pursuant to Securities Laws to which Spirit Aerosystems Holdings, Inc. is subject, including the preparation and public filing of certain Transaction Documents, press releases, material change reports and business acquisition reports, in each case in the reasonable opinion of Spirit Aerosystems Holdings, Inc. (collectively, Buyer Public Disclosure Obligations). The Sellers agree to provide to the Buyers any information regarding the Sellers which is held by any of them and is, in the reasonable opinion of the Buyers, required in order for Spirit Aerosystems Holdings, Inc. to meet the Buyer Public Disclosure Obligations, and the Buyer agrees to consult with BI in advance of Spirit Aerosystems Holdings, Inc. making a public disclosure in connection with the Buyer Public Disclosure Obligations (where practicable to do so and where permitted by Law).


27.3	Nothing in this clause 27 shall require any party to provide to any other party any commercially sensitive information or any information in breach of any Laws or duty of confidentiality.


28	Severance

Each provision of this Agreement is severable and distinct from the others and, if any provision is, or at any time becomes, to any extent or in any circumstances invalid, illegal or unenforceable for any reason, that provision shall to that extent be deemed not to form part of this Agreement but the validity, legality and enforceability of the remaining parts of this Agreement shall not be affected or impaired, it being the parties' intention that every provision of this Agreement shall be and remain valid and enforceable to the fullest extent permitted by law.


29	No set off

The Buyers shall not be entitled to set off any sum due by it to the relevant Seller against any sum due by BI or the relevant Seller to the relevant Buyer under or in relation to this Agreement..


30	Payments


30.1	Unless otherwise expressly stated (or otherwise agreed in the case of a given payment), each payment under this Agreement shall be made on or before the date the payment is due by electronic funds transfer for value on that date to:


a.	in the case of a payment to BI, BI’s Bank Account;


b.	in the case of a payment to BAUK, BAUK’s Bank Account;


c.	in the case of a payment to BFI, BFI's Bank Account;


d.	in the case of a payment to BSC, BSC’s Bank Account;


e.	in the case of a payment to the UK Buyer, the UK Buyer's Bank Account; and


f.	in the case of a payment to the US Buyer, the US Buyer’s Bank Account,

and receipt of the amount due into the BI’s Bank Account, BAUK’s Bank Account, BFI’s Bank Account, BSC’s Bank Account or the Buyer's Bank Account (as the case may be) shall constitute an effective discharge of the relevant payment obligation.

30.2

If any sum due for payment in accordance with this Agreement is not paid on the due date for payment, the person in default shall pay interest thereon at the rate of one per cent over the overnight money market financing rate shown by the Bank of Canada as determined on the due date for payment which shall accrue from day to day and shall be calculated on the basis of a year of 365 days from but excluding the due date to and including the date of payment.


31	Alterations

No purported alteration of this Agreement shall be effective unless it is in writing, refers to this Agreement and is duly executed by each party to this Agreement.


32	Counterparts

This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, and each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original, but taken together, they shall constitute one and the same instrument.


33	Costs

Each of the parties shall be responsible for its respective legal and other costs incurred in relation to the negotiation, preparation and completion of this Agreement, and all ancillary documents.


34	Transfer Taxes


34.1	To the extent that any VAT is chargeable on any amount payable by either Buyer under this Agreement, such amount payable shall be exclusive of any VAT, which shall be payable by either Buyer in addition to the amount expressed to be payable under this Agreement.


34.2	All Transfer Taxes shall be borne by the relevant Buyer and to the extent any Seller is liable therefor, the relevant Buyer shall on demand reimburse the relevant Seller for the amounts for which the Seller is liable.


35	Agreement binding

This Agreement shall be binding on and shall enure for the benefit of the successors in title of each party.


36	Rights of third parties


36.1	Save as provided in clause 36.2, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

36.2

The parties agree that certain provisions of this Agreement confer a benefit on their respective Affiliates, and that such provisions are intended to benefit, and, subject to the provisions of clause 17, be enforceable by, such Affiliates in their own right under the Contracts (Rights of Third Parties) Act 1999. Notwithstanding the foregoing, under no circumstances shall any consent be required from any such Affiliate for the termination, rescission, amendment or variation of this Agreement, whether or not such termination, rescission, amendment or variation affects or extinguishes any such benefit or right.


37	Withholdings and gross-up


37.1	All sums payable under this Agreement by any party to this Agreement shall be paid free and clear of all deductions or withholdings whatsoever, save only as may be required by Law.

37.2

If, at any time, any applicable Law requires a party to this Agreement to make any deduction or withholding from any sums payable under this Agreement (other than any sums payable under clause 3 of this Agreement, or any interest payable under clause 30.2 or any payment by the UK Buyer under clause 10.9 or 11.1 or by either Buyer under Schedule 6), the amount so due shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the recipient of that payment receives, on the due date for such payment, a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made, provided that this clause 37.2 shall not apply to the extent that the requirement to make such deduction or withholding would not have arisen but for the recipient of the payment only being entitled to the payment as a result of an assignment to it of rights under this Agreement.


37.3	If a party to this Agreement is required by Law to make any deduction or withholding as referred to in clause 37.2, such party shall:


a.	make such deduction or withholding; and


b.	pay the full amount deducted or withheld to the relevant Tax Authority in accordance with applicable law, regulation or regulatory requirement.

37.4

If, at any time after any increased payment is made by a party to this Agreement as a consequence of the application of clause 37.2, the recipient of that payment (in this clause 37.4, the payee) receives or is granted a credit against or remission from any Tax payable by it which it would not otherwise have received or been granted, the payee shall, to the extent that it can do so without prejudicing the retention of the amount of such credit or remission, reimburse the party to this Agreement that made the payment with such amount as shall leave the payee (after such reimbursement) in no worse a position than it would have been in had the circumstances giving rise to the increased payment not in fact arisen. Such reimbursement shall be made not later than ten Business Days after the payee receives or is granted such credit.

37.5

The US Buyer shall be entitled to withhold any amounts (determined in the US Buyer’s reasonable discretion) that are required to be withheld from the MRO Purchase Price pursuant to Section 1445 of the Code; provided, however, that if BSC furnishes to the Buyer a duly completed and authorised withholding certificate described in: (i) United States Treasury Regulations Section 1.1445-2(b)(2) that BSC is not a “foreign person” for U.S. federal income tax purposes; or (ii) United States Treasury

Regulations Sections 1.1445-2(c) and 1.897-2(h) that none of the assets being transferred by BSC is a “United States real property interest” within the meaning of Section 897(c) of the Code, (each a FIRPTA Withholding Certificate), the US Buyer shall not be entitled to withhold any amounts from the MRO Purchase Price pursuant to this clause 37.5. For the avoidance of doubt and notwithstanding anything in this Agreement to the contrary, any amount withheld and paid over to the appropriate Tax Authority pursuant to this clause 37.5 shall be treated for all purposes of this Agreement as having been paid to BSC.

37.6

If a Tax Authority charges to Tax (including where the sum is brought into any computation of income, profits or gains but is not charged to Tax because of the use of a Buyer’s Relief) any sum paid in respect of a Relevant Claim, a Claim in respect of a Specific Indemnity, the Product Defect Indemnity or the A320 Neo TR Indemnity, or a Claim under clause 11, the relevant Seller shall pay to the relevant Buyer or its successor or assign such additional amount as will ensure that the relevant Buyer, its successor or assign shall receive and retain the amount that is equal to the amount it would have received and retained had the payment in question not been charged to Tax (after taking into account any credit in respect of such Tax). The provisions of this clause 37.6 shall only apply to the extent that they would apply: (i) in the case of a payment to the UK Buyer or a successor or assign of the UK Buyer (subject to clause 39.2), to a buyer resident for Tax purposes in the United Kingdom (and not liable to Tax elsewhere) at the time that any sum is brought into charge; and (ii) in the case of a payment to the US Buyer or to a successor or assign of the US Buyer (subject to clause 39.2), to a buyer resident for Tax purposes in the United States of America (and not liable to Tax elsewhere) at the time that any sum is brought into charge.


38	Notices


38.1	Any notice or other communication to be given under or in connection with this Agreement (a Notice) shall be:


(a)	in writing;


(b)	in the English language; and


(c)	sent by the Permitted Method to the address of the relevant party as set out in clause 38.3 (Notified Address).


38.2	The Permitted Method means any of the methods set out in the first column below. A Notice given by such Permitted Method shall be effective upon receipt and shall be deemed to have been received in accordance with the second column below, provided the Notice is properly addressed and sent in full to the Notified Address:



(1) Permitted Method	(2) When Notice is deemed received
Personal delivery	At the time of delivery if during Working Hours, and otherwise, at the start of Working Hours on the next Business Day
Registered post or courier	At the time of delivery if during Working Hours, and otherwise, at the start of Working Hours on the next Business Day
E-mail, with the notice attached in PDF format	At the time of transmission if during Working Hours, and otherwise, at the start of Working Hours on the next Business Day


38.3	The Notified Address of each of the parties is as set out below:


(a)	in the case of BI, BAUK, BFI or BSC, to the Sellers’ Representative: Bombardier Inc.

800, Boulevard René-Lévesque West Montréal

Québec H3B 1Y8

Canada

Attention: Steeve Robitaille

Email: corporatelegalaffairs@bombardier.com

with a copy (which shall not constitute notice) to:

Norton Rose Fulbright Canada LLP 1 Place Ville Marie, Suite 2500 Montreal, Québec H3B 1R1 Canada

Attention: Paul Raymond and Nicolas Labrecque Email: paul.raymond@nortonrosefulbright.com

nicolas.labrecque@nortonrosefulbright.com


(b)	in the case of each Buyer:

Spirit Aerosystems, Inc. 3801 South Oliver, Wichita,

Kansas 67210,

United States of America

Attention: Stacy Cozad

E-mail: stacy.cozad@spiritaero.com

and

Attention: Kelly Gaide

E-mail: kelly.gaide@spiritaero.com

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP 125 Broad Street

New York, NY 10004 United States

Attention: George Sampas

E-mail: sampasg@sullcrom.com

and

Sullivan & Cromwell LLP 1 New Fetter Lane London EC4A 1AN United Kingdom

Attention: Ben Perry

E-mail: perryb@sullcrom.com


38.4	In providing the giving of a Notice or other communication in accordance with this Agreement it shall be sufficient to prove that delivery in person was made or that the envelope containing the communication was properly addressed and posted or delivered to a courier service, or that the email was properly addressed and transmitted, as the case may be.


39	Assignment


39.1	No party shall be entitled to assign, transfer, hold on trust or encumber the benefit of any rights under this Agreement, save with the written consent of each of the parties to this Agreement.

39.2

Notwithstanding the above, either Buyer may (subject to informing the Sellers thereof) assign (in whole or in part) the benefit of this Agreement to any member of the Buyers’ Group, subject to such assignment not resulting in greater liability or additional obligations nor diminished rights for the Sellers under this Agreement. The relevant Buyer shall ensure that, before any such assignee subsequently ceases to be a member of the Buyers’ Group, that assignee shall re-assign that benefit to the Buyer or to another continuing member of the Buyers’ Group.


40	Governing law


40.1	This Agreement and any non-contractual obligations connected with it shall be governed by English law.


40.2	The parties irrevocably agree that all disputes arising under or in connection with this Agreement, or in connection with the negotiation, existence, legal validity, enforceability or termination of this Agreement, regardless of whether the same shall be regarded as contractual claims or not, shall be exclusively governed by and determined only in accordance with English law.


41	Jurisdiction


41.1	The parties irrevocably agree that the courts of England and Wales are to have exclusive jurisdiction, and that no other court is to have jurisdiction to:

determine any claim, dispute or difference arising under or in connection with this Agreement, any non-contractual obligations connected with it, or in connection with the negotiation, existence, legal validity, enforceability or termination of this Agreement, whether the alleged liability shall arise under the laws of England and Wales or under the law of some other country and regardless of whether a particular cause of action may successfully be brought in the English courts (Proceedings); and


b.	grant interim remedies, or other provisional or protective relief.


41.2	The parties submit to the exclusive jurisdiction of the courts of England and Wales and accordingly any Proceedings may be brought against the parties or any of their respective assets in such courts.


42	Service of process


42.1	Each of BI, BFI and BSC hereby irrevocably authorise and appoint BAUK to accept on their behalf service of all legal process arising out of or in connection with any proceedings before the courts of England and Wales in connection with this Agreement. Each of BI, BFI and BSC agrees that:


a.	failure by BAUK to notify them of the process will not invalidate the proceedings concerned; and


b.	if this appointment is terminated for any reason whatsoever, they will appoint a replacement agent having an office or place of business in England or Wales and will notify the Buyer of this appointment.


42.2	The US Buyer hereby irrevocably authorises and appoints the UK Buyer to accept on its behalf service of all legal process arising out of or in connection with any proceedings before the courts of England and Wales in connection with this Agreement. The US Buyer agrees that:


a.	failure by the UK Buyer to notify it of the process will not invalidate the proceedings concerned; and


b.	if this appointment is terminated for any reason whatsoever, it will appoint a replacement agent having an office or place of business in England or Wales and will notify the Sellers of this appointment.

IN WITNESS whereof, this Agreement has been executed and delivered as a deed the day and year first above written.

CFD-#31168153-v6

LONDON:618810.5N

Schedule 3

The Warranties

Part A - Sellers’ Warranties in relation to their relevant part of the Atlantic Business


1	The Sale Shares

1.1

The shares, the details of which are set out opposite "Issued share capital" and “Shareholder(s)” in Part A, Part B and Part C of Schedule 1, constitute the entire issued and allotted share capital of the relevant Sale Group Company and are validly issued and fully paid up (with the exception of NIAECC, in respect of which the membership interest, the details of which are set out in Part C of Schedule 1, constitutes the only existing membership interest in that company (being a company limited by guarantee) and has been validly subscribed for by Shorts).


1.2	BAUK is the sole legal and beneficial owner of the Shorts Shares.


1.3	BI and BFI are, together, the sole legal and beneficial owners of the BANA Shares.


1.4	The Sellers are entitled to transfer legal and beneficial title to the Sale Shares free from all Encumbrances, without the consent of any other person.


1.5	No Encumbrance has been granted to any person or otherwise exists affecting the Sale Shares or any issued shares in (or membership interest in) any Subsidiary.


1.6	There is no agreement or commitment to give or create any Encumbrance on or over the Sale Shares and no person has made any claim to be entitled to any right over or affecting the Sale Shares.


2	Powers and authorisations


2.1	BI is a corporation validly existing under the Canada Business Corporations Act and has the right, power and authority to execute and deliver, and to exercise its rights and perform its obligations under, the Transaction Documents.


2.2	BAUK is a private limited company validly existing under the Companies Act 2006 and has the right, power and authority to execute and deliver, and to exercise its rights and perform its obligations under, the Transaction Documents.


2.3	BFI is a corporation validly existing under the Canada Business Corporations Act and has the right, power and authority to execute and deliver, and to exercise its rights and perform its obligations under, the Transaction Documents.

CFD-#31168153-v6

LONDON:618810.5N


2.4	BSC is a corporation validly existing under the corporate law of Delaware and has the right, power and authority to execute and deliver, and to exercise its rights and perform its obligations under, the Transaction Documents.


2.5	Each of BI, BAUK and BFI has the right, power and authority to transfer to the UK Buyer the relevant Sale Shares it owns, in each case in accordance with this Agreement.

2.6

This Agreement constitutes, and the other documents to be executed by the Sellers which are to be delivered at Completion in accordance with paragraph 1 of Part A of Schedule 5, paragraph 1 of Part B of Schedule 5 and paragraph 1 of Part C of Schedule 5 will, when executed, constitute legal, valid and binding obligations of each respective Seller enforceable in accordance with their respective terms, subject, however, to such limitations with respect to enforcement as are generally imposed by Law on creditors, in particular in connection with bankruptcy or similar proceedings, and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the competent court.


2.7	Except for:


a.	compliance with any requirement of any applicable Securities Laws or any applicable securities exchange;


b.	any consent, approval, authorisation, designation, declaration or filing specifically related to the identity of the Buyers;


c.	any consent, approval, authorisation, designation, declaration or filing, the absence of which would not, individually or in the aggregate, reasonably be likely to be material to the Atlantic Business or prevent, delay or materially impair Completion; and


d.	any Condition specified in clause 4.1,

no notices, reports or filings are required to be made by any Seller or any Sale Group Company with or to, nor is any consent, registration, approval, permit or authorisation required to be obtained by any Seller or any Sale Group Company from, any of the Sellers’ shareholders or any Governmental Authority in connection with (as applicable) the execution, delivery, validity, enforceability, admissibility in evidence and performance of this Agreement by the Sellers and, where applicable, the Sale Group Companies, or Completion (save where this would be caused solely due to the identity of the Buyers).

CFD-#31168153-v6

LONDON:618810.5N


2.8	The execution, delivery and performance of the Agreement, and the performance of obligations under and compliance with the provisions of the Agreement, by the Sellers do not, and the consummation of the transactions contemplated by the Agreement will not, constitute or result in:


a.	a breach or violation of, or a default under, any provision of the Organisational Documents of any Seller or any Sale Group Company (or, in respect of the MRO Business, BSC);

(save where this would be caused solely due to a change in control of any of the Sale Group Companies) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or default under, the creation or acceleration of any obligation under or the creation of any Encumbrance on any of the assets of any Sale Group Company or, with respect to the MRO Business, BSC pursuant to any contract (which, for the avoidance of doubt, shall include the A220 Agreements) binding upon any Sale Group Company or, with respect to the MRO Business, BSC; or


c.	any change in the rights or obligations of any party under any contract binding upon any Sale Group Company or, in respect of the MRO Business, BSC, except, in the case of (b and (c) above, for any such breach, violation, termination, default, creation or acceleration that would not, individually or in the aggregate, reasonably be likely to be material to the Atlantic Business, taken as a whole..


