[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q) This section provides key filing details for Spirit AeroSystems Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 2022 [Registrant Information](index=1&type=section&id=Registrant%20Information) Spirit AeroSystems Holdings, Inc. filed its Form 10-Q, detailing its corporate structure, NYSE listing under SPR, and status as a large accelerated filer - Spirit AeroSystems Holdings, Inc. is a Delaware corporation with headquarters in Wichita, Kansas[2](index=2&type=chunk) Class A Common Stock Listing | Title of each class | Trading symbol | Name of each exchange on which registered | | :------------------ | :------------- | :-------------------------------------- | | Class A common stock, par value $0.01 per share | SPR | New York Stock Exchange | - The registrant is a large accelerated filer and not a shell company[3](index=3&type=chunk) - As of July 20, 2022, **105,137,748 shares of Class A common stock** were outstanding[3](index=3&type=chunk) [PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2022 [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, operating costs, and net loss for the three and six months ended June 30, 2022 Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2022 ($ in millions) | Three Months Ended July 1, 2021 ($ in millions) | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | 1,257.9 | 1,002.1 | 2,432.6 | 1,902.9 | | Total operating costs and expenses | 1,362.6 | 1,099.8 | 2,579.5 | 2,126.5 | | Operating loss | (104.7) | (97.7) | (146.9) | (223.6) | | Net loss | (122.2) | (135.3) | (175.0) | (306.9) | | Basic Loss per share | (1.17) | (1.30) | (1.67) | (2.95) | | Diluted Loss per share | (1.17) | (1.30) | (1.67) | (2.95) | - Revenue increased by **$255.8 million (25.5%)** for the three months and **$529.7 million (27.8%)** for the six months ended June 30, 2022, year-over-year[10](index=10&type=chunk) - Net loss improved for both the three-month period (from **$135.3 million to $122.2 million**) and the six-month period (from **$306.9 million to $175.0 million**) year-over-year[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) This statement presents the net loss and other comprehensive income components, leading to total comprehensive loss Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) | Metric | Three Months Ended June 30, 2022 ($ in millions) | Three Months Ended July 1, 2021 ($ in millions) | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | (122.2) | (135.3) | (175.0) | (306.9) | | Total other comprehensive (loss) gain | (41.7) | (2.1) | (59.3) | 2.0 | | Total comprehensive loss | (163.9) | (137.4) | (234.3) | (304.9) | - Total comprehensive loss for the six months ended June 30, 2022, was **$234.3 million**, an improvement from **$304.9 million** in the prior year, despite a larger 'Total other comprehensive loss' in the current period[13](index=13&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity as of June 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets (Unaudited) | Asset/Liability/Equity | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :-------------------------------- | :---------------------------- | :-------------------------------- | | Cash and cash equivalents | 770.2 | 1,478.6 | | Total current assets | 3,211.6 | 3,806.0 | | Total assets | 6,989.3 | 7,737.3 | | Total current liabilities | 2,179.9 | 1,876.0 | | Long-term debt | 3,424.8 | 3,742.7 | | Total stockholders' equity | 225.4 | 448.3 | | Total liabilities and equity | 6,989.3 | 7,737.3 | - Cash and cash equivalents decreased significantly from **$1,478.6 million** at December 31, 2021, to **$770.2 million** at June 30, 2022[15](index=15&type=chunk) - Total stockholders' equity decreased from **$448.3 million to $225.4 million**, while total current liabilities increased from **$1,876.0 million to $2,179.9 million**[15](index=15&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details changes in stockholders' equity, including net losses, other comprehensive losses, and employee equity awards Changes in Stockholders' Equity (Unaudited) | Metric | Balance — December 31, 2021 ($ in millions) | Balance — June 30, 2022 ($ in millions) | | :-------------------------------- | :---------------------------------------- | :------------------------------------ | | Total Stockholders' Equity | 448.3 | 225.4 | | Net loss (Q1 2022) | (52.8) | (52.8) | | Net loss (Q2 2022) | (122.2) | (122.2) | | Other comprehensive loss (Q1 2022) | (17.6) | (17.6) | | Other comprehensive loss (Q2 2022) | (41.7) | (41.7) | | Employee equity awards (total) | 18.2 | 18.2 | | Dividends declared (total) | (2.2) | (2.2) | - Total stockholders' equity decreased from **$448.3 million** at December 31, 2021, to **$225.4 million** at June 30, 2022, primarily due to net losses and other comprehensive losses[17](index=17&type=chunk) - Cash dividends declared per common share were **$0.01** for the three months ended June 30, 2022 and July 1, 2021, and **$0.02** for the six months ended June 30, 2022 and July 1, 2021[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2022 Condensed Consolidated Statements of Cash Flows (Unaudited) | Activity | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :-------------------------------- | :--------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | (331.7) | (197.7) | | Net cash used in investing activities | (47.4) | (72.2) | | Net cash used in financing activities | (321.8) | (332.0) | | Net decrease in cash, cash equivalents, and restricted cash | (708.5) | (604.0) | | Cash, cash equivalents, and restricted cash, end of period | 789.9 | 1,289.1 | - Net cash used in operating activities increased to **$331.7 million** for the six months ended June 30, 2022, from **$197.7 million** in the prior year, primarily due to working capital growth associated with increased production[20](index=20&type=chunk)[256](index=256&type=chunk) - Net cash used in investing activities decreased to **$47.4 million** from **$72.2 million**, mainly due to the prior year acquisition of Applied Aerodynamics[20](index=20&type=chunk)[257](index=257&type=chunk) - Net cash used in financing activities slightly decreased to **$321.8 million** from **$332.0 million**, driven by differences in debt repayments[20](index=20&type=chunk)[258](index=258&type=chunk) [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization, Basis of Interim Presentation and Recent Developments](index=9&type=section&id=1.