3	Constitution and structure of the Sale Group


3.1	The information set out in Schedule 1 is true and accurate.


3.2	The Subsidiaries are the only subsidiaries of the Sale Companies, and are all legally and beneficially owned only by Shorts, free from any Encumbrances.


3.3	No person has the right (whether exercisable now or in the future and whether contingent or not) to call for the issue or transfer of any share or loan capital of any Sale Group Company under any option or other agreement or otherwise howsoever.

3.4

No Sale Group Company has or has agreed to acquire any shares, loan capital, or any other form of security or any other interest in any body corporate (other than the Subsidiaries), partnership, joint venture, consortium or unincorporated association and no Sale Group Company has or has agreed to establish any branch, place of business or permanent establishment outside the country where it is incorporated.

CFD-#31168153-v6

LONDON:618810.5N


3.5	No Sale Group Company has since the Accounts Date any time purchased, redeemed or repaid any of its own share capital;


3.6	All dividends declared, made or paid by any Sale Group Company have been declared, made or paid in accordance with the relevant company’s Organisational Documents and applicable Laws.


3.7	No shares in the capital of any Sale Group Company have been issued and no transfer of any such shares has been registered (where applicable), except in accordance with all applicable Laws and Organisational Documents of the relevant Sale Group Company and, where applicable, all transfers of shares have been duly stamped or are otherwise exempt from being stamped.


3.8	Copies of the Organisational Documents of each Sale Group Company are contained in the Data Room in folder 1.1 of the Non Clean Team Data Room. Such copy documents:


a.	are true, accurate and complete in all respects; and


b.	fully set out all the rights and restrictions attaching to each class of shares in the capital of the Sale Group Companies.


4	Compliance with legal requirements


4.1	So far as the Sellers are aware, each Sale Group Company and BSC (in respect of the MRO Business) and each Seller (in respect of the Atlantic Business) has in the last 5 years conducted and is conducting its business in all material respects in accordance with all applicable Laws.


4.2	Each Sale Group Company and BSC (in respect of the MRO Business) has obtained all material Permits and has made all material filings required for or in connection with:


a.	the ownership and the operation of its assets; and


b.	the carrying on of business in the places and in the manner in which its business is now carried on,

except where a failure to do so would not reasonably be expected to materially affect the ability of the Sale Group Companies or BSC (in respect of the MRO Business) to conduct their business.


4.3	No notice or communication from any person has been received by or on behalf of any Seller or any Sale Group Company which states or alleges that any Permit should be subjected to audit, suspended, cancelled, invalidated, revoked or not renewed and, so far as the Sellers are aware, there are no proceedings pending or threatened which might affect any Permit.

CFD-#31168153-v6

LONDON:618810.5N


4.4	Save as set out in this Agreement, neither the execution of this Agreement nor Completion of the Transaction shall cause any material Permit to be audited, suspended, cancelled, invalidated, revoked or not renewed or the terms of any material Permit to be breached.

4.5

All registers and minute books required by Law to be kept by each Sale Group Company (including, in respect of BANA, its share transfer register) and BSC (in respect of the MRO Business) have been properly written up and contain a record of the matters which should, by Law, be recorded in them, and no Sale Group Company or BSC (in respect of the MRO Business) has received any application or request for rectification of its statutory registers or any other notice or allegation that any of them is incorrect or incomplete.


4.6	No Sale Group Company or BSC (in respect of the MRO Business) has been notified that any investigation or enquiry in respect of its affairs is being or has been conducted by any Governmental Authority and, so far as the Sellers are aware, there are no circumstances which currently exist and are likely to give rise to any such investigation or enquiry.

4.7

No Sale Group Company nor BSC (in respect of the MRO Business) nor any other member of the Sellers’ Group (in respect of the Atlantic Business), nor, as far as the Sellers are aware, any of their respective directors has been convicted of any indictable criminal offence in connection with the carrying on of such business and which affects the ability of the Atlantic Business to conduct its business.


4.8	So far as the Sellers are aware, each Sale Group Company and BSC (in respect of the MRO Business) and BI in respect of the Atlantic Business has filed in a timely manner all Customs Filings required to be filed with the appropriate Governmental Authorities. Such Customs Filings were correct and complete in all material respects.


5	Powers of attorney


5.1	There are no powers of attorney granted by any Sale Group Company nor, in respect of the MRO Business, by BSC, currently in force.


5.2	No person is entitled or authorised in any capacity to bind or commit a Sale Group Company or, in respect of the MRO Business, BSC, to any obligation outside the ordinary course of the Atlantic Business.

CFD-#31168153-v6

LONDON:618810.5N


6	Accounts


6.1	The Atlantic Audited Combined Statement of Financial Position:


a.	has been properly prepared in accordance with the Accounting Standards in force and applicable to the Atlantic Business as at the Accounts Date; and


b.	present fairly in all material respects the combined financial position and combined financial performance of the Atlantic Business as at the Accounts Date and for the two financial years ended on the Accounts Date.


6.2	The Shorts Accounts:


a.	have been properly prepared in accordance with the Financial Reporting Standard 101 Reduced Disclosure Framework in force and applicable to Shorts and in accordance with applicable Law as at the Accounts Date; and


b.	give a true and fair view of the state of affairs of Shorts as at the Accounts Date and its profit or loss for the financial year ended on that date.


6.3	The BANA Accounts:


a.	have been properly prepared in accordance with the generally accepted accounting principles in Morocco in force and applicable to BANA and in accordance with applicable Law as at the Accounts Date; and


b.	give a true and fair view of the state of affairs of BANA as at the Accounts Date and its profit or loss for the financial year ended on that date.


6.4	All adjustments made to the Shorts Accounts or the BANA Accounts to produce the Atlantic Audited Combined Statement of Financial Position have been made to present the Atlantic Audited Combined Statement of Financial Position in accordance with the Basis of Preparation.


6.5	The Atlantic Audited Combined Statement of Financial Position, the Shorts Accounts and the BANA Accounts disclose and make adequate provision for bad and doubtful debts, liabilities (actual or contingent) and financial commitments existing at the Accounts Date.


6.6	The Management Accounts have been properly and carefully prepared and, having regard to the purpose for which they were prepared, present a materially accurate view of the assets and liabilities and profit and losses of the Atlantic Business as at and to the Management Accounts Date.

CFD-#31168153-v6

LONDON:618810.5N


6.7	No change in accounting policies has been made in preparing the audited financial statements of the Sale Group Companies for each of the last two financial years of that company ending on the Accounts Date, except as stated in those companies’ audited financial statements for those years.

6.8

The results shown in the Atlantic Audited Combined Statement of Financial Position, the Shorts Accounts and the BANA Accounts for each of the last two financial years ending on the Accounts Date have not (except as disclosed in those accounts) been affected by an extraordinary, exceptional or non-recurring item making the profit or loss for a period covered by any of those accounts unusually high or low.


6.9	The Sale Group Companies and BSC (in respect of the MRO Business) did not have any material actual or contingent liabilities as at the Accounts Date other than liabilities that have been adequately reserved against or disclosed in the Atlantic Audited Combined Statement of Financial Position in accordance with International Financial Reporting Standards.

6.10

None of the Sale Group Companies or BSC (in respect of the MRO Business) has released a debt shown in the Atlantic Audited Combined Statement of Financial Position or in its accounting records so that the debtor has paid or will pay less than the debt’s book value. None of the debts shown in the Atlantic Audited Combined Statement of Financial Position nor in the accounting records of any Sale Group Company or BSC (in respect of the MRO Business) has been deferred, subordinated or written off or become irrecoverable to any extent. To the best of the Sellers’ knowledge, information and belief, each of those debts will realise its book value in the usual course of collection.


6.11	The accounting records of each Sale Group Company and BSC (in respect of the MRO Business) are in its possession and are in all material respects up-to-date and have in all material respects been properly written up on a consistent basis and contain the information required by the relevant applicable Laws to be entered in them.


7	Events since the Accounts Date


7.1	Since the Accounts Date, no Sale Group Company has:


a.	conducted its business otherwise than in the ordinary course without any material interruption so as to maintain the same as a going concern;


b.	resolved to change its name or to alter its Organisational Documents;


c.	allotted or issued or agreed to allot or issue any shares or any securities or granted or agreed to grant any right which confers on the holder any right to acquire any shares or other securities;


d.	declared, paid or made (or is required to make) any dividend or other distribution (or

CFD-#31168153-v6

LONDON:618810.5N

deemed distribution for Tax purposes);


e.	incurred any indebtedness other than indebtedness owing to another Sale Group Company and/or indebtedness arising in the ordinary course of business consistent with past practice;


f.	repaid, redenominated, redeemed or purchased any of its share capital or loan capital or agreed to do so;


g.	reduced its share capital;


h.	resolved to be voluntarily wound up;


i.	made, or agreed to make, any material change in the nature or extent of its business;


j.	created, or agreed to create, any Encumbrance over its business, undertaking or over any of its material assets other than retentions of title over its inventory and spare parts arising in the ordinary course of its business;


k.	transferred any material asset (other than in the ordinary course of trading or as required pursuant to this Agreement) to any member of the Sellers’ Group and, other than in the ordinary course of trading, no Sale Group Company has assumed, incurred or indemnified any liability for the benefit of the Sellers’ Group;


l.	acquired or disposed of any business as a going concern;


m.	assumed or incurred any material liability (including any contingent or future liability) to any third party other than in the ordinary course of trading;


n.	appointed new auditors;


o.	made any change in its accounting or Tax reference period;


p.	(save as disclosed in the Accounts) paid or agreed to pay any service, management or similar charges to any member of the Sellers’ Group, other than pursuant to the sale of goods and services in the ordinary course of business;

CFD-#31168153-v6

LONDON:618810.5N


q.	entered into any new severance, retention, change of control or other arrangements payable to any Senior Employee by any Sale Group Company;


r.	made any change in its accounting or Tax policies or practices;


s.	become or ceased to be a member of a group, or changed its Tax residence or where it has any branch or permanent establishment, for Tax purposes; or


t.	conducted its business with persons who are not members of the Sellers’ Group otherwise than on arm’s length terms,

nor has BSC done any of the items listed in paragraphs 7.1(i), (k), (l), (m), or (r) in respect of the MRO Business, and no Sale Group Company nor, in respect of the MRO Business, BSC, has entered into any agreement to do any of the above (or, with respect to the MRO Business, any of the items listed in paragraphs 7.1(i), (k), (l), (m) or (r)) outside the ordinary course of business.


7.2	Since the Accounts Date:

no provision included within the Atlantic Audited Combined Statement of Financial Position has been released which would, on a basis of preparation consistent with that used in the preparation of the Atlantic Audited Combined Statement of Financial Position, result in an impact on the profit and loss account in excess of US$1,000,000, except for provisions released in the ordinary course of business as a result of a change in circumstance since the Accounts Date; and


b.	there has been no material damage, destruction or other casualty loss with respect to any asset or property owned, leased or otherwise used by the Sale Group Companies or, in respect of the MRO Business, BSC, or by any other member of the Sellers’ Group that is material for the conduct of the Atlantic Business and not fully covered by insurance.


8	Indebtedness and guarantees


8.1	Except as provided for in the Atlantic Audited Combined Statement of Financial Position:


a.	the Sale Group does not have outstanding material indebtedness or loans to third parties which have arisen otherwise than in the normal course of business; and


b.	there is no outstanding indebtedness on any account whatever owing by any Sale Group Company to any member of the Sellers’ Group or by any member of the Sellers’ Group to any Sale Group Company, other than in the ordinary course of trading.

CFD-#31168153-v6

LONDON:618810.5N


8.2	Folder 2.9 of the Clean Team Data Room and folder 1.3 of the Non Clean Team Data Room contains copies of all loans, overdrafts or other financial facilities currently outstanding or available to the Sale Group Companies or, in respect of the MRO Business, BSC (together, the Facilities).


8.3	The total amount borrowed by each Sale Group Company (whether pursuant to the Facilities or otherwise) does not exceed any limitation on the borrowing powers of that company contained in either its Organisational Documents or in any debenture or other deed or document binding on that company.


8.4	No indebtedness of any Sale Group Company or, in respect of the MRO Business, BSC, is due and payable and no Encumbrance over any of the assets of any Sale Group Company or the MRO Business is now enforceable, whether by virtue of the stated maturity date of the indebtedness having been reached or otherwise.

8.5

No Sale Group Company or, in respect of the MRO Business, BSC, has received any notice (the terms of which have not been fully complied with or carried out) from any creditor requiring any payment to be made in respect of any indebtedness (whether arising pursuant to the Facilities or otherwise), or stating an intention to enforce any Encumbrance which it holds over the assets of a Sale Group Company or the MRO Business.


8.6	There is no agreement or obligation to provide and there is not outstanding any Guarantee given by any member of the Sale Group for the benefit of any third party (including any member of the Sellers’ Group) in respect of an obligation owed by a member of the Sellers’ Group (other than another member of the Sale Group).

8.7

None of the Sale Group Companies nor the MRO Business is liable for any investment banking fee, finder’s fee, brokerage payment or other like payment in connection with the origination, negotiation or consummation of the Transaction that will be the obligation of the Sale Group, and no Seller is a party to any agreement which might give rise to any valid Claim against any Sale Group Company or the MRO Business for any such fee commission or similar payment.


9	Grants and subsidies


9.1	The Clean Team Data Room contains, in folder 2.1.4, details of each grant or subsidy or other financial assistance received, applied for or receivable by or on behalf of any of the Sale Group Companies and BSC in respect of the MRO Business from any Governmental Authority.

CFD-#31168153-v6

LONDON:618810.5N


9.2	So far as the Sellers are aware and other than as contemplated by this Agreement, no Sale Group Company nor, in respect of the MRO Business, BSC, nor any Seller:


a.	has received any demand or notice regarding the repayment of;


b.	is in breach of or has received any notice that it is in breach of the terms of; or


c.	has at any time failed to be in compliance with the conditions of,

any subsidy or grant paid (an Existing Subsidy) to any Sale Group Company or, in respect of the MRO Business, to BSC.


10	Inventory and Assets


10.1	Since the Accounts Date, there has not been a material change in the age, quality, quantity or usability of the inventory of the Sale Group Companies, other than in the ordinary course of business.


10.2	Each asset included in the Shorts Accounts, the BANA Accounts and the Atlantic Audited Combined Statement of Financial Position, or acquired by a Sale Group Company since the Accounts Date, is:


a.	legally and beneficially owned solely by a Sale Group Company (or, in respect of the MRO Business, BSC) free from any Encumbrance; and


b.	where capable of possession, in the possession or under the control of a Sale Group Company (or, in respect of the MRO Business, BSC).


10.3	The Sale Group Companies own, or have the right to use, each asset necessary for the effective operation of their business as currently operated in all material respects.


10.4	The Sale Group Companies’ asset registers comprise a substantially complete and accurate record of all material plant, machinery, equipment, vehicles and other assets owned, possessed or used by them and are not materially inaccurate.


10.5	Maintenance contracts are in force for each material asset of the Sale Group Companies which it is normal to have maintained by independent or specialist contractors and for each asset which the Sale Group Companies are obliged to maintain or repair under a leasing or similar agreement. Those assets have been regularly maintained in all material respects in accordance with:


a.	safety regulations required to be observed in relation to them; and


b.	the provisions of any applicable leasing or similar agreement.


10.6	No Sale Group Company is a party to, nor is liable under, a lease or hire, hire purchase, credit sale

CFD-#31168153-v6

LONDON:618810.5N

or conditional sale agreement.


10.7	No asset that is reflected in the Atlantic Audited Combined Statement of Financial Position is owned by, or required to be transferred to, a member of the Sellers’ Group other than the Sale Group Companies with the effect that it cannot be used in connection with the Atlantic Business following Completion.


11	Contracts, customers and suppliers


11.1	The Sellers have made available to the Buyers copies of all Material Contracts with customers, which have been disclosed in the Data Room in folder 2.1.1 of the Clean Team Data Room.


11.2	The Sellers have made available to the Buyers copies of all Material Contracts with suppliers, which have been disclosed in the folder 2.1.2 of the Clean Team Data Room.


11.3	The Sellers have made available to the Buyers in the Data Room in folder 2.1.1.4 of the Clean Team Data Room copies of all contracts under which:


a.	military or law enforcement goods or services; or


b.	“dual use” goods or services (being products or services which are, or could reasonably be expected to be, usable for military or law enforcement activities), are supplied by any Sale Group Company, BSC (in respect of the MRO Business) or otherwise by the Atlantic Business,

(each a Military Contract).


11.4	Each Material Contract is in full force and effect and binding on the parties to it.


11.5	No Sale Group Company nor BSC (in respect of the MRO Business) nor BI (in respect of the A220 Agreements) is aware:


a.	of, and has been notified that, any Material Contract counterparty intends to terminate, avoid or repudiate any Material Contract; or


b.	that any Material Contract counterparty is in default of any Material Contract, a default under which would be material having regard to the trading, profits or financial position of the Atlantic Business.


11.6	No other member of the Sellers’ Group is a party to a contract with the Atlantic Business and which is material.

CFD-#31168153-v6

LONDON:618810.5N


11.7	There are no outstanding agreements or arrangements under which any Sale Group Company or BSC (in respect of the MRO Business) is under an obligation to acquire or dispose of all or a substantial part of its assets or business.

11.8

No Sale Group Company or BSC (in respect of the MRO Business) has received notification of the termination of (otherwise than through expiry in accordance with the terms of the relevant contract) or any Claim for breach of contract in respect of any Material Contract in circumstances when any such breach would have a material adverse effect on the Sale Group or the MRO Business. So far as the Sellers are aware, there are no grounds subsisting for the termination, rescission, avoidance, repudiation or a Material change in the terms of any such contract.


11.9	There are no agreements or arrangements between any Sale Group Company or BSC (in respect of the MRO Business) and any member of the Sellers’ Group (or another Sale Group Company) for the supply of any goods or services or the use by one company of the property, rights or assets of the other, other than in the ordinary course of business.