%20Organization,%20Basis%20of%20Interim%20Presentation%20and%20Recent%20Developments) This note details the company's business, interim financial statement basis, and recent developments including COVID-19 impacts and Russia sanctions - The Company provides manufacturing and design expertise for fuselage, propulsion, and wing products for aircraft OEMs and operators[25](index=25&type=chunk) - COVID-19 pandemic continues to have a significant negative impact on the aviation industry and the Company's business, with uncertain duration and recovery[31](index=31&type=chunk) - B737 MAX deliveries resumed in Q4 2020, with most regulators ungrounding the aircraft; China issued an airworthiness directive in December 2021[33](index=33&type=chunk) - Suspension of sanctioned activities relating to Russia resulted in a pre-tax loss of **$28.1 million** related to asset and liability adjustments in Q2 2022[34](index=34&type=chunk) [2. Adoption of New Accounting Standards](index=10&type=section&id=2.%20Adoption%20of%20New%20Accounting%20Standards) The company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes, with no material impact on its financial statements - Adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes, as of January 1, 2021, did not have a material impact on financial position or results of operations[35](index=35&type=chunk) [3. New Accounting Pronouncements](index=10&type=section&id=3.%20New%20Accounting%20Pronouncements) The company is evaluating ASU 2020-04 and preparing for ASU 2021-10, with no significant impact expected from the latter - The Company is evaluating ASU 2020-04, Reference Rate Reform, but has not yet applied its guidance to any contract modifications[36](index=36&type=chunk) - The Company is preparing for the initial application of ASU 2021-10, Government Assistance, for annual financial statements ending December 31, 2022, with no significant impact expected[37](index=37&type=chunk)[39](index=39&type=chunk) [4. Changes in Estimates](index=11&type=section&id=4.%20Changes%20in%20Estimates) Unfavorable changes in estimates totaled **$71.7 million** in Q2 2022, driven by forward loss charges and cumulative catch-up adjustments on key programs - Unfavorable changes in estimates totaled **$71.7 million** for Q2 2022, including **$63.7 million** in net forward loss charges and **$8.0 million** in unfavorable cumulative catch-up adjustments[41](index=41&type=chunk) - Forward losses in Q2 2022 were primarily due to increased cost estimates for B787 (production rate decreases, supply chain costs), A220 (supplier bankruptcy), and A350 (production schedule changes, labor, NRE/tooling costs)[42](index=42&type=chunk) - Unfavorable cumulative catch-up adjustments for Q2 2022 mainly related to B737 (production schedule changes, parts shortages, supply chain costs) and A320 (production cost overruns, material/freight/labor/overhead increases)[43](index=43&type=chunk) Changes in Estimates Summary | Changes in Estimates | For the Three Months Ended June 30, 2022 ($ in millions) | For the Three Months Ended July 1, 2021 ($ in millions) | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------------ | :------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Total (Unfavorable) Favorable Cumulative Catch-up Adjustment | (8.0) | 9.9 | (24.4) | 0.1 | | Total Changes in Estimates (Forward Loss) on Loss Programs | (63.7) | (52.2) | (87.5) | (124.6) | | Total Change in Estimate | (71.7) | (42.3) | (111.9) | (124.5) | | EPS Impact (diluted per share) | (0.63) | (0.42) | (0.98) | (1.22) | [5. Accounts Receivable and Allowance for Credit Losses](index=12&type=section&id=5.%20Accounts%20Receivable%20and%20Allowance%20for%20Credit%20Losses) Accounts receivable, net, increased to **$581.3 million**, with **$1,309.6 million** monetized through sales arrangements with major customers Accounts Receivable, net | Metric | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :------------------------ | :---------------------------- | :-------------------------------- | | Trade receivables | 565.2 | 412.0 | | Other | 27.0 | 58.1 | | Less: allowance for credit losses | (10.9) | (8.5) | | Accounts receivable, net | 581.3 | 461.6 | - For the six months ended June 30, 2022, **$1,309.6 million** of accounts receivable were sold via arrangements with Boeing, Airbus, and Rolls-Royce, included in cash from operating activities[50](index=50&type=chunk) - The recorded net loss on sale of receivables was **$6.5 million** for the six months ended June 30, 2022[50](index=50&type=chunk) [6. Contract Assets and Contract Liabilities](index=13&type=section&id=6.%20Contract%20Assets%20and%20Contract%20Liabilities) Net contract assets increased to **$123.2 million**, reflecting higher over-time revenue recognition and decreased deferred revenues Net Contract Assets (Liabilities) | Metric | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | Change ($ in millions) | | :------------------------ | :---------------------------- | :-------------------------------- | :--------------------- | | Contract assets | 483.6 | 443.2 | 40.4 | | Contract liabilities | (360.4) | (387.0) | 26.6 | | Net contract assets (liabilities) | 123.2 | 56.2 | 67.0 | - The increase in contract assets reflects more over-time revenue recognition in relation to billed revenues[54](index=54&type=chunk) - The decrease in contract liabilities reflects less deferred revenues recorded in excess of revenue recognized[54](index=54&type=chunk) [7. Revenue Disaggregation and Outstanding Performance Obligations](index=14&type=section&id=7.