11.10	No bid or tender given or made by any Sale Group Company or BSC (in respect of the MRO Business) or any other member of the Sellers’ Group on or before the date of this Agreement and still outstanding is capable of giving rise to a legally binding agreement or arrangement which would constitute a Material Contract if formed, merely by a unilateral act of another person.


11.11	No Sale Group Company or BSC (in respect of the MRO Business) or BI (in respect of the A220 Agreements) has made any product warranty to customers or end users in connection with any Material Contract which is not contained in a contract disclosed in folder 2.1.1 of the Clean Team Data Room.


11.12	No airworthiness directive or service bulletin has been issued or required by any regulatory authority in connection with a product produced in whole or in part by any Sale Group Company or BSC (in respect of the MRO Business).


12	The Properties and other interests in land


12.1.	In this paragraph, unless the context requires otherwise:

Planning Acts means the Town and Country Planning Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning (Hazardous Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 the Planning and Compensation Act 1991, the Planning and Compulsory Purchase Act 2004, the Planning Act 2008, the Localism Act 2011, the Growth and

CFD-#31168153-v6

LONDON:618810.5N

Infrastructure Act 2013, the Housing and Planning Act 2016, the Neighbourhood Planning Act 2017,

the Planning (Northern Ireland) Order 1991 and the Planning Act (Northern Ireland) 2011 and any other legislation from time to time regulating the use or development of land.


12.2.	The Properties are all the properties owned, controlled, used or occupied by a Sale Group Company or BSC (in respect of the MRO Business) or in which any Sale Group Company or BSC (in respect of the MRO Business) has any interest.


12.3.	The particulars of each of the Properties set out in Schedule 11 are true, complete and accurate in all respects.


12.4.	Each relevant Sale Group Company and BSC (in respect of the MRO Business) has paid all rent or licence fees and all other outgoings which have become due in respect of any of its Properties.


12.5.	So far as the Sellers are aware, the relevant Sale Group Company or BSC (in respect of the MRO Business) has performed and observed all other material obligations under all covenants and conditions affecting any of its Properties.


12.6.	The Sellers have not received written notice of, nor are they aware of, any material dispute, claims, demands, actions, notices or complaints relating to its ownership or use of any of the Properties.


12.7.	None of the Properties is subject to or affected by:


a.	any Encumbrance or any agreement to create any Encumbrance; or


b.	any option, agreement for sale, estate contract, agreement for lease, or right of pre-emption.


12.8.	So far as the Sellers are aware, there is no circumstance under the control of the Sale Group Companies or BSC which would entitle any third party to take possession of, or exercise a right or power of entry, or which would adversely restrict the continued possession, enjoyment or current use of, any Property.


12.9.	There are no insurance policies relating to any issue of title subsisting in respect of any Property.


12.10.	No applications for planning permission or building control approval have been made and are yet to be determined.


12.11.	The Properties are occupied by the relevant Sale Group Company or BSC (in respect of the MRO Business) and no other person is in adverse possession of any of the Properties.

CFD-#31168153-v6

LONDON:618810.5N


12.12.	The relevant Sale Group Company or BSC (in respect of the MRO Business) has no actual or contingent obligations or liabilities in respect of land and premises apart from the Properties.


12.13.	There are no outstanding rent reviews in respect of any of the Properties.


12.14.	In the last five years the Sellers have not received any notice of breach and/or enforcement action in relation to the Planning Acts or building control regulations in respect of the Properties.


13	Environmental matters


13.1	In this paragraph, unless the context requires otherwise:

Environment means the following media (alone or in combination): air (including the air within the buildings and the air within other natural or man-made structures whether above or below ground); water (including without limitation water under or within land or in drains or sewers and surface, ground, coastal and inland waters); land (including surface land, sub-surface strata, land under water and natural and manmade structures); and any ecological systems and living organisms (including man) supported by that media including in the case of man his senses and his property

Environmental Claim means any claim or demand or any civil or administrative litigation, arbitration, dispute resolution proceedings, suit, action, notice or other enforcement process or any voluntary action approved by any Governmental Authority or a third party, or any enquiry or investigation by any Governmental Authority, official warning, abatement or other order or notice (conditional or otherwise) relating to the pollution or protection of the Environment, or harm or protection of human health, animals or plants under any Environmental Licenses or Environmental Laws

Environmental Laws means all or any of statute, common law, rule, regulation, treaty, directive, direction, decision of the court, bye-law, order, notice or demand (in each case having the force of law) of any governmental, statutory or regulatory authority, agency or body in any relevant jurisdiction (including the European Union) at the date of this Agreement and concerning the Environment

Environmental Licence means any agreement, permission, permit, licence, authorisation, consent, exemption or other approval required by any Sale Group Company or BSC (in respect of the MRO Business) pursuant to any Environmental Law in order to carry out its operations as presently carried out on the Properties.


13.2	So far as the Sellers are aware:


a.	each Sale Group Company and BSC (in respect of the MRO Business) complies and has at all times in the past three years complied in all respects with all Environmental Laws in circumstances where a failure to do so would result in a Loss for the Sale Group or BSC (in respect of the MRO Business) of US$20million or more;

CFD-#31168153-v6

LONDON:618810.5N


b.	each applicable Sale Group Company and BSC (in respect of the MRO Business) complies and has at all times in the past three years complied in all material respects with all material conditions in applicable Environmental Licences in circumstances where a failure to do so would result in a Loss for the Sale Group or BSC (in respect of the MRO Business) of US$20million or more; and


c.	each applicable Sale Group Company or BSC (in respect of the MRO Business) has obtained and maintained in full force and effect all material Environmental Licences.


13.3	So far as the Sellers are aware, no written Environmental Claim has been made against any Sale Group Company or BSC (in respect of the MRO Business) within the five (5) years prior to the date of this Agreement, nor so far as the Sellers are aware are there any circumstances which might give rise to an Environmental Claim.


13.4	Each Sale Group Company and BSC (in respect of the MRO Business) is not and has not been engaged in any Environmental Claims within the five (5) years prior to the date of this Agreement and the Sellers are not aware of any such matters pending or being threatened.


13.5	So far as the Sellers are aware, no Sale Group Company and BSC (in respect of the MRO Business) has given or received any warranties, indemnities, agreements on liabilities or escrow monies in respect of Environmental Claims or matters relating to the Properties.


13.6	Copies of all:


a.	current Environmental Licences;


b.	environmental reports and health & safety audits from the last five years;


c.	environmental insurance policies; and


d.	material correspondence in the last five years with any Governmental Authority in relation to environmental matters;

relating to the Properties have been disclosed at folder 1 of the Outside Counsel Data Room. There are no other Environmental Licenses required by BANA under applicable Environmental Laws and to carry out its operations as presently carried out on the Properties.

CFD-#31168153-v6

LONDON:618810.5N


14	Employees


14.1	Each Sale Group Company has complied in all material respects with the terms and conditions of all employment agreements and MRO Employee Plans.

14.2

The Data Room contains or refers to anonymised details of the employees and workers of each Sale Group Company and BSC (in respect of the MRO Employees) including, by reference to appropriate categories of employees, their total number, job titles, place of work, date of hire, remuneration payable (including bonus arrangements), whether active or inactive (on leave of absence with reemployment rights or short-term disability), notice period, other principal benefits provided and hours of work.


14.3	The Data Room contains, in folder 2.3.1 of the Clean Team Data Room, details of all persons who are not workers and who are providing services on a self-employed consultancy or contractor basis to the Sale Group Companies and the MRO Business.


14.4	The Data Room contains, in folders 1.4.1.2, 1.4.2.3 and 1.4.3.3 of the Non Clean Team Data Room, a list of all employment handbooks and policies that apply to any employee or worker of any Sale Group Company or the MRO Business.


14.5	The Sellers have disclosed to the Buyers copies of the service contracts of the directors of each Sale Group Company and BSC (in respect of the MRO Employees) and a representative sample of the contracts of employment between each Sale Group Company or BSC (in respect of the MRO Employees) and its employees.


14.6	The Sellers have not incurred any undischarged actual or contingent material liability in connection with any termination of employment of any employee (including redundancy payments) of any Sale Group Company or, in respect of BSC, the MRO Employees, nor for failure to comply with any order for the reinstatement or re-engagement of any employee.


14.7	So far as the Sellers are aware, no temporary employee (travailleur intérimaire) currently or previously used by BANA has asked for a requalification of its relationship with BANA as an employment relationship.


14.8	No Sale Group Company nor BSC (in respect of the MRO Employees) has incurred any undischarged liability for failure to provide information or to consult with employees under any employment legislation.

CFD-#31168153-v6

LONDON:618810.5N


14.9	Other than in the ordinary course of business, no Sale Group Company nor, in respect of the MRO Employees, BSC, has, in the last 12 months, altered any terms of employment or engagement or any Senior Employee nor agreed to any future variation in their terms of employment or engagement.


14.10	No offer of employment or engagement has been made to any person who would be a Senior Employee by any Sale Group Company nor, in respect of the MRO Business, BSC, other than in the ordinary course of business, that has not yet been accepted, or that has been accepted but where the employment or engagement has not yet started.


14.11	Within two years preceding the date of this Agreement, there has been no industrial action involving any employee of any Sale Group Company or BSC (in respect of the MRO Business), and, so far as the Sellers are aware there are no circumstances likely to give rise to any such industrial action.


14.12	No Senior Employee of a Sale Group Company or BSC (in respect of the MRO Business) has, since the Accounts Date, given notice terminating their contract of employment or is under notice of dismissal.


14.13	No Sale Group Company nor BSC (in respect of the MRO Business) is involved in any material dispute with any of its employees or their representatives, nor, so far as the Sellers are aware, are there any circumstances which could give rise to such dispute.


14.14	In respect of BANA, there is no outstanding claim against BANA by any person who is now or was an employee (or a temporary employee (travailleur intérimaire) used by BANA) or officer of BANA nor, so far as the Sellers are aware are there any circumstances which could give rise to any such claim.

14.15

Within the period of one year before the date of this Agreement no Sale Group Company or BSC (in respect of the MRO Business) has given notice of any redundancies to the relevant Governmental Authorities and BSC (in respect of the MRO Business) has not incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act and the regulations promulgated thereunder or any similar state law that remains unsatisfied.


14.16	The Data Room contains, in folder 2.3.2 of the Clean Team Data Room, details of any contractual entitlement of any employee of any Sale Group Company or BSC (in respect of the MRO Business) to redundancy pay which is in excess of entitlement under applicable Laws.


14.17	In the last two years prior to the date of this Agreement, all employees and workers of Shorts have been afforded the right to paid holiday under regulations 15 and 16 of the Working Time Regulations

CFD-#31168153-v6

LONDON:618810.5N

(Northern Ireland) 2016, and no employee or worker has been deterred or prevented from taking such holiday whether or not requested.

14.18

In the two years preceding the date of this Agreement in respect of all employees and workers of Shorts, all holiday pay for periods of holiday taken under regulations 15 and 16 of the Working Time Regulations (Northern Ireland) 2016 has been calculated and paid in accordance with Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time and Article 45 of the Employment Rights (Northern Ireland) Order 1996 has been complied with at all material times.


14.19	Every employee or worker of a Sale Group Company who requires permission to work in the UK (or in Morocco) has current and appropriate permission to work in the United Kingdom (or in Morocco).


14.20	Save as disclosed in the Data Room, no Senior Employee is subject to a current disciplinary warning or procedure.


14.21	The acquisition of the Sale Shares by the UK Buyer or compliance with the terms of this Agreement will not entitle any director, officer or Senior Employee of any Sale Group Company to receive any payment or other benefit.


14.22	The acquisition of the MRO Business by the US Buyer or compliance with the terms of this Agreement will not entitle any MRO Employee to receive any payment or other benefit.


14.23	In respect of each employee, the Sale Group Companies and BSC (in respect of the MRO Employees) have complied in all material respects with the terms of any agreement or arrangement with any trade union, works council, employee representative or body of employees or their representatives.


14.24	BSC is not a party to any collective bargaining agreement or other agreement with any trade union, employee representative or body of employees or their representatives in respect of the MRO Employees, and there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor unions, to organize any MRO Employees.


14.25	There has been no exercise in whole or in part the option granted under the Option Agreement between Shorts and BI (concerning an asset purchase agreement entered into between Lauak Canada Inc. and BI), a copy of which is located in folder 2.1.9 of the Clean Team Data Room (the Lauak Option Agreement). Consequently as at the date of this Agreement no employees are

CFD-#31168153-v6

LONDON:618810.5N

required to transfer under TUPE as a consequence of anything done under, related to or arising out of the Lauak Option Agreement.


15	Pensions


15.1	In this paragraph 15:

Bombardier Transport DB Schemes means each of:


a.	the Bombardier Transportation UK Senior Executives Pension Scheme governed by a definitive deed dated 14 September 2010;


b.	the Bombardier Transportation UK Pension Plan governed by a definitive deed dated 30 September 2010;


c.	the Bombardier Transportation UK 2003 Pension Scheme governed by a trust deed dated 20 December 2012; and


d.	the Bombardier Transportation UK Vice-Presidents Pension Scheme governed by a trust deed dated 31 December 2010

DB Pension Schemes means each of:


(a)	the Short Brothers Pension Scheme, governed by Rules dated 4 August 2008 as amended from time to time of which Shorts is the principal employer as disclosed in folder 2.2.1.1.1 of the Non Clean Team Data Room;


(b)	the Bombardier Aerospace Shorts Executive Benefits Scheme governed by Rules dated 4 December 2014 as amended from time to time, of which Shorts is the principal employer as disclosed in folder 2.2.1.1.1 of the Non Clean Team Data Room; and


(c)	the Bombardier Aerospace Corporation Retirement Plan governed by the Bombardier Aerospace Corporation Retirement Plan (Restated Effective January 1, 2013), as amended, as disclosed in folder 1.6.3.1 of the Non Clean Team Data Room

DC Pension Schemes means the Bombardier UK Aerospace Retirement Saver provided by Scottish Widows Administration Services Limited and the Bombardier 401(K) Savings Plan, as disclosed in folders 1.6.2 and 1.6.3.3 respectively of the Non Clean Team Data Room

FA 2004 means the Finance Act 2004

CFD-#31168153-v6

LONDON:618810.5N

Post-Retirement Medical Plan means any medical cover provided to certain ex-employees and/or ex-executives of Shorts and their families (as communicated to them in writing at the time at which they left service) as disclosed in the Data Room, or any medical cover which shall in the future be provided to an executive of Shorts and his family upon the termination of his position as executive of Shorts up to the time at which the executive reaches age 65, as disclosed in the Data Room

Relevant Benefits means any pension, lump sum, death, ill health benefits or post-retirement medical benefits provided or to be provided in connection with past service, retirement or death, of any employee or officer

Sale Group Pension Scheme means each of the DB Pension Schemes and the DC Pension Scheme.

15.2

Save for the Sale Group Pension Schemes and the Post-Retirement Medical Plan (and applicable social security/state pension plans), none of the Sale Group Companies or BSC (in respect of the MRO Business) is under any legal obligation (whether actual, prospective or contingent) to provide or contribute towards any Relevant Benefits for any of the present or former employees or directors of the Sale Group Companies or BSC (in respect of the MRO Business) or their dependants, and no proposal, announcement, undertaking or assurance has been made as to the introduction, continuation or augmentation of any Relevant Benefits.


15.3	The Data Room contains material particulars of the Sale Group Pension Schemes and the Post- Retirement Medical Plan.


15.4	Each of the Sale Group Pension Schemes is a registered pension scheme under the FA 2004 or the equivalent applicable Law.


15.5	All employer and employee contributions and premiums due prior to the date of this Agreement to the Sale Group Pension Schemes and the Post-Retirement Medical Plan have been deducted and paid.

15.6

There are currently no legal proceedings, complaints, arbitrations, mediations or Claims in progress by any of the employees or former employees of the Sale Group Companies or BSC (in respect of the MRO Business) or any individual claiming through or in respect of them (in respect of a benefit entitlement) relating to the Sale Group Pension Schemes. So far as the Sellers are aware, no legal proceedings, complaints, arbitrations, mediations or Claims in connection with the Sale Group Pension Schemes or the provision of Relevant Benefits are pending, threatened or expected and there is no fact or circumstance likely to give rise to any such proceedings.

CFD-#31168153-v6

LONDON:618810.5N

15.7

Other than in respect of equalisation of pension benefits for the effect of unequal guaranteed minimum pensions in respect of the Short Brothers Pension Scheme, so far as the Sellers are aware, each of the Sale Group Pension Schemes complies in all material respects with applicable primary and secondary legislation applying to the Sale Group Pension Schemes, including laws prohibiting discrimination on the grounds of a protected characteristic (as set out in the Equality Act 2010) in relation to the provision of Relevant Benefits. The Bombardier Aerospace Shorts Executive Benefits Scheme does not provide guaranteed minimum pensions in respect of its members.


15.8	Any lump sum benefits payable on the death of a member of the DC Pension Scheme whilst in employment (other than a return of a member’s own contributions and contributions paid in respect of him) are fully insured and all premiums due to the insurance company prior to the date of this Agreement have been paid.


15.9	Where applicable, each of the Sale Group Companies has complied in all material respects with their workplace pension duties to employees under the Pensions Act 2008 and/or the Pensions Act (Northern Ireland) 2015.


15.10	The DC Pension Schemes provide only “money purchase benefits” (as such term is defined in section 181 of the Pension Schemes Act 1993 or the equivalent under applicable Law).

15.11

No employee or officer, and no former employee or officer, of a Sale Group Company has any right (whether actual or contingent) to Relevant Benefits arising as a result of a transfer of their employment to the Sale Group Company under either the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as amended), or the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended).

15.12

Save in relation to the DB Pension Schemes, the Bombardier Transport DB Schemes and the Bombardier Transport RPS Participation no Sale Group Company has ever been an “associate” of or “connected” with an “employer” (within the meaning of the Pensions Act 2004) of an “occupational pension scheme” which is not a “money purchase scheme” (as such terms are defined in the Pension Schemes Act 1993) in the United Kingdom. No “contribution notice”, “financial support direction” or “restoration order” (within the meaning of the Pensions Act 2004) has been issued in which a Sale Group Company is named.