%20Revenue%20Disaggregation%20and%20Outstanding%20Performance%20Obligations) Total revenue for the six months was **$2,432.6 million**, with significant unsatisfied performance obligations for 2022 and beyond Disaggregated Revenue by Satisfaction Method | Revenue Type | For the Three Months Ended June 30, 2022 ($ in millions) | For the Three Months Ended July 1, 2021 ($ in millions) | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Contracts with performance obligations satisfied over time | 933.0 | 763.2 | 1,762.7 | 1,412.4 | | Contracts with performance obligations satisfied at a point in time | 324.9 | 238.9 | 669.9 | 490.5 | | Total Revenue | 1,257.9 | 1,002.1 | 2,432.6 | 1,902.9 | Disaggregated Revenue by Major Customer | Customer | For the Three Months Ended June 30, 2022 ($ in millions) | For the Three Months Ended July 1, 2021 ($ in millions) | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :--------- | :------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Boeing | 762.2 | 561.8 | 1,409.4 | 1,029.7 | | Airbus | 281.1 | 244.6 | 585.0 | 476.2 | | Other | 214.6 | 195.7 | 438.2 | 397.0 | | Total Revenue | 1,257.9 | 1,002.1 | 2,432.6 | 1,902.9 | Unsatisfied Performance Obligations | Year | Unsatisfied performance obligations ($ in millions) | | :---------------- | :---------------------------------------- | | Remaining in 2022 | 2,119.3 | | 2023 | 4,237.6 | | 2024 | 4,062.5 | | 2025 and After | 708.8 | [8. Inventory](index=15&type=section&id=8.%20Inventory) Total inventory, net, decreased slightly to **$1,345.8 million**, with increased valuation reserves partly due to Russia sanctions Inventory, net | Inventory Component | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :------------------------ | :---------------------------- | :-------------------------------- | | Raw materials | 323.0 | 301.4 | | Work-in-process | 937.3 | 999.1 | | Finished goods | 60.9 | 56.9 | | Product inventory | 1,321.2 | 1,357.4 | | Capitalized pre-production | 24.6 | 25.2 | | Total inventory, net | 1,345.8 | 1,382.6 | - Product inventory is net of valuation reserves of **$87.2 million** at June 30, 2022, an increase from **$54.9 million** at December 31, 2021, partly due to impacts from the suspension of activities in Russia[63](index=63&type=chunk) - Cost of sales for the six months ended June 30, 2022, includes **$94.7 million** for excess capacity production costs and **$9.5 million** for abnormal costs related to temporary workforce adjustments[64](index=64&type=chunk) [9. Property, Plant and Equipment, net](index=16&type=section&id=9.%20Property,%20Plant%20and%20Equipment,%20net) Property, plant and equipment, net, decreased to **$2,260.9 million**, with **$71.3 million** in repair and maintenance costs incurred Property, Plant and Equipment, net | Asset Category | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :-------------------------- | :---------------------------- | :-------------------------------- | | Total | 5,061.2 | 5,040.4 | | Less: accumulated depreciation | (2,800.3) | (2,654.9) | | Property, plant and equipment, net | 2,260.9 | 2,385.5 | - Repair and maintenance costs were **$71.3 million** for the six months ended June 30, 2022[66](index=66&type=chunk) - Depreciation expense related to capitalized software was **$11.5 million** for the six months ended June 30, 2022[67](index=67&type=chunk) [10. Leases](index=16&type=section&id=10.%20Leases) The company reported total net lease cost of **$26.2 million**, with remaining lease liabilities of **$81.5 million** for operating and **$145.4 million** for finance leases Components of Lease Expense | Lease Cost Component | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :-------------------------- | :------------------------------------------------------- | :------------------------------------------------------ | | Operating lease cost | 6.6 | 5.0 | | Finance lease cost: Amortization of assets | 16.3 | 12.4 | | Finance lease cost: Interest on lease liabilities | 3.3 | 3.5 | | Total net lease cost | 26.2 | 20.9 | - Weighted average remaining lease term as of June 30, 2022, was **35.1 years** for operating leases and **4.6 years** for finance leases[77](index=77&type=chunk) Remaining Maturities of Lease Liabilities (as of June 30, 2022) | Lease Type | Total Lease Payments ($ in millions) | Less: Imputed Interest ($ in millions) | Total Lease Obligations ($ in millions) | | :--------------- | :----------------------------------- | :------------------------------------- | :------------------------------------ | | Operating Leases | 204.0 | (122.5) | 81.5 | | Financing Leases | 161.7 | (16.3) | 145.4 | [11. Other Assets, Goodwill, and Intangible Assets](index=18&type=section&id=11.%20Other%20Assets,%20Goodwill,%20and%20Intangible%20Assets) Other current assets decreased to **$31.4 million**, while goodwill remained stable and intangible assets, net, decreased to **$205.0 million** Other Current Assets | Asset Category | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :-------------------- | :---------------------------- | :-------------------------------- | | Prepaid expenses | 24.6 | 20.7 | | Income tax receivable | 1.0 | 14.0 | | Other assets - short-term | 5.8 | 5.0 | | Total other current assets | 31.4 | 39.7 | Goodwill by Segment (as of June 30, 2022) | Segment | Balance at December 31, 2021 ($ in millions) | Currency Exchange Adjustments/Other ($ in millions) | Balance at June 30, 2022 ($ in millions) | | :-------------- | :----------------------------------------- | :------------------------------------------------ | :--------------------------------------- | | Commercial | 296.8 | (0.3) | 296.5 | | Defense & Space | 5.5 | — | 5.5 | | Aftermarket | 321.4 | — | 321.4 | | Total | 623.7 | (0.3) | 623.4 | Intangible Assets, net | Intangible Asset | June 30, 2022 ($ in millions) | December 31, 2021 ($ in millions) | | :------------------------------------ | :---------------------------- | :-------------------------------- | | Total intangible assets | 232.0 | 232.0 | | Less: Accumulated amortization | (27.0) | (19.7) | | Intangible assets, net | 205.0 | 212.3 | - The weighted average amortization period for intangible assets is **14.8 years** as of June 30, 2022[83](index=83&type=chunk) [12. Advance Payments](index=20&type=section&id=12.