16	Insurance


16.1	Full particulars of all insurance policies maintained by each Sale Group Company and BSC (in respect

CFD-#31168153-v6

LONDON:618810.5N

of the MRO Business) and currently in force (Policies) have been made available to the Buyers and have been disclosed in the Data Room in folder 1.8 of the Non Clean Team Data Room.

16.2

Each Sale Group Company and, in respect of the MRO Business, BSC, maintains, and has at all times maintained, insurance cover which the relevant Sale Group Company considers reasonable to maintain (or is contractually required to maintain under any Material Contract) against all losses and liabilities, including business interruption, director and officer claims, long-tail liabilities, run-off liabilities and all other risks that would normally be insured against by a reasonable person carrying on the same type of business as the Atlantic Business.


16.3	All premiums due on the Policies have been paid and, so far as the Sellers are aware, all other material conditions of the Policies have been performed and observed.


16.4	No Seller has received any written notice threatening termination of, premium increase with respect to, or material alteration of coverage under, any of the Policies.


16.5	So far as the Sellers are aware, there are no outstanding Claims or subrogation actions under, or in respect of the validity of, any of the Policies and there are no circumstances likely to give rise to a Claim under any of the Policies.


16.6	So far as the Sellers are aware, no event has occurred within the Atlantic Business which makes any Atlantic Business insurance policy voidable or which may entitle an insurer under such policy not to pay any Claim.


17	Intellectual Property Rights, Information Technology and Data Protection


17.1	So far as the Sellers are aware, all Intellectual Property Rights which are necessary for the operation of the Atlantic Business (in the manner in which the Atlantic Business is conducted as of the date of this Agreement) are either:


a.	licensed from third parties;


b.	licensed from a member of the Sellers’ Group (and will, following Completion, be licensed under the BI IP License Agreement); or


c.	legally and beneficially owned by a Sale Group Company or, in respect of the MRO Business, by BSC,

and, in each case, the relevant Sale Group Company or BSC is entitled to use such Intellectual Property Rights, and all such Intellectual Property Rights are subsisting, valid and enforceable and are:

CFD-#31168153-v6

LONDON:618810.5N


i.	not subject to any Governmental Order adversely affecting the enforceability or ownership thereof;


ii.	free from any Encumbrance; and


iii.	not the subject of a Claim or opposition from another person as to title, validity, enforceability or entitlement thereto.

17.2

Without limiting the generality of the Sellers’ Warranty in paragraph 17.1, all Intellectual Property Rights which are necessary for the performance by the Sale Group of the A220 Agreements (other than those rights owned by CSALP and licenced under the A220 Agreements) are legally and beneficially owned by a Sale Group Company and are: (a) not subject to any Governmental Order adversely affecting the enforceability or ownership thereof; (b) free from any Encumbrance; and (c) not received any written notice of a Claim or opposition from another person as to title, validity, enforceability or entitlement thereto.

17.3

Part A of Schedule 10 sets out details of all pending and registered Intellectual Property Rights which are necessary for the operation of the Atlantic Business or MRO Business (in the manner in which the Atlantic Business or MRO Business is conducted as of the date of this Agreement) of which any Sale Group Company or BSC (in respect of the MRO Business) is the registered or beneficial owner or applicant for registration.

17.4

The Sellers’ Group owns no Intellectual Property Rights that have not been licensed or otherwise transferred to a Sale Group Company or, in respect of the MRO Business, to BSC (including Excluded Technology, as that term is defined in the BI IP License Agreement), that would prevent the continued operation of the Atlantic Business (in the manner in which the Atlantic Business is conducted as of the date of this Agreement) or the performance by the Sale Group of the A220 Agreements.


17.5	All renewal fees due on or prior to the date of this Agreement in respect of the maintenance of the Intellectual Property Rights disclosed pursuant to paragraph 17.2 have been paid other than where failure to pay such fees would not have a material adverse effect on the Atlantic Business.


17.6	So far as the Sellers are aware, no Sale Group Company or BSC (in respect of the MRO Business) is infringing nor has it in the last three years infringed, nor is there or has there been any unauthorised or otherwise non-permitted use, infringement, misappropriation or other violation by a Sale Group Company or, in respect of the MRO Business, BSC, of, the Intellectual Property Rights of any third

CFD-#31168153-v6

LONDON:618810.5N

party, and so far as the Sellers are aware, no third party is infringing, nor has any third party in the last three years infringed, nor is there or has there been any unauthorised or otherwise non-permitted

use, disclosure, infringement, misappropriate or other violation of, any Intellectual Property Rights owned by any Sale Group Company or BSC (in respect of the MRO Business) where, in either case, such infringement is, was, or would reasonably be expected to have, a material adverse effect on the Atlantic Business.

17.7

Copies of all licence agreements (other than licenses granted by suppliers under supply agreements, or to customers under customer agreements in the ordinary course) under which any Sale Group Company or BSC (in respect of the MRO Business) has granted to, or has been granted by, any third party or Sellers’ Group a licence of Intellectual Property Rights and which which are necessary for the operation of the Atlantic Business, the MRO Business, or Sellers’ Group (in the manner in which such operations are conducted as of the date of this Agreement) are contained in the Data Room in in folder 2.3.2 of the Non Clean Team Data Room and folder 2.1.8 of the Clean Team Data Room and accurate details thereof are set out in Part B of Schedule 10. No material licence of Intellectual Property Rights to any Sale Group Company or to BSC (in respect of the MRO Business) will be adversely affected by the Transaction. So far as the Sellers are aware, no Sale Group Company has received written notice that any such licence agreement will be terminated, suspended, varied or revoked without the consent of a Sale Group Company or BSC (in respect of the MRO Business), as the case may be. Any and all royalties due prior to or at the date of this Agreement by any Sale Group Company or BSC (in respect of the MRO Business) under such licence agreements have been paid in full, other than where failure to pay such royalties would have a material adverse effect on the Atlantic Business.

17.8

Copies of all licence agreements which are material to the Atlantic Business under which any Sale Group Company or BSC (in respect of the MRO Business) has granted to, or has been granted by, any third party or Sellers’ Group a royalty-bearing license of Intellectual Property Rights and which are related in any way to the operation of the Atlantic Business, the MRO Business, or Sellers' Group are contained in the Data Room in folders 2.1.6 and 2.1.9.1 of the Clean Team Data Room.

17.9

Subject to and in compliance with applicable laws, and so far as the Sellers are aware, each current and former employee and independent contractor of the Sale Group Companies has assigned (whether formally or by operation of Law) to the relevant entity all Intellectual Property Rights authored, developed, conceived or reduced to practice during the course of such employee’s or independent contractor’s employment or engagement with the Sale Group Company related to patents and patent applications described in Part A of Schedule 10.


17.10	Copies of all agreements to which any Sale Group Company or BSC (in respect of the MRO Business) is a party relating to material Information Technology used by any Sale Group Company

CFD-#31168153-v6

100

LONDON:618810.5N

or BSC (in respect of the MRO Business) are contained in the Data Room in folder 2.3 of the Non Clean Team Data Room.


17.11	So far as the Sellers are aware, no Sale Group Company or BSC (in respect of the MRO Business) has received notification within the last three years of the termination of (otherwise than through expiry in accordance with the terms of the relevant contract) or any Claim for breach of contract in respect of any agreement referred to in paragraphs 17.7 and 17.8 above.

17.12

All Information Technology used by the Sale Group Companies or BSC (in respect of the MRO Business) is functioning, and has for the past three years functioned, without any material problems, defects or interruptions and, so far as the Sellers are aware, no Sale Group Company or BSC (in respect of the MRO Business) has suffered any material data security breach or cyber-attack during the past three years).


17.13	All Information Technology used by the Sale Group Companies or, in respect of the MRO Business, BSC, has been satisfactorily maintained.


17.14	All versions of the Software used by the Sale Group Companies or, in respect of the MRO Business, BSC, are currently supported by the respective owners of the Software and the Information Technology systems used in the Atlantic Business have the benefit of appropriate maintenance and support agreements.


17.15	The Sale Group Companies and the MRO Business have in place appropriate procedures in accordance with good industry practice (including in relation to off-site working, where applicable) for ensuring the security of the Information Technology systems used in the Atlantic Business and the confidentiality and integrity of the data stored in it, including Personal Data.


17.16	The Sale Group Companies and, in respect of the MRO Business, BSC, have in place a disaster recovery plan which is fully documented and would enable the Atlantic Business to continue if there were significant damage to, or destruction of, some or all of the Information Technology systems and a data security breach plan, each of which has been made in accordance with best industry practice.


17.17	The Sale Group Companies and, in respect of the MRO Business, BSC, have where required to do so under relevant Data Protection Legislation:


a.	introduced and applied appropriate data protection policies and procedures, including through training, concerning the collection, use, storage, retention and security of Personal

CFD-#31168153-v6

101

LONDON:618810.5N

Data;


b.	appointed a data protection officer;


c.	maintained accurate and up to date records of their Personal Data processing activities;


d.	issued privacy notices to data subjects which comply with applicable requirements of Data Protection Legislation; and

implemented (or, in respect of a Processor, procured the implementation of, or procured sufficient guarantees as regards the implementation of) appropriate technical and organisational measures to protect against the unauthorised or unlawful processing of, or accidental loss or damage to, any Personal Data processed by them, and ensure a level of security appropriate to the risk represented by the processing and the nature of the Personal Data to be protected.


17.18	So far as the Sellers are aware, the Sale Group Companies and, in respect of the MRO Business, BSC, have, in all material respects, complied with applicable requirements under Data Protection Legislation relating to the disclosure or transfer of Personal Data outside the European Economic Area.

17.19

Except as disclosed in the Disclosure Letter and so far as the Sellers are aware, none of the Sale Group Companies nor, in respect of the MRO Business, BSC, has in the 18 months preceding the date of this Agreement suffered any breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to any Personal Data reportable to the data protection authority in the relevant jurisdiction under the relevant Data Protection Legislation.

17.20

So far as the Sellers are aware, no Sale Group Company or BSC (in respect of the MRO Business) has received any material complaint, enforcement action, assessment or penalty notice from any person (including any relevant Governmental Authority) in the last 18 months relating to any alleged breach of Data Protection Legislation or claiming a right to compensation under Data Protection Legislation and, so far as the Sellers are aware, there is no fact or circumstance which is likely to lead to such material complaint, enforcement action, assessment or penalty notice.


17.21	The Sale Group Companies and, in respect of the MRO Business, BSC, have complied with all applicable notification or registration obligations and paid the appropriate level of fees or charges in respect of their Personal Data processing activities, in each case as required by Data Protection Legislation or Governmental Authorities.


18	Litigation and regulatory matters


18.1	No Sale Group Company or BSC (in respect of the MRO Business) is engaged in any capacity in any litigation, arbitration, prosecution or other legal proceedings or in any proceedings or hearings

CFD-#31168153-v6

102

LONDON:618810.5N

before any Governmental Authority or other dispute resolution proceedings which are likely to have a material adverse effect on the Sale Group or BSC (in respect of the MRO Business) and, so far as the Sellers are aware, no such litigation, arbitration, prosecution or other proceedings are pending.


18.2	There is no outstanding judgment, order, decree, arbitral award or decision of any court, tribunal, arbitrator or governmental agency against any Sale Group Company or BSC (in respect of the MRO Business) or any person for whose acts that company may be vicariously liable which is likely to have a material adverse effect on the Sale Group or BSC (in respect of the MRO Business).


19	Insolvency


19.1	No Sale Group Company:


a.	is insolvent or unable to pay its debts within the meaning of insolvency Laws applicable to the company concerned (and BANA is not considered as being in "cessation de paiements" under Moroccan insolvency Law); or


b.	has stopped paying its debts as they fall due.


19.2	No order has been made and no resolution has been passed for the winding-up of any Sale Group Company or BSC or for a liquidator to be appointed in respect of any Sale Group Company or BSC and, so far as the Sellers are aware, no petition has been presented and no meeting has been convened for the purpose of winding-up any Sale Group Company or BSC.


19.3	No administration order has been made, and, so far as the Sellers are aware, no petition for such an order has been presented in respect of any Sale Group Company or BSC.


19.4	No receiver (which expression shall include an administrative receiver) has been appointed in respect of any Sale Group Company or BSC or in respect of all or any material part of its assets.


19.5	No voluntary arrangement has been proposed under section 1 Insolvency Act 1986 and/or section 14 of The Insolvency (Northern Ireland) Order 1989 in respect of Shorts and its Subsidiaries nor any analogous arrangement has been proposed in respect of BANA in Morocco or BSC in the State of Delaware, the United States of America.


19.6	None of the events referred to in paragraphs 19.1 to 19.5 has occurred in relation to any Seller.

CFD-#31168153-v6

103

LONDON:618810.5N


20	Tax

20.1

All returns, declarations, computations, notices, statements, reports or information which ought to have been made or provided by or in respect of any Sale Group Company or BSC (in respect of the MRO Business) for any Tax purpose have been properly and punctually submitted to the relevant Tax Authority; all such returns, computations, notices, accounts, statements, declarations, reports and information supplied to any Tax Authority were, when made or supplied, up-to-date, complete and correct in all respects, and remain so in all material respects; and none of such returns, computations, notices, accounts statements, reports or information is being disputed by any Tax Authority; the Disclosure Letter gives full and accurate details of the current status of the corporation tax returns of each Sale Group Company.

20.2

All Tax for which each of the Sale Group Companies or BSC (in respect of the MRO Business) has been liable to account, in respect of the four years prior to the date of this Agreement, the due date for payment of which is (in the absence of any application to postpone) on or before Completion has been or will be paid on or before Completion and within applicable time limits. Without limitation, each Sale Group Company and BSC (in respect of the MRO Business) has made all deductions, withholdings and retentions of or on account of Tax as it was or is obliged or entitled to make, and has accounted to the relevant Tax Authority for any such deductions and retentions for which it was obliged to account within applicable time limits.

20.3

Reasonable provision or reserve has been made in accordance with the relevant Accounting Standards in the Atlantic Audited Combined Statement of Financial Position for all Tax liable to be assessed (whether actual, deferred, contingent or disputed, and whether or not the Sale Group Company has or may gave any right of reimbursement against any other person) on the Sale Group Companies or for which they are accountable on or before the Accounts Date, including in respect of income, profits or gains earned, accrued or received on or before the Accounts Date, or by reference to any event occurring, act done or circumstances existing on or before the Accounts Date. Reasonable provision has been made and shown in the Atlantic Audited Combined Statement of Financial Position for deferred Tax in accordance with generally accepted accounting principles.

20.4

No Tax Authority has in the last four years carried out, or (so far as the Sellers are aware) is at present conducting, any review, audit or investigation into any aspect of the business or affairs of any of the Sale Group Companies or BSC (in respect of the MRO Business) other than of a routine nature or in the ordinary course. No Sale Group Company is, or has been in the last four years, involved in any dispute with any Tax Authority or subject to any non-routine visit or access order by any Tax Authority. No extension of time is in force with respect to any date on which any Tax return

CFD-#31168153-v6

104

LONDON:618810.5N

of a Sale Group Company was or is to be filed, and no waiver or written agreement is in force for the extension of time for the assessment or payment of any Tax by a Sale Group Company.


20.5	The Disclosure Letter contains full particulars of:


a.	all groups and consolidated groups for Tax purposes and fiscal unities of which any Sale Group Company is, or has been, a member within the four years prior to the date of this Agreement;


b.	every agreement relating to the use of group relief or allowance to which any Sale Group Company is, or has been, a party within the four years prior to the date of this Agreement; and


c.	any arrangements for the payment of group Tax liabilities to which any Sale Group Company has ever been party within the four years prior to the date of this Agreement.


20.6	All material arrangements entered into by any Sale Group Company in relation to groups and consolidated groups for Tax purposes and fiscal unities were valid when made and will be valid up to Completion.


20.7	No transaction or event has occurred in the four years prior to the date of this Agreement in consequence of which any Sale Group Company may be held liable for any Tax for which some other person was primarily liable (whether by reason of any such other person being or having been a member of the same group of companies or under a Tax sharing agreement).

20.8

All claims made by any Sale Group Company for exemption, relief, allowance or credit as a result of any relationship with any other person were valid when made and have been or will be allowed by way of exemption or relief from or allowance or credit against Tax. So far as the Sellers are aware, neither the execution nor completion of this Agreement, nor any other event since the Accounts Date, will result in the clawback or disallowance of any such exemption, relief, allowance or credit previously given.


20.9	No Sale Group Company has entered into any transaction otherwise than on arm's length terms, nor has a Sale Group Company agreed to do so in any period before Completion, where a Tax Authority would be entitled to adjust such Short Group Company’s net income and gains so that the Sale Group Company would have an increased liability to make a payment of Tax in respect of such period.


20.10	In relation to each transaction or arrangement in which any Sale Group Company has entered in the

CFD-#31168153-v6

105

LONDON:618810.5N

four years preceding the date of this Agreement, the relevant Sale Group Company has retained such evidence as is reasonable or required by law to demonstrate that the relevant transaction or arrangement was entered into on arm’s length terms where the relevant Sale Group Company is

required to report and account for Tax purposes on the basis that such transaction or arrangement was on arm’s length terms.

20.11

Each Sale Group Company, other than BANA, (each such Sale Group Company other than BANA being a UK Company and together, the UK Companies) is and has at all times been resident in the UK for Tax purposes and is not and has not been treated as resident in any other jurisdiction for any Tax purposes (including for the purposes of any double taxation agreement). No UK Company has a permanent establishment or other taxable presence in any jurisdiction other than the UK. So far as the Sellers are aware, no UK Company is liable to register with any Tax Authority outside of the UK for the purposes of paying or administering any Tax. No UK Company is an agent or a permanent establishment of any other person, business or enterprise for the purposes of assessing that other person, business or enterprise to Tax in the UK.