%20Advance%20Payments) Outstanding advance payments from Boeing for B787 and B737 programs totaled **$211.2 million** and **$61.5 million**, respectively - Advance payments from Boeing for the B787 program not yet repaid totaled approximately **$211.2 million** as of June 30, 2022[86](index=86&type=chunk) - Advance payments from Boeing for the B737 program not yet repaid totaled **$61.5 million** as of June 30, 2022, after a **$61.5 million** repayment during the six-month period[87](index=87&type=chunk) - Advance payments, short-term, include **$18.9 million** related to an Aftermarket segment customer, impacted by sanctions on Russia[88](index=88&type=chunk) [13. Fair Value Measurements](index=20&type=section&id=13.%20Fair%20Value%20Measurements) Long-term debt had a carrying amount of **$3,571.7 million** and an estimated fair value of **$3,205.2 million** as of June 30, 2022 Carrying Amount and Estimated Fair Value of Long-Term Debt | Debt Type | June 30, 2022 Carrying Amount ($ in millions) | June 30, 2022 Fair Value ($ in millions) | December 31, 2021 Carrying Amount ($ in millions) | December 31, 2021 Fair Value ($ in millions) | | :------------------------------------ | :------------------------------------------ | :--------------------------------------- | :------------------------------------------ | :--------------------------------------- | | Senior secured term loan B | 592.8 | 578.0 | 595.2 | 595.2 | | Senior notes due 2023 | 299.5 | 281.1 | 299.3 | 303.6 | | Senior secured first lien notes due 2025 | 496.0 | 461.5 | 495.3 | 513.3 | | Senior secured second lien notes due 2025 | 1,189.2 | 1,110.2 | 1,187.5 | 1,252.4 | | Senior notes due 2026 | 298.6 | 255.7 | 298.4 | 307.5 | | Senior notes due 2028 | 695.6 | 518.7 | 695.2 | 697.4 | | Total | 3,571.7 | 3,205.2 | 3,570.9 | 3,669.4 | - Senior notes are classified as Level 1 Fair Value hierarchy, while the senior secured term loan B is Level 2[92](index=92&type=chunk) [14. Derivative and Hedging Activities](index=21&type=section&id=14.%20Derivative%20and%20Hedging%20Activities) The company uses foreign currency forward contracts as cash flow hedges, recognizing a **$17.0 million** loss in AOCI for the six months - The Company uses foreign currency forward contracts as cash flow hedges to reduce foreign currency exposure for forecasted British Pound Sterling disbursements through March 2023[96](index=96&type=chunk) Gain (Loss) Recognized in AOCI from Hedging Transactions | Metric | Three Months Ended June 30, 2022 ($ in millions) | Three Months Ended July 1, 2021 ($ in millions) | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :-------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Foreign currency exchange contracts | (13.1) | (0.5) | (17.0) | 0.7 | - Within the next 12 months, the Company expects to recognize a loss of **$13.3 million** in earnings related to foreign currency forward contracts[98](index=98&type=chunk) - For the six months ended June 30, 2022, the Company recorded a net gain of **$1.6 million** to other income from settled non-hedged foreign currency forward contracts[101](index=101&type=chunk) [15. Debt](index=23&type=section&id=15.%20Debt) Total debt was **$3,772.5 million** at June 30, 2022, including a senior secured term loan and various senior notes, with all debt covenants in compliance Total Debt (as of June 30, 2022) | Debt Type | Current ($ in millions) | Noncurrent ($ in millions) | | :-------------------------------- | :---------------------- | :------------------------- | | Senior secured term loan B | 5.9 | 586.9 | | Senior notes due 2023 | 299.5 | — | | Senior secured first lien notes due 2025 | — | 496.0 | | Senior secured second lien notes due 2025 | — | 1,189.2 | | Senior notes due 2026 | — | 298.6 | | Senior notes due 2028 | — | 695.6 | | Present value of finance lease obligations | 40.7 | 104.7 | | Other | 1.6 | 53.8 | | Total | 347.7 | 3,424.8 | - As of June 30, 2022, the outstanding balance of the Credit Agreement (Term Loan B) was **$595.5 million**, with a carrying value of **$592.8 million**[105](index=105&type=chunk) - The Company was in compliance with all covenants in the Credit Agreement and indentures governing its notes as of June 30, 2022[106](index=106&type=chunk)[116](index=116&type=chunk) [16. Pension and Other Post-Retirement Benefits](index=25&type=section&id=16.%20Pension%20and%20Other%20Post-Retirement%20Benefits) The company reported net periodic pension income of **$39.3 million**, with a **$70.3 million** pension reversion asset recorded after PVP B plan termination Components of Net Periodic Pension Expense (Income) | Metric | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :------------------------------------------------------- | :------------------------------------------------------ | | Service cost | 1.2 | 21.7 | | Interest cost | 29.1 | 27.5 | | Expected return on plan assets | (70.3) | (79.0) | | Amortization of net loss | 2.1 | — | | Settlement loss | (1.4) | (0.1) | | Net periodic pension expense (income) | (39.3) | (29.9) | - A pension reversion asset of **$70.3 million** is recorded on the Restricted plan assets line item as of June 30, 2022, following the PVP B plan termination[119](index=119&type=chunk) - The Company withdrew **$34.0 million** cash from PVP B as an excess plan assets reversion, resulting in an excise tax of **$6.8 million** recorded in Other income (expense), net[120](index=120&type=chunk) [17. Stock Compensation](index=26&type=section&id=17.%20Stock%20Compensation) The company recognized **$18.3 million** in stock compensation expense for the six months, including various RSU grants - The Company recognized a net total of **$18.3 million** of stock compensation expense for the six months ended June 30, 2022[124](index=124&type=chunk) - During the six months ended June 30, 2022, **500,053 time or service-based RSUs** were granted with aggregate fair values of **$22.5 million**[125](index=125&type=chunk) - During the six months ended June 30, 2022, **284,653 performance-based RSUs (PBRSUs)** were granted with aggregate grant date fair value of **$22.0 million**[126](index=126&type=chunk) [18. Income Taxes](index=27&type=section&id=18.%20Income%20Taxes) An incremental valuation allowance of **$43.5 million** was recorded against U.S. deferred tax assets, resulting in a **7.67%** effective tax rate - An incremental valuation allowance of **$43.5 million** was recorded against U.S. deferred tax assets for the six months ended June 30, 2022, with the total net U.S. valuation allowance reaching **$339.7 million**[133](index=133&type=chunk) - Increases in valuation allowances against U.K. deferred tax assets totaled **$4.3 million** for the six months ended June 30, 2022[134](index=134&type=chunk) - The effective tax rate for the six months ended June 30, 2022, was **7.67%**, compared to **(2.44%)** for the same period in 2021, primarily due to the release of valuation allowance on U.K. deferred tax assets for projected U.K. group relief[137](index=137&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) [19. Equity](index=28&type=section&id=19.%20Equity) Basic and diluted loss per share improved to **$1.67**, while accumulated other comprehensive loss increased to **$83.0 million** Loss Per Share | Metric | For the Three Months Ended June 30, 2022 | For the Three Months Ended July 1, 2021 | For the Six Months Ended June 30, 2022 | For the Six Months Ended July 1, 2021 | | :-------------------------------- | :--------------------------------------- | :-------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Basic Loss per share | (1.17) | (1.30) | (1.67) | (2.95) | | Diluted Loss per share | (1.17) | (1.30) | (1.67) | (2.95) | - The total authorization amount remaining under the current share repurchase program is approximately **$925.0 million**, but share repurchases are currently on hold due to Credit Agreement restrictions[144](index=144&type=chunk) Accumulated Other Comprehensive Loss | Component | As of June 30, 2022 ($ in millions) | As of December 31, 2021 ($ in millions) | | :------------------------------------ | :---------------------------------- | :------------------------------------ | | Pension | 30.0 | 26.6 | | SERP/Retiree medical | 11.3 | 12.1 | | Derivatives - foreign currency hedge | (13.3) | (2.0) | | Foreign currency impact on long-term intercompany loan | (16.2) | (12.2) | | Currency translation adjustment | (94.8) | (48.2) | | Total accumulated other comprehensive loss | (83.0) | (23.7) | [20. Commitments, Contingencies and Guarantees](index=29&type=section&id=20.%20Commitments,%20Contingencies%20and%20Guarantees) The company faces ongoing legal proceedings, including appeals of dismissed lawsuits and a **$44.8 million** liability for a former CEO's ruling - A consolidated securities class action lawsuit and shareholder derivative lawsuits were dismissed by the U.S. District Court on January 7, 2022, but the decision was appealed to the Tenth Circuit Court of Appeals on February 4, 2022[154](index=154&type=chunk) - A liability of **$44.8 million** plus accrued interest has been recognized for a court ruling in favor of a former Chief Executive Officer regarding withheld benefits, which is currently under appeal[155](index=155&type=chunk) - The Company cannot reasonably estimate the amount of potential claims related to B787 rework or a new product quality claim received on June 25, 2022, due to uncertainties[159](index=159&type=chunk)[160](index=160&type=chunk) Service Warranty and Extraordinary Rework Balance Roll Forward | Metric | Amount ($ in millions) | | :-------------------------- | :--------------------- | | Balance, December 31, 2021 | 71.3 | | Charges to costs and expenses | 0.8 | | Payouts | (1.7) | | Exchange rate | (0.6) | | Balance, June 30, 2022 | 69.8 | [21. Other Income (Expense), Net](index=32&type=section&id=21.%20Other%20Income%20(Expense),%20Net) Other income, net, increased to **$72.3 million**, driven by a **$20.7 million** gain on a repayable investment agreement and foreign currency gains Other Income (Expense), Net | Item | For the Three Months Ended June 30, 2022 ($ in millions) | For the Three Months Ended July 1, 2021 ($ in millions) | For the Six Months Ended June 30, 2022 ($ in millions) | For the Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Kansas Development Finance Authority bond | 0.7 | 0.7 | 1.3 | 1.6 | | Foreign currency (losses) gains | 12.3 | 1.4 | 27.2 | (7.5) | | Loss on foreign currency forward contract | (4.7) | — | (4.0) | — | | Loss on sale of accounts receivable | (4.1) | (1.4) | (6.5) | (3.0) | | Pension income | 17.9 | 26.4 | 41.3 | 52.5 | | Excise tax on pension assets reversion | (6.8) | — | (6.8) | — | | Other | 19.3 | 4.0 | 19.8 | 0.3 | | Total | 34.6 | 31.1 | 72.3 | 43.9 | - The six months ended June 30, 2022, includes a **$20.7 million** gain related to the full settlement of the repayable investment agreement with the U.K.'s Department for Business, Energy and Industrial Strategy[173](index=173&type=chunk) [22. Segment Information](index=32&type=section&id=22.