20.12

BANA is and has at all times been resident in Morocco for Tax purposes and is not and has not been treated as resident in any other jurisdiction for any Tax purposes (including for the purposes of any double taxation agreement). BANA does not have a permanent establishment or other taxable presence, and has at no time incurred any liability to Tax, in any jurisdiction other than Morocco. So far as the Sellers are aware, BANA is not liable to register with any Tax Authority outside of Morocco for the purposes of paying or administering any Tax. BANA is not an agent or a permanent establishment of any other person, business or enterprise for the purposes of assessing that other person, business or enterprise to Tax in Morocco.


20.13	All documents in the possession of the Sale Group Companies or BSC (in respect of the MRO Business) or to the production of which any of the Sale Group Companies or BSC (in respect of the MRO Business) is entitled and which attract stamp duty or similar Tax in the United Kingdom or elsewhere have been duly stamped.


20.14	In relation to VAT or any equivalent in any other jurisdiction:


a.	details of the VAT registration of each Sale Group Company are set out in the Data Room;


b.	each Sale Group Company has complied in all material respects with applicable VAT legislation;


c.	Shorts has, in the four years preceding the date of this Agreement, been treated as a member of the VAT groups set out in the Disclosure Letter; and

CFD-#31168153-v6

106

LONDON:618810.5N


d.	no Sale Group Company (other than Shorts) has, in the four years preceding the date of this Agreement, been treated as a member of a group for any VAT purpose (other than a group comprised solely of Sale Group Companies).


20.15	So far as the Sellers are aware, no Sale Group Company has received from any Tax Authority (and has not subsequently repaid to or settled with that Tax Authority) any payment to which it was not entitled, or any notice in which its liability to Tax was understated.


20.16	Each Sale Group Company and BSC (in respect of the MRO Business) has, within applicable time limits, kept and maintained completely and accurately such records, invoices and other information in relation to Tax as they are required by Law to keep and maintain.

20.17

The liability to Tax of each Sale Group Company during any accounting period (including the accounting period current at the date of this Agreement) within the last four years prior to the date of this Agreement has not depended on any concession, agreement or other formal or informal arrangement (being concessions, agreements or arrangements which are not based on any relevant legislation or published extra-statutory concessions) operated by or agreed with any Tax Authority in relation to the Tax affairs of the Sale Group Company.

20.18

All transactions in respect of which any clearance or consent was required from any Tax Authority have been entered into by the relevant Sale Group Company after such consent or clearance has been properly obtained. Any application for such clearance or consent has been made on the basis of full and accurate disclosure of all the relevant material facts and considerations, and all such transactions have been carried into effect only in accordance with the terms of the relevant clearance or consent.


20.19	Each Sale Group Company has duly submitted all claims, disclaimers and elections the making of which has been assumed for the purposes of the Atlantic Audited Combined Statement of Financial Position. So far as the Sellers are aware, no such claims, disclaimers or elections are likely to be disputed or withdrawn.


20.20	So far as the Sellers are aware, no transaction, act, omission or event has occurred which has resulted or could result in any Encumbrance or other third party right arising over any of the assets of any Sale Group Company or the MRO Business in respect of unpaid Tax.


20.21	No Sale Group Company has in the four years prior to the date of this Agreement entered into, been a party to, or otherwise been involved in any scheme, arrangement, transaction or series of

CFD-#31168153-v6

107

LONDON:618810.5N

transactions which was (i) a marketed Tax avoidance scheme for the avoidance of Tax, or (ii) required

to be notified or disclosed to any Tax Authority pursuant to any statutory regime relating to the avoidance of Tax other than one implementing the provisions of EU Directive 2011/16.

20.22

No Sale Group Company has committed an offence nor has been the subject of any investigation, inquiry or enforcement proceedings regarding any offence or alleged offence under Part 3 of the United Kingdom’s Criminal Finances Act 2017 or any similar provisions in any jurisdiction. So far as the Sellers are aware, no actions, omissions or transactions have occurred which may lead to a Sale Group Company committing such an offence.


20.23	Each Sale Group Company has, so far as applicable to it, identified, documented and implemented all prevention procedures required in order for it to establish a defence under section 45(2)(a) and/or section 46(3)(a) of the United Kingdom’s Criminal Finances Act 2017.

20.24

In the four years prior to the date of this Agreement, the Sale Group Companies have complied with their legal obligations relating to United Kingdom Pay As You Earn (PAYE) and national insurance contributions and any similar amounts payable to a Tax Authority outside the United Kingdom and no Tax has arisen or is likely to arise to any of the Sale Group Companies as a result of any person acquiring, holding or disposing of shares or securities or an interest in shares or securities on or before Completion where the right or opportunity to acquire the same is or was available by reason of employment.

20.25

No (i) payments or loans have been made to; (ii) assets have been made available or transferred to; or (iii) assets have been earmarked, however informally, for the benefit of, any employee or former employee (or anyone linked with such an employee or former employee) of a Sale Group Company by an employee benefit trust or another third party so as to fall within the Disguised Remuneration Provisions.


20.26	No Sale Group Company (or BSC in respect of the MRO Business) is a party to any Tax abatement agreement or similar agreement with any Tax Authority.


20.27	No Sale Group Company will incur any liability to make a payment of Tax from, in consequence of or in respect of the Pre-Completion Reorganisation, including but not limited to those steps mentioned in paragraphs 1(a) and 1(e) of Schedule 7 (Pre-Completion Conduct and Undertakings).


20.28	No Sale Group Company is or has in the past four years been a close company within the meaning

CFD-#31168153-v6

108

LONDON:618810.5N

of Part 10 of CTA 2010.


21	Compliance with Anti-Corruption Laws, No Conflicts with Sanctions Laws, no Antitrust Violations

21.1

Each Sale Group Company, BSC (in respect of the MRO Business) and each member of the Seller’s Group in respect of the Atlantic Business as a whole has implemented and maintains in effect policies and procedures designed to ensure compliance by each Sale Group Company, BSC (in respect of the MRO Business) and each of their subsidiaries, and their respective directors, officers, employees, and agents, with any provision of the Foreign Corrupt Practices Act of 1977, as amended, the Corruption of Foreign Public Officials Act (Canada), Terrorist Financing Act (Canada), or any applicable Law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery, anti-money laundering or anti-corruption Laws of each jurisdiction in which the Atlantic Business operates (collectively, Anti-Corruption Laws).

21.2

So far as the Sellers are aware, each Sale Group Company, BSC (in respect of the MRO Business) and each member of the Seller’s Group in respect of the Atlantic Business as a whole, and their respective directors, officers, employees, and agents, are in compliance with Anti-Corruption Laws and applicable sanctions administered or enforced by the U.S. Government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) or the

U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the European Union, Her Majesty’s Treasury (HMT), or other relevant sanctions authority (collectively, Sanctions) in all respects.

21.3

So far as the Sellers are aware, none of the Sale Group Companies nor, in respect of the MRO Business, BSC, nor any other member of the Seller’s Group in respect of the Atlantic Business as a whole, nor their respective officers, directors, employees or agents (each in their capacity as such) have paid, offered or promised to pay, or authorised or ratified the payment, directly or indirectly, of any monies or anything of value to any Government Official or any political party or candidate for political office for the purpose of influencing any act or decision of such person to obtain or retain business, or direct business to any person or to secure any other improper benefit or advantage, in each case, in violation in any material respect of Anti-Corruption Laws.


21.4	None of the Sale Group Companies, nor BSC (in respect of the MRO Business), nor any other member of the Sellers’ Group with regard to the Atlantic Business, nor any of their respective directors, officers

CFD-#31168153-v6

109

LONDON:618810.5N

or employees, or so far as the Sellers are aware, any agent of a Sale Group Company or BSC (in respect of the MRO Business) is subject to Sanctions.


21.5	So far as the Sellers are aware, no suit, action or proceeding by or before any Governmental Authority or any arbitrator involving a Sale Group Company or BSC (in respect of the MRO Business) with respect to Anti-Corruption Laws or Sanctions is in progress which would reasonably be expected to have a material adverse effect.

21.6

So far as the Sellers are aware, no Sale Group Company nor BSC (in respect of the MRO Business) has been or is, and none of the Sale Group Companies’ nor BSC’s directors, officers, employees agents, advisers, consultants or other representatives has been or is, a party to any contract or involved in any conduct that infringes or violates any applicable Law (either civil or criminal) relating to competition, restrictive trade practices, antitrust, monopolies, merger control, fair trading, restraint of trade, pricing, anti-dumping, subsidies by Governmental Authorities to private companies, or free movement of goods and services, the infringement or violation of which would have a material adverse effect.

CFD-#31168153-v6

110

LONDON:618810.5N

Part B - BSC's specific warranties in relation to the MRO Business


1	Powers and authorisations


1.1	BSC is entitled to, and has the requisite power and authority to, sell and transfer the MRO Business, the MRO Sale Assets and the MRO Sale Liabilities on the terms set out in this Agreement.


2	Ownership of the MRO Sale Assets


2.1	Each MRO Sale Asset is legally and beneficially owned by BSC, free from Encumbrances.

2.2

The MRO Sale Assets comprise all the assets and rights necessary for the US Buyer to carry on the MRO Business in the same manner as it was carried on by BSC immediately before the Completion Date. The MRO Business does not require or depend on for its continuation (or for the continuation of the method, manner or scope in which it is carried on) any asset, premises, facilities or services which are not comprised in the MRO Sale Assets.

2.3

All of the MRO Sale Assets are the property of BSC free from any lease, hire or hire-purchase agreement or agreement for payment on deferred terms or bill of sale or lien, Encumbrance, any licence or factoring arrangement or other adverse claim (and there is no agreement or commitment to give or create any of the foregoing in respect of the MRO Sale Assets) and have at all times been and are in the sole and exclusive possession of, and under the control of, BSC.


2.4	No person has claimed to be entitled to create any Encumbrance over any MRO Sale Asset.


2.5	None of the MRO Sale Assets is used for any purposes other than those of the MRO Business.


3	Records and documents of title


3.1	BSC has direct control and unrestricted possession of or access to:


a.	all documents of title relating to the MRO Sale Assets;


b.	all MRO Contracts; and


c.	all of the records, systems, data and information held by it or on its behalf which are recorded, maintained, stored or otherwise wholly or partly dependent on any system (including, without limitation, any electronic, mechanical or photographic process whether computerised or not) whether operated by the Seller or not.


3.2	All the books and other material comprised in the records of the MRO Business:

CFD-#31168153-v6

111

LONDON:618810.5N


a.	have been maintained on a consistent basis and have been written up to date and contain complete and accurate records in all material respects of those aspects of the MRO Business and the MRO Sale Assets to which they relate and all matters required by law to be entered therein;


b.	do not contain or reflect any material inaccuracies or discrepancies; and


c.	comprise all the records required to enable the US Buyer to operate the MRO Business.


4	Condition of certain MRO Sale Assets


4.1	BSC’s asset registers comprise a complete and accurate record of all the plant, machinery, equipment, vehicles and other assets owned, possessed or used by BSC in connection with operating the MRO Business.


4.2	Maintenance contracts are in force for each asset of the MRO Business which it is normal to have maintained by independent or specialist contractors and for each asset which BSC, in respect of the MRO Business, is obliged to maintain or repair under a leasing or similar agreement. Those assets have been regularly maintained in all material respects in accordance with:


a.	safety regulations required to be observed in relation to them; and


b.	the provisions of any applicable leasing or similar agreement.


4.3	BSC, in respect of the MRO Business, is not a party to, nor is liable under, a lease or hire, hire purchase, credit sale or conditional sale agreement.


5	MRO Contracts


5.1	The Sellers have made available to the Buyers copies of all MRO Contracts that are material, which are located in folder 2.1.1.2 of the Clean Team Data Room.


5.2	So far as the Sellers are aware, neither BSC nor any counterparty to any MRO Contract is in breach of any provision of any MRO Contract a default of which would be material having regard to the financial position of the MRO Business.


5.3	BSC (in respect of the MRO Business) has not received any notification of the termination of (otherwise than through expiry in accordance with the terms of the relevant MRO Contract) or any Claim for breach of contract in respect of any MRO Contract in circumstances when any such breach would have a material adverse effect on the MRO Business.

CFD-#31168153-v6

112

LONDON:618810.5N


6	MRO Lease


6.1	The Sellers have made available to the Buyers true, correct and complete copies of the MRO Lease, which are located in folder 1.2.3.2 of the Non Clean Team Data Room.


6.2	BSC is not aware of, and has not been notified or given any indication, whether formally or informally, of any notice of, or grounds for termination, avoidance or repudiation of the MRO Lease.


6.3	BSC is not and, so far as BSC is aware, DCT Pinnacle LP is not, in breach of any provision of the MRO Lease.


6.4	BSC has not subleased or assigned its interest under the MRO Lease.


6.5	The MRO Property constitutes all interests in real property held by BSC for the operation of the MRO Business and in the last three years BSC has not received any notice of material breach and/or enforcement action in relation to the planning permission or building control regulations in respect of the MRO Lease.

CFD-#31168153-v6

113

LONDON:618810.5N

Part C - The Buyers’ Warranties


1	The UK Buyer is a company duly incorporated and organised and validly existing and tax resident under the Laws of England and Wales.


2	The US Buyer is a corporation organised and validly existing under the Laws of the State of Delaware.


3	The Buyers have the right, power and authority to execute and deliver, and to exercise their rights and perform their obligations under, this Agreement.

This Agreement constitutes, and the other documents to be executed by the Buyers which are to be delivered at Completion in accordance with paragraph 2 of Part A of Schedule 5, paragraph 2 of Part B of Schedule 5 and paragraph 2 of Part C of Schedule 5 will, when executed, constitute legal, valid and binding obligations of the Buyers enforceable in accordance with their respective terms subject, however, to such limitations with respect to enforcement as are generally imposed by Law on creditors, in particular in connection with bankruptcy or similar proceedings, and to the extent that equitable remedies such as specific performance and injunction are in the discretion of the competent court.


5	The execution and delivery of, and the performance of obligations under and compliance with the provision of, this Agreement by the Buyers will not result in:


(a)	a violation of any provision of the Organisational Documents of either Buyer; or


(b)	a breach of or a default under any instrument to which either Buyer is a party.


6	No consent, authorisation, licence or approval of or notice to any governmental, administrative, judicial, regulatory body, authority or organisation is required to authorise the execution, delivery, validity, enforceability of this Agreement or the performance by the Buyers of their obligations under this Agreement.

No order has been made, petition presented or meeting convened for the purpose of considering a resolution for the winding up of either Buyer or for the appointment of any provisional liquidator. So far as the Buyers are aware, no petition has been presented for an administration order to be made in relation to either Buyer, and no receiver (including any administrative receiver) has been appointed in respect of the whole or any part of any of the property, assets and/or undertaking of either Buyer. So far as the Buyers are aware, no events or circumstances analogous to any of those referred to in this paragraph 7 have occurred in any jurisdiction outside its country of incorporation.

CFD-#31168153-v6

114

LONDON:618810.5N


8	At Completion, the Buyers will have all funds available to pay the Purchase Price in order to consummate the Transaction.


9	No member of the Buyers’ Group is:


(a)	subject to applicable law, regulation or other statutory or legislative provisions of any country or to any order, decree or judgment of any court, governmental agency or regulatory authority which is still in force; nor


(b)	a party to any litigation, arbitration or administrative proceedings which are in progress or, so far as the Buyers are aware, threatened or pending by or against or concerning it or any of its assets; nor


(c)	the subject of any governmental, regulatory or official investigation or enquiry which is in progress or, so far as the Buyers are aware, threatened or pending,

which in any case has or could reasonably be expected to have a material adverse effect on either Buyer's ability to execute, deliver and perform its obligations under this Agreement.

In this Part C of Schedule 3, where any Buyers’ Warranty is qualified as being made "so far as the Buyers are aware" or any similar expression, such statement shall be deemed to refer to the actual knowledge or awareness of Sam Marnick, Kailash Krishnaswamy and Kelly Gaide as at the date of this Agreement, it being agreed that in giving such statements or responding to such enquiries, no liability shall be incurred personally by any of these named individuals, save in the case of any such individual’s dishonesty, fraud, wilful misconduct or wilful concealment.