%20Segment%20Information) Commercial segment revenues increased by **31%** to **$1,969.5 million**, with improved operating loss, while other segments maintained profitability - Approximately **82%** of net revenues for the six months ended June 30, 2022, came from Boeing and Airbus[174](index=174&type=chunk) Segment Revenues and Operating Income (Loss) | Segment | Three Months Ended June 30, 2022 ($ in millions) | Three Months Ended July 1, 2021 ($ in millions) | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :---------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | **Segment Revenues** | | | | | | Commercial | 1,031.1 | 803.6 | 1,969.5 | 1,499.7 | | Defense & Space | 146.4 | 141.8 | 304.9 | 295.2 | | Aftermarket | 80.4 | 56.7 | 158.2 | 108.0 | | **Segment Operating Income (Loss)** | | | | | | Commercial | (45.1) | (44.7) | (48.5) | (127.6) | | Defense & Space | 13.7 | 12.4 | 33.7 | 24.4 | | Aftermarket | 11.8 | 14.8 | 29.8 | 25.6 | | Total operating loss | (104.7) | (97.7) | (146.9) | (223.6) | - Commercial segment operating margins improved from **(9%) to (2%)** for the six months ended June 30, 2022, driven by lower excess capacity and restructuring costs, and increased B737 program sales[244](index=244&type=chunk) - Defense & Space segment operating margins increased from **8% to 11%** for the six months ended June 30, 2022, due to lower excess capacity, restructuring costs, and the AMJP grant[246](index=246&type=chunk) [23. Restructuring Costs](index=35&type=section&id=23.%20Restructuring%20Costs) Restructuring costs significantly decreased to **$0.2 million** for the six months, reflecting reduced cost-alignment activities - Total restructuring costs for the six months ended June 30, 2022, were **$0.2 million**, included in the Commercial Segment[189](index=189&type=chunk) - For the six months ended July 1, 2021, total restructuring costs were **$7.3 million**, primarily due to site closures[190](index=190&type=chunk) [24. Subsequent Events](index=35&type=section&id=24.%20Subsequent%20Events) The company plans to terminate Pension Value Plan A, expecting a **$74 million** non-cash charge and at least **$180 million** in settlement charges - In July 2022, the Company adopted a plan to terminate its Pension Value Plan A (PVP A)[191](index=191&type=chunk) - The Company expects to recognize a non-cash, pre-tax non-operating charge of approximately **$74 million** for increased periodic benefit costs in Q3 2022[191](index=191&type=chunk) - Non-cash pre-tax non-operating settlement charges of at least **$180 million** are expected due to accelerated recognition of actuarial losses, with finalization between Q3 2022 and Q1 2023[191](index=191&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses financial condition, results of operations, and impacts of COVID-19 and global events on key programs [COVID-19](index=36&type=section&id=COVID-19) The COVID-19 pandemic continues to significantly impact the aviation industry and the company's global business - The COVID-19 pandemic continues to significantly negatively impact the aviation industry, customers, and the Company's global business[194](index=194&type=chunk) - The Company cannot accurately predict the future impact of COVID-19, expecting business operations to improve only when customers produce aircraft at sufficient levels, dependent on public air travel willingness, OEM orders, and airline financial resources[194](index=194&type=chunk) [Global Economic Events](index=36&type=section&id=Global%20Economic%20Events) The Russian invasion of Ukraine and associated sanctions led to a **$28.1 million** pre-tax loss in Q2 2022 - The Russian invasion of Ukraine and associated U.S. sanctions led to the suspension of sanctioned activities relating to Russia, resulting in an aggregate pre-tax loss of **$28.1 million** in Q2 2022[195](index=195&type=chunk) - Prospective impacts to revenues, net income, net assets, and cash flow from operations are not material, but a significant expansion of economic disruption or conflict escalation could have a material adverse effect[195](index=195&type=chunk) [B737 Program](index=36&type=section&id=B737%20Program) The B737 MAX program is critical, generating approximately **35%** of net revenues in 2021, but faces ongoing demand challenges - The B737 MAX program is critical, generating approximately **35%** of net revenues in 2021[196](index=196&type=chunk) - Boeing's deliveries of the B737 MAX resumed in Q4 2020, with most international regulators ungrounding the aircraft; China issued an airworthiness directive in December 2021[197](index=197&type=chunk) - Ongoing demand challenges from the B737 MAX grounding are exacerbated by the COVID-19 pandemic, with narrowbody production rates expected to recover before widebody rates[198](index=198&type=chunk)[199](index=199&type=chunk) - Failure to achieve FAA certification for 737 MAX 7 and MAX 10 models or inconsistent entry into service could adversely impact future revenues, earnings, and cash flows[200](index=200&type=chunk) [B787 Program](index=37&type=section&id=B787%20Program) The B787 program incurred additional forward losses of **$30.9 million** and **$44.3 million** for the three and six months, respectively - For the three and six months ended June 30, 2022, the B787 program incurred additional forward losses of **$30.9 million** and **$44.3 million**, respectively, due to production rate decreases, build schedule changes, supply chain costs, and rework costs[201](index=201&type=chunk) - Changes to the scope of quality issues, rework, production rates, cost assessments, or claims could lead to further incremental forward loss charges[201](index=201&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes the company's revenue, gross profit, operating loss, and net loss, along with comparative shipset deliveries Operating Data Summary | Metric | Three Months Ended June 30, 2022 ($ in millions) | Three Months Ended July 1, 2021 ($ in millions) | Six Months Ended June 30, 2022 ($ in millions) | Six Months Ended July 1, 2021 ($ in millions) | | :------------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | 1,257.9 | 1,002.1 | 2,432.6 | 1,902.9 | | Gross profit (loss) | (19.6) | (12.3) | 15.2 | (70.3) | | Operating loss | (104.7) | (97.7) | (146.9) | (223.6) | | Net loss | (122.2) | (135.3) | (175.0) | (306.9) | Comparative Shipset Deliveries by Model | Model | Three Months Ended June 30, 2022 | Three Months Ended July 1, 2021 | Six Months Ended June 30, 2022 | Six Months Ended July 1, 2021 | | :------------------------ | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | B737 | 71 | 35 | 131 | 64 | | Total Boeing | 89 | 63 | 166 | 123 | | A220 | 16 | 15 | 34 | 27 | | A320 Family | 147 | 96 | 302 | 226 | | Total Airbus | 180 | 126 | 374 | 285 | | Total Business and Regional Jets | 49 | 46 | 99 | 89 | | Total | 318 | 235 | 639 | 497 | - Net revenue for the three months ended June 30, 2022, increased by **$255.8 million (25.5%)** to **$1,257.9 million**, primarily due to increased B737 production[211](index=211&type=chunk) - Gross loss for the three months ended June 30, 2022, was **($19.6) million**, an increase in loss from **($12.3) million** in the prior year, impacted by a **$28.1 million** charge related to Russia sanctions and unfavorable cumulative catch-up adjustments and forward loss charges[213](index=213&type=chunk) - Operating loss for the six months ended June 30, 2022, improved by **$76.7 million** to **($146.9) million**, compared to **($223.6) million** in the prior year, reflecting increased gross profit and changes in operating expenses[235](index=235&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section reviews the company's debt, cash position, and significant cash flow activities, including asset sales and grants - As of June 30, 2022, total debt was **$3,772.5 million**, and cash and cash equivalents decreased by **$708.4 million** to **$770.2 million** from December 31, 2021[249](index=249&type=chunk) - The company settled a repayable investment agreement with the U.K.'s Department for Business, Energy and Industrial Strategy in April 2022 with a payment of **$292.8 million**[250](index=250&type=chunk) - The company received the full **$75.5 million** grant from the Aviation Manufacturing Jobs Protection Program as of June 30, 2022[251](index=251&type=chunk) - For the six months ended June 30, 2022, **$1,309.6 million** of accounts receivable were sold via factoring arrangements with Boeing, Airbus, and Rolls-Royce[253](index=253&type=chunk) - The balance of payables to suppliers participating in the supply chain financing program increased to **$95.7 million** as of June 30, 2022, from **$55.5 million** as of July 1, 2021[276](index=276&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks, primarily interest rate fluctuations, with no material changes since its 2021 Form 10-K - The Company is exposed to market risks, including fluctuations in interest rates on its variable rate debt[286](index=286&type=chunk) - There have been no material changes in the Company's market risk from the information provided in its 2021 Form 10-K[286](index=286&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The President and CEO and Senior VP and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[287](index=287&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[288](index=288&type=chunk) [PART II — OTHER INFORMATION](index=54&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings and exhibits [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 20 of the condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 20, Commitments, Contingencies and Guarantees, in the condensed consolidated financial statements[291](index=291&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors described in the company's 2021 Form 10-K - There have been no material changes from the risk factors described in the Company's 2021 Form 10-K[292](index=292&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No purchases were made under the share repurchase program, but **30,869 shares** were transferred for tax withholding Issuer Purchases of Equity Securities (Three Months Ended June 30, 2022) | Period | 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 ($ in millions) | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------- | | April 1, 2022 - May 5, 2022 | 19,549 | $48.69 | — | $925.0 | | May 6, 2022 - June 2, 2022 | 9,322 | $29.40 | — | $925.0 | | June 3, 2022 - June 30, 2022 | 1,998 | $29.09 | — | $925.0 | | Total | 30,869 | $43.69 | — | $925.0 | - **30,869 shares** were transferred from employees to satisfy tax withholding obligations associated with the vesting of restricted stock awards[296](index=296&type=chunk) - No purchases were made under the Board-approved share repurchase program, which has **$925.0 million** remaining authorization but is currently on hold due to Credit Agreement restrictions[296](index=296&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[296](index=296&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[297](index=297&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) No other information to report under this item - No other information to report[297](index=297&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including bylaws, employment agreements, and certifications Key Exhibits Filed | Exhibit Number | Exhibit | Incorporated by Reference to the Following Documents | | :------------- | :------------------------------------------------ | :--------------------------------------------------- | | 3.1 | Ninth Amended and Restated Bylaws of Spirit AeroSystems Holdings, Inc. | Current Report on Form 8-K (File No. 001-33160), filed July 13, 2022, Exhibit 3.1 | | † 10.1 | Employment Agreement, dated September 12, 2013, between Spirit AeroSystems, Inc. and Kevin Matthies | * | | 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | * | | 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | * | | 32.1** | Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ** | | 32.2** | Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ** | | 101.INS* | Inline XBRL Instance Document | * | | 104 | Cover Page Interactive Data File | | [Signatures](index=57&type=section&id=Signatures) The report was signed by the Senior Vice President and CFO and Vice President, Corporate Controller on August 3, 2022 - The report was signed by Mark J. Suchinski, Senior Vice President and Chief Financial Officer, and Damon Ward, Vice President, Corporate Controller, on August 3, 2022[303](index=303&type=chunk)