CFD-#31168153-v6

115

LONDON:618810.5N

Schedule 4

Competition Approvals

United States of America (in the event that the US revenue for 2019 attributable to the Atlantic Business, excluding the MRO Business, exceeds $90 million, with such 2019 revenue to be provided by the Seller to the Buyer as promptly as practicable after 1 January 2020)

European Union (to the extent the European Commission has jurisdiction following any potential referral under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings)

CFD-#31168153-v6

116

LONDON:618810.5N

Schedule 5 Completion

Part A: Completion in respect of Shorts and generally


1	At Completion, BAUK or BI shall (as the case may be):


(a)	deliver to the UK Buyer (or, in the case of the items described in paragraphs 1(a)(v) and 1(a)(vii), make available either at Shorts’ registered office or, at the Buyers’ option, in hard copy to the UK Buyer or the Buyers’ Solicitors):


(i)	a stock transfer form in respect of the Shorts Shares duly executed and completed in favour of the UK Buyer;


(ii)	duly executed powers of attorney or other authorities under which the stock transfer form in respect of the Shorts Shares have been executed;


(iii)	certificates for all shares in the Subsidiaries held by BAUK;


(iv)	a certified copy of the minutes of a duly held meeting of the directors of BAUK authorising the sale of the Shorts Shares, the execution of the stock transfer form in respect of the transfer of the Shorts Shares and the execution of this Agreement and the Transaction Documents to which BAUK is a party;


(v)	in respect of Shorts and the Subsidiaries, all their statutory and minute books, their common seal (if any), certificate of incorporation and any certificate or certificates of incorporation on change of name;

(vi)

letters of resignation in the agreed form (executed as deeds) from all the directors and the secretary of Shorts and each of the Subsidiaries (other than any director or secretary whom the Buyer wishes to continue in office) resigning their offices as such and acknowledging that they have no claim outstanding for compensation for loss of office or otherwise howsoever, including redundancy and unfair dismissal, such resignations to be tendered at the board meetings referred to in paragraph 1(c) below;


(vii)	the deeds and documents of title relating to the Properties owned by Shorts;


(viii)	the TSA, duly executed by BI and/or the relevant member of the Sellers’ Group;

CFD-#31168153-v6

117

LONDON:618810.5N


(ix)	the New Trading Agreements, duly executed by BI and/or the relevant member of the Sellers’ Group and Shorts;


(x)	the IP Licence Agreement, duly executed by BI and/or the relevant member of the Sellers’ Group and Shorts;


(xi)	the A220 GTA Transfer Agreement, duly executed by CSALP, CSAMGP and BI;


(xii)	the A220 STA Transfer Agreement, duly executed by CSALP, CSAMGP and BI;


(xiii)	the Pension Scheme Agreement, duly executed by Shorts and the Pension Scheme Trustee;


(xiv)	the Novation and Amendment of the BEIS Agreement, duly executed by BEIS, BI and Shorts;


(xv)	the Novation and Amendment of the INI 2009 Agreement, duly executed by INI, Shorts and BI;


(xvi)	(if not already delivered) the duly executed Disclosure Letter;


(xvii)	the minutes of each duly held board meeting, referred to in paragraph 1(c) below, certified as correct by the secretary of the relevant Sale Group Company (or, in the case of any Sale Group Company not having a secretary, by any director of that company); and


(xviii)	a counterpart of the Shorts Tax Deed duly executed and delivered by BAUK;


(b)	procure that Shorts’ auditors resign their office as auditors of each of Shorts and the Subsidiaries by sending their notice of resignation to each of Shorts and the Subsidiaries in accordance with section 516 CA 2006 along with a statement under section 519 CA 2006;


(c)	procure that each of Shorts and the Subsidiaries holds a board meeting at which it is resolved that:


(i)	the transfers mentioned in paragraph 1(a)(i) (in the case of the board meeting of Shorts) be registered (subject only to their being stamped);


(ii)	each of the persons nominated by the UK Buyer be validly appointed as additional directors and/or secretary, as the UK Buyer may direct, of that Sale Group Company;


(iii)	the resignations of the directors and secretaries of that Sale Group Company, referred

CFD-#31168153-v6

118

LONDON:618810.5N

to in paragraph 1(a)(vi) above, be tendered and accepted so as to take effect at the close of the meeting;


(iv)	such persons as are notified by the UK Buyer no later than 10 Business Days prior to Completion be appointed auditors of that Sale Group Company;


(v)	all bank mandates of that Sale Group Company in force be altered in such manner as the UK Buyer requires;


(vi)	the accounting reference date of that Sale Group Company be altered in accordance with any instructions given by or on behalf of the UK Buyer; and


(vii)	the registered office of that Sale Group Company be changed in accordance with any instructions given by or on behalf of the UK Buyer.


2	At Completion, the UK Buyer or the US Buyer shall (as the case may be):


(a)	deliver to BI:


(i)	[*****];


(ii)	a counterpart of the TSA, duly executed by the Buyers;


(iii)	a counterpart of the A220 GTA Transfer Agreement, duly executed by the UK Buyer (and the US Buyer, if applicable);


(iv)	a counterpart of the A220 STAs Transfer Agreement, duly executed by the UK Buyer (and the US Buyer, if applicable);


(v)	a counterpart of the Novation and Amendment of the BEIS Agreement, duly executed by the UK Buyer (and the US Buyer, if applicable);


(vi)	a counterpart of the Novation and Amendment of the INI 2009 Agreement, duly executed by the UK Buyer (and the US Buyer, if applicable);


(vii)	a certified copy of the minutes of a duly held meeting, or of written resolutions, of the directors of each Buyer authorising the purchase of the Sale Shares and the MRO Business and the other transactions contemplated by this Agreement and, as applicable, the Transaction Documents; and

CFD-#31168153-v6

119

LONDON:618810.5N


(viii)	a counterpart of the Shorts Tax Deed duly executed and delivered by the UK Buyer; and


(b)	pay (or procure payment of) the Shorts Purchase Price to BAUK in the manner specified in clause 30.

Part B: Completion in respect of BANA


1	At Completion, BI and BFI shall each:


(a)	deliver to the UK Buyer (or, in the case of the items described in paragraphs 1(a)(i), 1(a)(v) and 1(a)(vii), make available at BANA's registered office or, at the UK Buyer’s option, in hard copy to the Buyer or the Buyers’ Solicitors or such other person as the UK Buyer nominates):


(i)	five originals of the share transfer forms(s) (bulletin(s) de transfert) in respect of the BANA Shares duly executed outside the United Kingdom, authenticated (légalisés) and completed (in the French language) in favour of the UK Buyer together with the original share transfer register (registre des transferts) of BANA duly updated to reflect the transfer of the BANA Shares to the UK Buyer;


(ii)	two originals of the duly executed and authenticated (légalisés) powers of attorney or other authorities (in the French language) under which the share transfer form (s) (bulletin(s) de transfert) in respect of the BANA Shares have been executed;


(iii)	a certified copy of the minutes of a duly held meeting of the directors of BI and BFI (respectively) authorising the sale of the BANA Shares, the execution of the transfers in respect of the transfer of the BANA Shares and the execution of this Agreement and the Transaction Documents;


(iv)	in respect of BANA, all its corporate registers (registre des décisions des organes sociaux), its corporate seal (cachet) (if any), and one original of the trade registry extract (Modèle J);

(v)

two originals of the letters of resignation (in the French language) in the agreed form duly executed and duly authenticated (légalisés) from: (a) the Chairman (Président); (b) the Chief Executive Officer (Directeur Générale); (c) the Secretary (Secrétaire); and (d) each director (Administrateur) of BANA (other than any chairman, CEO, CFO, secretary or director whom the UK Buyer wishes to continue in office) resigning their offices as such and acknowledging that they have no claim outstanding for compensation for loss of office or otherwise howsoever, including redundancy and unfair dismissal;


(vi)	the original deeds and documents of title relating to the Properties owned by BANA;

CFD-#31168153-v6

120

LONDON:618810.5N


(vii)	one original of the Novation and Amendment of the MOU Agreement, duly executed by KoM and BI; and


(viii)	five originals of the minutes (in the French language) of the meeting of the corporate bodies of BANA duly executed and authenticated (légalisés), referred to in paragraph 1(d) below; and


(ix)	a counterpart of the BANA Tax Deed duly executed and delivered by BI and BFI;


(b)	procure that BANA’s auditors resign their office as auditors of BANA by sending their notice of resignation to BANA;


(c)	procure the transfer to BANA by BI of the inventory which is currently held under BI’s name in Casablanca; and


(d)	procure that BANA holds a shareholders’ general meeting at which it is resolved that:


(i)	the resignations of (a) the Chairman (Président), and (b) each director (Administrateur) of BANA, referred to in paragraph 1(a)(v) above, be tendered, accepted and acknowledged so as to take effect at the close of the meeting;


(ii)	each of the persons nominated by the UK Buyer be validly appointed as (a) Chairman (Président), and (b) director (Administrateur), as the UK Buyer may direct, of BANA;


(iii)	such persons as are notified by the UK Buyer no later than 10 Business Days prior to Completion be appointed auditors of BANA;


(iv)	all bank mandates of BANA in force be altered in such manner as the UK Buyer requires;


(v)	the accounting reference date of BANA be altered in accordance with any instructions given by or on behalf of the UK Buyer; and


(vi)	the registered office of that Sale Group Company be changed in accordance with any instructions given by or on behalf of the UK Buyer.


2	At Completion, the UK Buyer shall:


(a)	deliver to BI a counterpart of the Novation and Amendment of the MOU Agreement, duly executed by the UK Buyer (and the US Buyer, if applicable);

CFD-#31168153-v6

121

LONDON:618810.5N


(b)	deliver to BI a counterpart of the BANA Tax Deed, duly executed by the UK Buyer;


(c)	pay (or procure payment of) the BI BANA Purchase Price to BI in the manner specified in clause 30; and


(d)	pay (or procure payment of) the BFI BANA Purchase Price to BFI in the manner specified in clause 30.

CFD-#31168153-v6

122

LONDON:618810.5N

Part C: Completion in respect of the MRO Business


1	At Completion, BSC shall:


(a)	deliver to the US Buyer:


(i)	a certified copy of the minutes of a duly held meeting of the directors of BSC authorising the sale of the MRO Business and the execution of this Agreement and the Transaction Documents;


(ii)	such of the MRO Sale Assets as are transferable by delivery;


(iii)	(if requested by the US Buyer so to do) duly executed assignments, novations or transfers (prepared by and at the cost of the US Buyer in the agreed form) of such of the MRO Sale Assets (excluding the Properties and the Nonassignable Contracts referred to in clause 7.2) as are not transferable by delivery;

(iv)

the MRO Books and Records and all other documents of title or other records establishing title to the MRO Sale Assets (or any of them) and all other documents, records, data and things (other than VAT) relating in any way to the MRO Business or the carrying on thereof, its affairs or any of the MRO Sale Assets including (subject to the Data Protection Legislation) all personnel records and data relating to the MRO Business employees;


(v)	a duly authorized, properly completed Texas Comptroller Form 01-917, Statement of Occasional Sale;


(vi)	a certified copy of the minutes of a duly held meeting of the board of directors of BSC authorizing the transfer of the MRO Sale Assets and MRO Sale Liabilities to the Buyer; and


(vii)	a duly completed, authorized and executed FIRPTA Withholding Certificate;


(b)	complete in accordance with the provisions of Schedule 9, the sale of the MRO Property;


(c)	deliver to the US Buyer counterparts to the MRO Bill of Sale and Assignment and Assumption Agreement duly executed by BSC; and

CFD-#31168153-v6

123

LONDON:618810.5N


(d)	deliver to the US Buyer duly executed transfers of all material Permits that are capable of being transferred prior to Completion.


2	At Completion, the US Buyer shall:


(a)	complete, in accordance with the provisions of Schedule 9, the purchase of the MRO Property;


(b)	deliver to BSC counterparts to the MRO Bill of Sale and Assignment and Assumption Agreement duly executed by the US Buyer; and


(c)	pay the MRO Purchase Price to BSC in accordance with clause 30.

CFD-#31168153-v6

124

LONDON:618810.5N

Schedule 6

Limitation on the liability of the Sellers


1	Financial limits

1.1

The Sellers shall not be liable in respect of, and there shall be disregarded for all purposes, any Relevant Claim and any Tax Deed Claim unless the amount for which the Sellers would, but for this paragraph 1.1, be liable as a result of that Relevant Claim and any Tax Deed Claim and any Relevant Claim and any Tax Deed Claim arising out of the same or similar circumstances exceeds US$750,000, in which case the Sellers shall be liable for the full amount of the liability (and not merely the excess).

1.2

The Sellers shall not be liable in respect of any Relevant Claim or Tax Deed Claim unless the amount for which the Sellers would be liable as a result of any and all Relevant Claims and Tax Deed Claims (other than Relevant Claims or Tax Deed Claims for which the Sellers are not liable as a result of any other provision in this Schedule 6) exceeds in aggregate US$7,500,000 (the Basket), in which case the Sellers shall be liable (subject to the other provisions of this Agreement) for the full amount of the Basket (and not merely the excess).


1.3	The Sellers’ maximum aggregate liability in respect of:


(a)	all Relevant Claims (other than a Claim for breach of a Sellers’ Fundamental Warranty), including Claims under the Specific Indemnities, shall not exceed US$65,000,000;


(b)	a Claim for breach of a Sellers’ Fundamental Warranty, Claims under the Product Defect Indemnity, the A320 Neo TR Indemnity and Tax Deed Claims shall not exceed the Purchase Price; and


(c)	the aggregate of all Claims under this Agreement, including all Relevant Claims, Product Defect Indemnity, Tax Deed Claims and A320 Neo TR Indemnity, shall not exceed the Purchase Price,

ignoring any deemed reduction in consideration as a result of paragraph 14 of this Schedule 6.

1.4

In respect of any sum referred to in paragraphs 1.1, 1.2 and 1.3, the amount of any costs, expenses and other amounts (including interest and defence costs) claimed or demanded by either Buyer, or ordered or determined to be payable to either Buyer (together with any irrecoverable VAT thereon) under, in connection with or arising out of any Relevant Claim, any Claim under the Specific Indemnities, the Product Defect Indemnity, the A320 Neo TR Indemnity or any Tax Deed Claim (or

CFD-#31168153-v6

125

LONDON:618810.5N

any judgement, order or award) shall be excluded from the sums referred to therein as a liability in respect of the Relevant Claim, Claim under the Specific Indemnities, the Product Defect Indemnity, the A320 Neo TR Indemnity or the Tax Deed Claim.

1.5

Any amounts paid by the Seller in respect of a Relevant Claim, a Claim under the Specific Indemnities, the Product Defect Indemnity, the A320 Neo TR Indemnity or a Tax Deed Claim and subsequently refunded by either Buyer, as applicable or set off against a liability of the either Buyer pursuant to clause 10.9, paragraphs 7, 8 or 9 of this Schedule 6 or clauses 3, 4 or 6 of a Tax Deed shall be disregarded to the extent of the refund or set-off for the purpose of paragraph 1.3 in the event of any further Relevant Claim, Specific Indemnity Claim or Tax Deed Claim.


2	Time limits


2.3	The Sellers shall not be liable in respect of a Relevant Claim or Tax Deed Claim unless the relevant Buyer has given notice to the Sellers:


(a)	in the case of a Relevant Claim in respect of a breach of a Sellers’ Fundamental Warranty, or in the case of a Tax Claim pursuant to clause 6.6 of the Tax Deed, by no later than the date falling ten years after the Completion Date;


(b)	in the case of any other Tax Claim, by no later than the date falling seven years after the Completion Date; and


(c)	in the case of any other Relevant Claim, by no later than the date falling 18 months after the Completion Date.


2.4	The Sellers' liability in respect of any Relevant Claim shall terminate (if such claim has not been previously remedied, satisfied or withdrawn) on the expiry of 9 months after the date it was notified to the Sellers unless court proceedings in respect of it have been commenced by being both issued and served in accordance with relevant procedural rules.


3	Remediable breaches


3.1	Where the matter or default giving rise to a Relevant Claim is capable of remedy, the relevant Seller will not be liable for such Relevant Claim unless the matter or default is not remedied to the reasonable satisfaction of the Buyers within 20 Business Days after the date on which notice of such Relevant Claim is given to the Sellers.

CFD-#31168153-v6

126

LONDON:618810.5N


3.2	The Buyers shall procure that the relevant Seller is given the opportunity in the 20 Business Day period referred to in paragraph 3.1 to remedy the relevant matter or default (if capable of remedy)

and shall provide (and procure that each member of the Buyers’ Group shall provide) all reasonable assistance to the relevant Seller to remedy the relevant matter or default.


4	General limitations


4.1	The Sellers shall not be liable in respect of a Relevant Claim (other than a Tax Claim) to the extent that the matter giving rise to, or the Losses arising from, or any increase in that claim:

occurs as a result of or is otherwise attributable to any introduction, enactment, change, amendment or withdrawal of any Law, rules or administrative or Governmental Authority practice or guidance occurring after the date of this Agreement (whether or not that introduction, enactment, change, amendment or withdrawal purports to have retrospective effect in whole or in part), or any change in the interpretation of any of the foregoing by any court of law or tribunal after the date of this Agreement;


b.	occurs as a result of or is otherwise attributable to:


i.	any change in the accounting reference date of any member of the Buyers’ Group after Completion, except where such a change is required to comply with applicable generally accepted accounting practice or the relevant Accounting Standards; or


ii.	a change in the accounting or Tax policies or practices of any member of the Buyers’ Group (including the method of submitting Tax returns) introduced or having effect after Completion, except where such change is required to comply with Law or generally accepted accounting practice or the relevant Accounting Standards;

would not have arisen or occurred but for any action or omission of either Buyer or a member of the Buyers’ Group, after Completion, nor in respect of any Losses resulting from or triggered by any investigation or claim initiated following any initiative taken by either Buyer or a member of the Buyers’ Group after Completion, unless such action, initiative or omission is an action, initiative or omission which a similarly situated internationally active industrial buyer, whether or not listed, engaging in a transaction or size and nature as the Transaction would as shareholder of the Sale Group Companies reasonably be expected to undertake or omit to undertake or cause the Sale Group Companies to undertake or omit to undertake with due regard for the interests of such buyer as shareholder in preserving the value of its investment in the Sale Group Companies and their assets;


d.	arises as a consequence of any act or omission (other than, for the avoidance of doubt, the

CFD-#31168153-v6

127

LONDON:618810.5N

Pre-Completion Steps) carried out:


i.	in consequence of the execution and performance of and in accordance with the terms of this Agreement (other than in respect of a Tax Claim); or


ii.	at the request or with the written consent of a member of the Buyers’ Group.

4.2

The Sellers shall have no liability in respect of a Relevant Claim (other than a Tax Claim) to the extent that the matter giving rise to, or the expected Losses arising from, or any expected increase in that Claim was specifically noted or fully provided for in Shorts Accounts, the BANA Accounts or the Atlantic Audited Combined Statement of Financial Position (including the calculation of any allowance, provision or reserve in the Shorts Accounts, the BANA Accounts or the Atlantic Audited Combined Statement of Financial Position, as the case may be).

4.3

The Sellers shall have no liability in respect of a Relevant Claim (other than a Tax Claim) to the extent that the relevant Buyer or the relevant Sale Group Company has received from any other person (other than a Sale Group Company) a payment in respect of such liability giving rise to the Relevant Claim (less the reasonable costs of the relevant Buyer or relevant Sale Group Company of obtaining the payment).


5	No double recovery


5.1	The Buyers agree with the Sellers that, in respect of any matter which may give rise to liability pursuant to a Relevant Claim or Tax Deed Claim:


a.	no such liability shall be met more than once; and


b.	any liability with respect to such matter to any member of the Buyers’ Group shall be deemed to be satisfied by the satisfaction of the liability with respect to such matter to any other member of the Buyers’ Group.

5.2

The Sellers agree with the Buyers that, in respect of any benefit relating to Tax to be paid to or applied, or taken into account, for the benefit of a Seller or a member of the Sellers’ Group (including any Tax Benefit or Seller Relief so paid or applied, or taken into account) under this Agreement or a Tax Deed, the Sellers and their Group members shall not be entitled to be paid or benefit from any such benefits more than once.


6	Limitations on scope of Warranties


6.1	Save for the Warranties contained in paragraph 12 of Schedule 3, none of the Warranties shall extend to, or be construed as a warranty relating to the Properties or other interest in land (such matters

CFD-#31168153-v6

128

LONDON:618810.5N

being the subject of the Warranties contained only in paragraph 12 of Schedule 3).


6.2	Save for the Warranties contained in paragraph 13 of Schedule 3, none of the Warranties shall extend to, or be construed as a warranty relating to Environmental Matters (such matters being the subject of the Warranties contained only in paragraph 13 of Schedule 3).


6.3	Save for the Warranties contained in paragraph 17 of Schedule 3, none of the Warranties shall extend to, or be construed as a warranty relating to Intellectual Property Rights, Information Technology or compliance with Data Protection Legislation (such matters being the subject of the Warranties contained only in paragraph 17 of Schedule 3).


6.4	Save for the Tax Warranties, none of the Warranties shall extend to, or be construed as a warranty relating to Tax (such matters being the subject of the Tax Warranties).


7	Insurance

7.1

If, in respect of any matter which would otherwise give rise to a Relevant Claim (other than a Tax Claim), any member of the Buyers’ Group is entitled to claim under any policy of insurance other than the Buyers’ W&I Policy, that Relevant Claim shall be reduced by the amount to which that member of the Buyers’ Group recovers under such policy of insurance (less the reasonable costs of the Buyer or relevant Sale Group Company of obtaining the payment).


7.2	The Buyers shall have the right, at its election, to make a claim under the Buyers’ W&I Policy in respect of any Relevant Claim, addition to, or instead of, issuing court proceedings in respect of such Relevant Claim.


7.3	The provisions of this paragraph 7 shall not prohibit the subrogation rights of the insurer under the Buyers’ W&I Policy provided however that no such subrogation shall increase the liability of the Sellers under this Agreement or a Tax Deed.


8	Claims by or against third parties


8.1	If any member of the Buyers’ Group becomes aware of any matter:


a.	which has given, or might give rise, to a claim being made by a third party against a member of the Buyers’ Group which will or may give rise to a Relevant Claim (other than a Tax Claim); or

CFD-#31168153-v6

129

LONDON:618810.5N


b.	in respect of which any member of the Buyers’ Group is or may become entitled to recover (whether by way of payment, discount, credit, set-off, counterclaim or otherwise) from any third party (other than pursuant to a policy of insurance referred to in paragraph 7) any sum in

respect of any loss, damage or liability which has been, is or may become the subject of a Relevant Claim (other than a Tax Claim),

in each case a Third Party Claim (including for the avoidance of doubt, a prospective claim), then the following provisions of this paragraph 8 shall apply.

8.2

The Buyers shall, upon any member of the Buyers’ Group becoming aware of a Third Party Claim, give written notice (containing reasonable details of the Third Party Claim) to the Sellers of the matter within 20 Business Days of becoming aware of the Third Party Claim, and shall consult with the Sellers with respect to that Third Party Claim and keep the Sellers promptly informed of all material developments in relation to that Third Party Claim (provided that the Buyers are permitted to take any reasonable provisional measure, to the extent necessary, subject to informing the Sellers promptly thereof).


8.3	Neither Buyer shall, and each Buyer shall procure that no member of the Buyers’ Group shall, make any admission of liability in respect of the Third Party Claim, or agree, compromise or settle the Third Party Claim, without the prior written consent of the Sellers (such consent not to be unreasonably withheld, delayed or conditioned).

8.4

Subject to paragraph 8.8(d), the Buyers shall provide, and shall procure that each member of the Buyers’ Group shall provide, the Sellers and the Sellers’ professional advisers with reasonable access, during Working Hours, to premises and personnel and to all materially relevant documents, records, correspondence, accounts and other information within the power, possession or control of any member of the Buyers’ Group for the purpose of investigating the Third Party Claim and/or ascertaining whether any member of the Buyers’ Group has a right of recovery against any person other than the Sellers.

8.5

Upon any member of the Buyers’ Group becoming aware of a Third Party Claim, the Buyer shall, and shall procure that each member of the Buyers’ Group shall, so far as is reasonably practicable, retain and preserve all documents, records, correspondence, accounts and other information within the power, possession or control of any such persons which are or could reasonably be considered materially relevant in connection with the Third Party Claim for so long as any such Third Party Claim remains outstanding.


8.6	Subject to paragraph 8.8(d), the Sellers shall be entitled to copies of any of the documents, records and information referred to in paragraph 8.5 or, in the event that the Sellers wish to insure against its

CFD-#31168153-v6

130

LONDON:618810.5N

liabilities in respect of any actual or prospective Relevant Claim, any information that a prospective insurer may reasonably require before effecting such insurance.


8.7	Each Buyer shall, and shall procure that each member of the Buyers’ Group shall:

take such action and institute such proceedings, and give such information and assistance, as the Sellers may reasonably request to dispute, resist, appeal, compromise, defend, remedy or mitigate the Third Party Claim or to enforce against any person (other than the Seller or any member of the Sellers’ Group) the rights of any member of the Buyers’ Group in relation to the Third Party Claim (including the assignment to the Seller or such other third party as the Sellers may direct any rights of action which any member of the Buyers’ Group may have), and more generally co-operate fully and promptly with the Sellers and their professional advisers; and


b.	in connection with any proceedings related to the Third Party Claim (other than against the Sellers or any member of the Sellers’ Group) use professional advisers nominated by the Sellers and, if the Sellers so request, permit the Sellers to have exclusive conduct of the negotiations and/or proceedings,

and the relevant Seller shall indemnify the Buyers against all costs, expenses and/or other amounts (including interest) properly and reasonably incurred by the Buyers and/or any other member of the Buyers’ Group pursuant to its obligations under this paragraph 8.7.


8.8	Notwithstanding any other provision of this Agreement:


a.	subject to paragraph 8.8(b), the Sellers shall be entitled at any stage and at its sole direction to settle any such Third Party Claim provided that the settlement shall contain a complete release of the relevant member of the Buyers’ Group (a Release);

if at any time the Sellers notify the Buyers in writing that it wishes to settle, compromise or cease pursuing a Third Party Claim in which a Release is obtained and the Buyers or the relevant member of the Buyers’ Group declines or decline to do so, the Sellers shall thereupon cease to have any obligation to indemnify the Buyers in relation to such Third Party Claim pursuant to paragraph 8.7 beyond the amount of the settlement;


c.	the Sellers shall have no obligation to make payment to the Buyers in respect of any Relevant Claim until the Third Party Claim related thereto (if any) has been satisfied, settled, determined or withdrawn; and


d.	the Buyers shall not be required, in connection with the operation of the provisions of this

CFD-#31168153-v6

131

LONDON:618810.5N

paragraph 8, to provide or procure the provision of:


i.	any document in respect of which legal privilege can properly be claimed where to do so would cause the loss of privilege in respect of the advice contained in such document; or


ii.	any information in breach of any Laws.


9	Recovering and calculating liability

9.1

If, after any of the Sellers has made any payment in respect of a Relevant Claim (other than a Tax Claim), the recipient of that payment recovers from a third party (including any Tax Authority) (whether by payment, discount, credit, relief or otherwise) a cash sum which is referable to that payment and was not taken into account in calculating the amount of that payment (after having deducted the reasonable costs of the relevant Buyer or relevant Sale Group Company of obtaining the sum, (the Recovery Amount), then the relevant Buyer shall forthwith repay (or procure the repayment) to the relevant Seller an amount equal to the lesser of the Recovery Amount and the sum paid by the relevant Seller.

9.2

Subject to paragraph 9.3 of this Schedule 6, in calculating the liability of the Sellers, there shall be taken into account the amount by which any cash Tax for which any member of the Buyers’ Group is liable in respect of the period to which the liability relates is actually reduced or extinguished as a result of the matter or circumstance giving rise to the Relevant Claim in question (any such amount being a Tax Benefit).


9.3	No sum or amount shall be a Recovery Amount or Tax Benefit to the extent that:


a.	it arises as a result of or is otherwise attributable to the use of any Buyer’s Relief;


b.	if the Recovery Amount or Tax Benefit were instead a liability of the Sellers, that liability would (without taking into account any other exclusions or limitations under this Agreement) be reduced or eliminated under paragraph 4.1 of this Schedule 6; or


c.	the Tax Benefit relates to a matter involving BSC, the MRO Property, or the MRO Business.


9.4	If:


a.	any provision (whether for Tax or for any other matter) in the Atlantic Audited Combined Statement of Financial Position proves to be an over-provision; or

CFD-#31168153-v6

132

LONDON:618810.5N


b.	any sum is received by any Sale Group Company which has previously been written off as irrecoverable in the accounts of that Sale Group Company,

the amount over-provided or, as the case may be, the sum so received shall be set off against the liability (if any) of any of the Sellers under this Agreement.


10	Consequential loss

Notwithstanding anything to the contrary in this Agreement or the Tax Deeds, the Sellers shall not in any circumstances be liable to the Buyers, whether in contract, tort or breach of statutory duty or otherwise for:


(a)	loss of or anticipated loss of profit, loss of or anticipated loss of revenue, business interruption, loss of any contract or other business opportunity or goodwill (save that this paragraph 10(a) shall not apply to the Claims arising under the Product Defect Indemnity);


(b)	indirect loss or consequential loss; or


(c)	any special, punitive or aggravated damages.


11	Contingent and unquantifiable liabilities


11.4	If any Relevant Claim (other than a Tax Claim) is made within the time limits referred to in paragraph

2.3 in respect of a liability which, at the time such claim is notified to the Sellers, is contingent or is unquantifiable, then:


(a)	the Sellers shall not be under any obligation to make any payment in respect of such Relevant Claim to the extent (but only to the extent) that such liability is contingent or unquantifiable unless and until such liability ceases to be contingent or unquantifiable;


(b)	the Buyers shall provide to the Sellers all such information as is in or comes into its or the relevant Sale Group Company's possession in connection with such Relevant Claim as soon as reasonably practicable;


(c)	where such liability is unquantifiable the Buyers shall use all reasonable endeavours to quantify such liability as soon as possible;


(d)	paragraph 2.4 shall be amended in relation to such Relevant Claim so as to require legal

CFD-#31168153-v6

133

LONDON:618810.5N

proceedings to be commenced within 6 months of the date on which such liability ceases to be contingent or becomes capable of being quantified, as the case may be; and


(e)	if legal proceedings have not been commenced within the meaning of paragraph 2.4 or such liability has not ceased to be contingent or become capable of being quantified, as the case

may be, within 9 months of the expiry of the relevant time limit referred to in paragraph 2.3, the Sellers shall cease to be liable for such Relevant Claim.

11.5

For the purposes of this paragraph 11, a liability shall only be unquantifiable if it is of a nature which is capable of precise determination but which is not at the relevant time capable of determination on the basis of the information available to any member of the Buyers’ Group and a liability shall not be unquantifiable simply because the Buyer needs to make further enquiries or undertake further investigations in order to determine the amount of any such loss.


12	Waiver of set off rights

Each Buyer hereby waives any and all rights of set-off, counter-claim, deduction or retention in respect of any claim or any payment which that Buyer may be obliged to make (or procure be made) to any of the Sellers pursuant to this Agreement or any of the other Transaction Documents which it might otherwise have by virtue of any Relevant Claim or Tax Deed Claim.


13	Fraud

Nothing in this Schedule, nor any other provision of this Agreement or the Tax Deeds purporting to limit or exclude any of the Sellers’ liability, shall apply to any claim to the extent that it arises or is increased as a result of dishonesty, fraud, fraudulent misrepresentation, wilful misconduct or wilful concealment on the part of any of the Sellers.


14	Successful claims constitute reduction in Purchase Price

The satisfaction by any of the Sellers of any claim under this Agreement (including the Warranties) and/or a Tax Deed shall be deemed to constitute a reduction in the consideration payable by the Buyers for the purchase of:


(a)	the Shorts Shares, in the case of BAUK where the subject matter of the claim relates to the Shorts Shares;


(b)	the BANA Shares, in the case of BI;


(c)	the BANA Shares, in the case of BFI; and


(d)	the MRO Business, in the case of BSC.

CFD-#31168153-v6

134

LONDON:618810.5N


15	Claims under the Tax Warranties

The provisions of the Tax Deeds shall apply to limit the liability of the Sellers in relation to the Tax Warranties and the conduct of various matters in relation to the Tax Warranties in the extent stated therein.


16	Mitigation

Each Buyer shall (and shall procure that each member of the Buyers’ Group shall) take reasonable steps to mitigate any event or Loss suffered by it (or such member of the Buyers’ Group) which has resulted in or which is reasonably likely to result in a Relevant Claim other than a claim under or in respect of a Tax Deed.

CFD-#31168153-v6

135

LONDON:618810.5N

Schedule 7

Pre-Completion Conduct and Undertakings


1	Prior to Completion the Sellers shall procure that:


(a)	the Pre-Completion Steps, including but not limited to:


(i)	the transfer of the shares held by Shorts in LLC Bombardier Aerospace Marketing Russia, Bombardier Aerospace India Private Limited and Bombardier (UK) CIF Trustee Limited to a member of the Sellers’ Group; and


(ii)	the transfer of the business of LLC Bombardier Aerospace Services Russia that does not relate to the Atlantic Business to a member of the Sellers’ Group,

are completed in accordance with the Pre-Completion Steps Plan, to the extent they have not occurred prior to the execution of this Agreement

(b)

all borrowings and indebtedness in the nature of borrowing owed by the Sale Group Companies or BSC (in respect of the MRO Business) to BI or any member of the Sellers’ Group (other than any of the Sale Group Companies or BSC (in respect of the MRO Business)) at the Completion Date but not Trade Debts have been repaid, together with any accrued interest, or have otherwise been addressed to the satisfaction of the Buyers and the Sellers in such other manner as may be agreed by the parties, acting reasonably;


(c)	all borrowings and indebtedness in the nature of borrowing owed to any of the Sale Group Companies or BSC (in respect of the MRO Business) by BI or any member of the Sellers’ Group (other than any of the Sale Group Companies or BSC (in respect of the MRO Business)) at the Completion Date but not Trade Debts have been repaid, together with any accrued interest;


(d)	the leases of the offices in Farnborough and Biggin Hill are transferred by Shorts to a member of the Sellers’ Group;


(e)	the inventory/tooling located at the MRO Property and owned by other members of the Sellers’ Group shall be transferred from the MRO Business prior to Completion;


(f)	the IT Services (Infrastructure and Applications) serving as an IT HUB for the Sellers’ Group

CFD-#31168153-v6

136

LONDON:618810.5N

in Europe and located in Belfast are transferred to a member of the Sellers’ Group; and


(g)	all necessary steps as may be required are taken by Shorts, in collaboration with the Pension Scheme Trustee and the CIT Trustee to facilitate the Short Brothers Pension Scheme and the Bombardier Aerospace Shorts Executive Benefits Scheme formally ceasing to participate in the Bombardier CIF.

Prior to Completion the Sellers shall provide to the Buyers a copy of the management accounts prepared each month in relation to Shorts and BANA when received from management and shall procure that Shorts’ management provides answers to reasonable questions provided on those accounts to enable the Buyers to review the performance of the Sale Group in the period prior to Completion, it being understood that no detailed information which might reasonable be regarding as sensitive for competition Law purposes may be provided to persons in the Buyers’ Group who are outside of the agreed “clean team” of the Buyers’ Group.


3	Prior to Completion the Sellers shall:


(a)	procure the repayment by members of the Sellers’ Group in the ordinary course and, in accordance with the applicable terms of payment, of all Trade Debt owing to: (i) Sale Group Companies; or (ii) to the MRO Business, in relation to the Atlantic Business, in each case as at Completion;


(b)	procure the repayment by: (i) the Sale Group Companies; and (ii) the MRO Business in the ordinary course and, in accordance with the applicable terms of payment, of all Trade Debt owing to members of the Sellers’ Group as at Completion;

(c)

except to the extent prohibited by applicable Law or applicable competition rules, provide (and shall cause the Sale Group Companies to provide) to the Buyers, such information and assistance as is reasonably requested by the Buyers in connection with the arrangement and marketing by the Buyers of debt financing to fund all or a portion of the consideration for the Transaction (or refinance debt in connection therewith) prior to or at Completion. The Sellers hereby consent to the use of the logos of the Sale Group Companies in connection with the syndication or marketing of any debt financing, provided that such logos are not used in a manner that would reasonably be expected to harm or disparage the Sale Group Companies or their marks.


4	Pending Completion the Sellers shall procure that the Sale Group Companies shall, and BSC shall in respect of the MRO Business, except as required under this Agreement or with the prior written consent of the Buyers and to the extent permitted under applicable Laws:

CFD-#31168153-v6

137

LONDON:618810.5N


(a)	carry on business as a going concern in the way carried on prior to the date of this Agreement (which shall include, for the avoidance of doubt, maintaining levels of working capital within the Atlantic Business);


(b)	honour all obligations under Existing Subsidies and (to the extent granted) any Future Subsidies);


(c)	use all reasonable endeavours to preserve and maintain in the ordinary course the assets of the Atlantic Business;


(d)	use all reasonable endeavours to preserve and maintain in the ordinary course the goodwill of the Atlantic Business


(e)	use all reasonable endeavours to preserve and maintain all Permits of the Atlantic Business;


(f)	maintain and purchase inventory in line with the practice of the Atlantic Business during the 12 months prior to the date of this Agreement;


(g)	use all reasonable endeavours to maintain the material fixed assets of the Atlantic Business in line with the practice of the Atlantic Business during the 12 months prior to the date of this Agreement;


(h)	use all reasonable endeavours to maintain in force all existing insurance policies on the same material terms to provide the level of cover as is in force at the date of this Agreement for the benefit of the Sale Companies or MRO Business (as applicable);


(i)	make any insurance claim in relation to the Sale Companies or MRO Business promptly and in accordance with the terms of the relevant policy; and

(j)

give to the Buyers and their authorised representatives, to the extent authorised by Law and in compliance with applicable competition rules, full access to the Properties and to all the books and records of the Sale Companies and procure that the directors and employees of the Sale Companies are instructed to give promptly all such information and explanations with respect to the business and affairs of the Sale Companies as the Buyers and their authorised representatives may reasonably request.


5	Without prejudice to the generality of paragraph 4(a) of this Schedule 7, pending Completion, the Sellers shall not do or agree to do any of the following in respect of the Sale Group Companies, and the Sellers shall procure that no Sale Group Company shall (nor shall agree), to do any of the following, except as required under this Agreement, the Pre-Completion Steps Plan or with the prior

CFD-#31168153-v6

138

LONDON:618810.5N

written consent of the Buyers (such consent not to be unreasonably withheld or delayed) and to the extent permitted under applicable Laws:


(a)	circulate any resolution to the shareholders of any Sale Group Company for consideration, voting or approval (or pass any such shareholder resolution) or obtain any consent from any of its members;


(b)	resolve to change its name or to alter its Organisational Documents;


(c)	change its financial year end;


(d)	change (or resolve to change) its residence for Tax purposes, or open or create any permanent establishment, branch or agency in a jurisdiction outside its jurisdiction of incorporation;


(e)	modify the rights attached to any Sale Shares;


(f)	allot or issue or agree to allot or issue any shares, interests or other securities other than by way of capitalisation of debt owed to other members of Sellers’ Group or grant or agree to grant any option or other right which confers on the holder any right to acquire any shares, interests or other securities;


(g)	reduce, repay, redeem, purchase or effect any other reorganisation of any of its share capital;


(h)	declare, pay or make any dividend (whether in cash or in specie) or other distribution (including any deemed distribution for Tax purposes);


(i)	resolve to be voluntarily wound up;


(j)	change any term of any Existing Subsidy or apply for or accept any new subsidy or grant (other than the grant application disclosed in the Disclosure Letter);


(k)	change any term of any collective bargaining agreement to which it is a party;


(l)	acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture, or enter into any joint venture agreement;


(m)	enter into any Military Contract;


(n)	defer any capital expenditure individually exceeding US$5,000,000 currently in the budget/capital plan for the Atlantic Business contained in the Data Room;

CFD-#31168153-v6

139

LONDON:618810.5N

(o)

acquire or dispose of any asset which is material to the business of the Sale Group Companies (for these purposes material means any asset having a value in excess of US$1,000,000, exclusive of VAT) other than on arm’s length terms or in accordance with the existing terms of its agreements or arrangements with other members of the Sellers’ Group disclosed to the Buyers prior to the date hereof;


(p)	enter into any agreement, arrangement or obligation with any member of the Sellers’ Group (or other Sale Group Company), or a person connected to any of them, other than on arm’s length terms in the ordinary course of business or otherwise outside of the historic practice;


(q)	incur or agree to incur any commitment to capital expenditure for an amount which exceeds or could exceed US$1,000,000, exclusive of VAT other than as disclosed to the Buyers prior to the date hereof;


(r)	enter into, terminate, amend, or vary any Material Contract;


(s)	vary any lease or other material licence agreement relating to any of the Properties or acquire any interest in, or enter into any agreement in relation to, any real property other than the Properties;


(t)	acquire or dispose of any real property asset;


(u)	amend any term of a pension trust deed or pension scheme rules to which it is a party (including in respect of the DB Pension Schemes), or take any other action to increase pension contribution obligations of any Sale Group Company;


(v)	give any Guarantee other than in the ordinary course of business and on arm’s length terms;

(w)

enter into any borrowing, factoring or other financing commitments (other than use of overdraft facilities agreed before the date of this Agreement) or lend any money to, or enter into any lending commitments with, any person, being in each case commitments which are outside the ordinary course of its business (save in the case of the borrowing of any monies by any member of the Sellers’ Group from any Sale Group Company, which shall not be considered to be in the ordinary course of business);


(x)	use cashflows of the Atlantic Business to make any payment of interest or repayment of principal in respect of any Intercompany Debt, other than at Completion;


(y)	create any Encumbrance over its business, undertaking or any of its assets (including the Sale Shares);

CFD-#31168153-v6

140

LONDON:618810.5N


(z)	fail to keep proper accounting records or to make therein true and complete entries of all its dealings and transactions, or otherwise fail to keep any books and records as required and in the manner prescribed by applicable Law;

(aa) threaten or enter into any proceeding or settle any litigation other than respect of debt collection in the ordinary course of business;

(bb) settle any insurance claim below the amount claimed under the relevant insurance policy;

(cc) save as required by Law, make or agree to make any material change in the terms or conditions of employment or engagement of any of its employees, workers or officers (including, without limitation, remuneration, pension entitlements and other benefits under any benefit plans);

(dd) provide or agree to provide to any employee or any of his dependants any gratuitous payment or benefit which is in excess of US$100,000 and which is or becomes a liability of any member of the Sale Group;

(ee) offer employment to any person who, by accepting such offer, would upon commencing employment be a Senior Employee;

(ff) dismiss any Senior Employee or implement any redundancy programme in respect of other employees (other than pursuant to a redundancy programme disclosed in writing to the Buyers prior to the date of this Agreement or for gross misconduct);

(gg) enter into, terminate or vary the terms of the Tax consolidation or group arrangements to which a Sale Group Company is a party;

(hh) change its accounting reference date or Tax accounting periods or make any change to its accounting or Tax practices or policies or its methods of reporting or approach to claiming income, losses or reductions for Tax purposes;

(ii) make any material Tax election, file any materially amended Tax return, settle any material Tax audit or proceedings, or enter into any material agreement with any Tax Authority or obtain any material Tax ruling, in each case either (i) which may affect its Tax position in periods ending after Completion or (ii) otherwise than in the ordinary course of conducting its Tax affairs;

CFD-#31168153-v6

141

LONDON:618810.5N

(jj) take steps to procure payment by any debtor generally in advance of the date on which book and other debts are usually payable in accordance with its standard terms of business or, if different, the period extended to any particular debtor in which to make payment;

(kk) delay making payment to any trade creditors generally outside of the Sale Group’s ordinary course of business prior to the date of this Agreement;

(ll) assign, license, charge, abandon, cease to prosecute or otherwise dispose of or fail to maintain, defend or diligently pursue applications for any Intellectual Property Rights or enter into any licence, sub-licence, assignment or other agreement in respect of or affecting any licences of Intellectual Property Rights;

(mm) waive any financial obligation owed by a member of the Sellers’ Group to a Sale Group Company;

(nn) incur professional fees and expenses in connection with any of the transactions contemplated by this Agreement; and

(oo) transfer any asset to a member of the Sellers’ Group other than as contemplated by paragraph 1 of Schedule 7 or pursuant to trading agreements in force at the date of this Agreement.


6	Pending Completion BSC shall not do or agree to do any of the following in respect of the MRO Business (except as required under this Agreement or with the prior written consent of the US Buyer and to the extent permitted under applicable Laws):


(a)	acquire or dispose of any asset which is material to the MRO Business (for these purposes material means any asset having a value in excess of US$1,000,000, exclusive of VAT) other than on arm’s length terms or in accordance with the existing terms of its agreements or arrangements with other members of the Sellers’ Group disclosed to the US Buyer prior to the date hereof;


(b)	enter into or amend or incur any commitment that is not in the ordinary and usual course of business which involves or may involve total annual expenditure in excess of US$1,000,000


(c)	incur or agree to incur any commitment to capital expenditure for an amount which, together with all other such commitments entered into between the date of this Agreement and Completion, exceeds or could exceed US$1,000,000, exclusive of VAT other than as disclosed to the US Buyer prior to the date hereof;


(d)	enter into any borrowing, factoring or other financing commitments (other than use of overdraft facilities agreed before the date of this Agreement) or lend any money to, or enter into any

CFD-#31168153-v6

142

LONDON:618810.5N

lending commitments with, any person, being in each case commitments which are outside the ordinary course of its business;


(e)	threaten or enter into any proceeding or settle any litigation (other than in respect of any debt collection in the ordinary course of business), including in respect of Tax;


(f)	apply for or accept any subsidy or grant;


(g)	enter into, terminate, amend, or vary any Material Contract;


(h)	settle any insurance claim below the amount claimed under the relevant insurance policy;


(i)	give any Guarantee other than in the ordinary course of business;


(j)	enter into any borrowing, factoring or other financing commitments (other than use of overdraft facilities agreed before the date of this Agreement) or lend any money to, or enter into any lending commitments with, any person, being in each case commitments which are outside the ordinary course of its business;


(k)	create any Encumbrance over its business, undertaking or any of its assets;


(l)	vary any lease or other contract relating to any of the Properties or acquire any interest in, or enter into any agreement in relation to, any real property other than the Properties;


(m)	acquire or dispose of any real property asset;


(n)	fail to keep proper accounting records or to make therein true and complete entries of all its dealings and transactions, or otherwise fail to keep any books and records as required and in the manner prescribed by applicable Law;


(o)	save as required by Law, make or agree to make any material change in the terms or conditions of employment or engagement of any of its employees, workers or officers (including, without limitation, remuneration, pension entitlements and other benefits under any benefit plans);


(p)	provide or agree to provide to any employee or any of his dependants any gratuitous payment or benefit which is in excess of US$100,000;

CFD-#31168153-v6

143

LONDON:618810.5N


(q)	offer employment to any person who, by accepting such offer, would upon commencing employment be a Senior Employee;


(r)	dismiss any Senior Employee or implement any redundancy programme in respect of other employees (other than pursuant to a redundancy programme disclosed in writing to the US Buyer prior to the date of this Agreement or for gross misconduct);


(s)	take steps to procure payment by any debtor generally in advance of the date on which book and other debts are usually payable in accordance with its standard terms of business or, if different, the period extended to any particular debtor in which to make payment; and


(t)	delay making payment to any trade creditor generally beyond the date on which payment of the relevant trade debt should be paid in accordance with the credit period authorised by the relevant creditor or, if different, the period extended by the creditor in which to make payment.

CFD-#31168153-v6

144

LONDON:618810.5N

EXECUTED as a deed by BOMBARDIER INC.

acting by Christian Poupart and Pier-Olivier Calestagne under a power of attorney dated 30 October 2019

)/s/ Christian Poupart

)Name: Christian Poupart

)Title: Head of Legal

) /s/ Pier-Olivier Calestagne

Name: Pier-Olivier Calestagne

Title: Senior Director M&A

EXECUTED as a deed by BOMBARDIER AEROSPACE UK LIMITED

acting by Christian Poupart and Pier-Olivier Calestagne under a power of attorney dated 30 October 2019

) /s/ Christian Poupart

) Name: Christian Poupart

) Title: Head of Legal

) /s/ Pier-Olivier Calestagne

Name: Pier-Olivier Calestagne

Title: Senior Director M&A

EXECUTED as a deed by BOMBARDIER FINANCE INC.

acting by Christian Poupart and Pier-Olivier Calestagne under a power of attorney dated 30 October 2019

) /s/ Christian Poupart

) Name: Christian Poupart

) Title: Head of Legal

) /s/ Pier-Olivier Calestagne

Name: Pier-Olivier Calestagne

Title: Senior Director M&A

EXECUTED as a deed by BOMBARDIER SERVICES CORPORATION

acting by Christian Poupart and Pier-Olivier Calestagne under a power of attorney dated 30 October 2019

) /s/ Christian Poupart

) Name: Christian Poupart

) Title: Head of Legal

) /s/ Pier-Olivier Calestagne

Name: Pier-Olivier Calestagne

Title: Senior Director M&A

[Signature Page to SPA]

Executed as a deed by: SPIRIT AEROSYSTEMS GLOBAL HOLDINGS LIMITED

acting by: Sam J. Marnick

…………………………

name of authorised signatory

/s/ Sam J. Marnick

…………………………

Authorised signatory



in the presence of:
Witness name:	Kelly A. Gaide	) /s/ Kelly A. Gaide
Witness address:	XXXXX	) …………………………
	XXXXX	) Witness
	XXXXX	)
Witness occupation:	Attorney	)

Executed as a deed by: SPIRIT AEROSYSTEMS, INC.

acting by: Sam J. Marnick

…………………………

name of authorised signatory

/s/ Sam J. Marnick

…………………………

Authorised signatory



in the presence of:
Witness name:	Kelly A. Gaide	) /s/ Kelly A. Gaide
Witness address:	XXXXX	) …………………………
	XXXXX	) Witness
	XXXXX	)
Witness occupation:	Attorney	)

[Signature Page to SPA]


•	200,000,000 shares of class A common stock (“common stock”), par value $0.01 per share, and


•	10,000,000 shares of preferred stock, par value $0.01 per share.


2.1	“Account” means the brokerage account maintained on behalf of each participant by the Recordkeeper for the purpose of investing in Stock and engaging in other transactions permitted under the Plan.


2.2	“Affiliate” means a Subsidiary or other entity in which the Company has a direct or indirect controlling interest.


2.3	“Board of Directors” or “Board” means the board of directors of the Company.


2.4	“Committee” means the Compensation Committee of the Board of Directors or a subcommittee thereof or any other committee designated by the Board to administer this Plan. The Board may take any action under the Plan that would otherwise be the responsibility of the Committee.


2.5	“Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations issued thereunder and successor provisions and regulations thereto.


2.7	“Compensation” means base salary or other base pay, overtime, and shift differential pay paid during the calendar year before elective payroll deduction contributions to any employee benefit plan or program offered by the Company. The Committee may, in its discretion, establish a different definition of Compensation on a uniform and nondiscriminatory basis for any subsequent Offering Period.


2.8	“Designated Affiliate” means any Affiliate that is designated by the Committee to be eligible to participate in the portion of the Plan that is not subject to Code Section 423.


2.13	“Plan” means this Spirit AeroSystems Employee Stock Purchase Plan.


2.14	“Purchase Date” means the last Trading Day of each Offering Period.


2.15	“Purchase Price” means an amount equal to 95% of the Fair Market Value of a share of Stock on the Purchase Date. However, for any future Offering Period, the Committee will have the authority, in its discretion, to make either of the following changes in the Purchase Price for that Offering Period, so long as the change is uniform for all participants:


a.	The Purchase Price may be determined by reference to a higher or lower percentage of the Fair Market Value of a share of Stock, so long as the percentage is not lower than 85% and not higher than 100%.


b.	The Purchase Price may be a designated percentage (not lower than 85% or higher than 100%) of the Fair Market Value of a share of Stock, determined as of the first Trading Day of the Offering Period or the last Trading Day of the Offering Period, whichever is lower.


2.16	“Recordkeeper” means Computershare, or its successor, or such replacement recordkeeper as may be appointed or contracted to assist with the recordkeeping and administration of this Plan.


2.17	“Reserves” means the number of shares of Stock covered by all options under the Plan that have not yet been exercised and the number of shares of Stock which have been authorized for issuance under the Plan but which have not yet become subject to options.


2.18	“Stock” means the Company’s Class A common stock and such other securities as may be substituted (or resubstituted) for Stock pursuant to Section 10.6.


2.20	“Trading Day” means a day on which the New York Stock Exchange is open for trading.


3.3	Restrictions on Participation. Notwithstanding any provisions of the Plan to the contrary, no Employee will be granted an option to participate in the Plan to the extent that:


a.	Immediately after the grant, such Employee would own stock and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of the Company’s stock (determined under the rules of Section 424(d) of the Code); or


b.	The Employee’s rights to purchase Stock under the Plan would accrue at a rate that exceeds $25,000 in fair market value of the Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding.


c.	If a participant is not paid through the participant’s employer’s payroll (e.g., the participant is paid by a third party payroll vendor), the Committee or its delegate will establish such reasonable and uniform policies and procedures to facilitate contribution to an Account by any such participant wishing to participate with respect to an Offering Period.


5.2	Continuation of Payroll Deduction. A participant’s payroll deduction election will automatically remain in effect for successive Offering Periods, unless modified or terminated in accordance with the terms of the Plan.


6.1	Number of Option Shares. On the first day of each Offering Period, each Employee participating in such Offering Period will be granted an option to purchase, on the Purchase Date of such Offering Period at the applicable Purchase Price, as many shares (which may include a fractional share) as he or she will be able to purchase by dividing such Employee’s


6.3	Transferability of Option. During a participant’s lifetime, options held by such participant will be exercisable only by that participant.


a.	At or as promptly as practicable after the Purchase Date for an Offering Period, the Company will deliver the shares of Stock purchased to the Recordkeeper to be deposited in the participants’ Accounts.


8.1	Maximum Shares. The maximum number of shares of Stock that may be issued under the Plan is 1,000,000 shares of Stock, subject to adjustment upon changes in capitalization of the Company as provided in Section 10.6.


8.2	Share Usage. Shares of stock covered by an option that expires or remains unexercised after the latest date on which exercise may occur will again be available for option grants under the Plan.


8.3	Participant’s Interest in Option Stock. A participant will have no interest in Stock covered by the participant’s option until such option has been exercised.


9.3	Indemnification. Members of the Committee, and any officer or employee of the Company acting at the direction, or on behalf, of the Committee will not be personally liable for any action or determination taken or made in good faith with respect to the Plan and will, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.