First Quarter 2022 Earnings Review Tom Gentile President and Chief Executive Officer Sam Marnick Executive Vice President & Chief Operating Officer; President of Commercial Mark Suchinski Senior Vice President and Chief Financial Officer May 4, 2022 Recent Events U.S. Air Force photo by Senior Airman Tessa B. Corrick Reached agreement with U.K. Government to settle the repayable investment agreement Completed new pay agreements for more than 2,000 union employees in Belfast Launched engineering collaboratio ...

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) Q1 2022 Earnings Conference Call May 4, 2022 11:00 AM ET Company Participants Aaron Hunt - Director of IR, Senior Leader of Sales & Marketing Tom Gentile - President and CEO Sam Marnick - President of Commercial Division & COO Mark Suchinski - SVP & CFO Conference Call Participants Robert Spingarn - Credit Suisse Seth Seifman - JPMorgan Ken Herbert - RBC Capital Markets David Strauss - Barclays Sheila Kahyaoglu - Jefferies Doug Harned - Bernstein George Shap ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 Or ☐ 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) (State or other ...

Revenue Generation - For the year ended December 31, 2021, approximately 35% of the company's net revenues were generated from sales of components to Boeing for the B737 aircraft, compared to 19% in 2020 and 53% in 2019[246]. - Approximately 80% of the company's net revenues in 2021 came from its two largest customers, Boeing and Airbus[278]. - Net revenues from direct sales to non-U.S. customers were approximately $1,130.8 million in 2021, representing 29% of total net revenues, up from 23% in 2020[363]. - For the twelve months ended December 31, 2021, Spirit AeroSystems reported net revenues of $3,953.0 million, an increase of 16.1% compared to $3,404.8 million in 2020[397]. - Commercial segment net revenues for the twelve months ended December 31, 2021 were $3,128.1 million, an increase of $416.8 million or 15.4% compared to the prior year[291]. - Defense & Space segment net revenues for the twelve months ended December 31, 2021 were $585.0 million, an increase of $93.7 million or 19.1% compared to the prior year[292]. - Aftermarket segment net revenues for the twelve months ended December 31, 2021 were $239.9 million, an increase of $37.7 million or 18.6% compared to the prior year[293]. Financial Performance - The company’s net loss for the twelve months ended December 31, 2021, was $540.8 million, compared to a net loss of $870.3 million in the prior year[272]. - The company’s operating loss for the twelve months ended December 31, 2021, was $459.2 million, compared to an operating loss of $812.8 million in the prior year[272]. - Gross loss profit for the twelve months ended December 31, 2021 was ($117.8) million, an improvement of $322.9 million compared to ($440.7) million for the same period in the prior year[280]. - Total comprehensive loss income for 2021 was $410.4 million, compared to a comprehensive loss of $915.2 million in 2020, indicating a significant reduction in overall losses[399]. - Basic and diluted loss per share for 2021 was $5.19, an improvement from a loss of $8.38 per share in 2020[397]. Cash Flow and Liquidity - The net cash outflow from operating activities for 2021 was $63.2 million, a decrease of $681.7 million compared to a net cash outflow of $744.9 million in 2020, primarily due to improved cash flows from operating income and working capital[344]. - The company had a net cash outflow of $163.8 million from investing activities in 2021, significantly reduced from a net cash outflow of $502.0 million in 2020, mainly due to the prior year's Bombardier acquisition[345]. - Financing activities resulted in a net cash outflow of $163.5 million in 2021, a change of $933 million compared to a net cash inflow of $769.5 million in 2020, influenced by debt redemptions and refinancing[346]. - The company anticipates sufficient liquidity to meet operating and financing needs for at least the next 12 months[412]. - The company expects future cash needs to include working capital, R&D, capital expenditures, and potential M&A activities, with significant capital required for new programs and increased production rates[350]. Debt and Financing - As of December 31, 2021, the company had a debt balance of approximately $3,792.2 million, with more than 50% being secured debt, and a cash balance of $1,478.6 million[309]. - The Amended Credit Agreement as of December 31, 2021 had an outstanding balance of $598.5 million, with customary covenants restricting additional indebtedness and other financial activities[315]. - The company was in compliance with all covenants contained in the indentures governing its outstanding debt as of December 31, 2021[334]. - The company has agreements to sell certain trade accounts receivable balances with Boeing, Airbus, and Rolls-Royce, allowing for monetization of receivables prior to payment[336]. Operational Challenges - The company expects ongoing demand challenges from the B737 MAX grounding to continue to be exacerbated by the COVID-19 pandemic[247]. - The company delivered 162 B737 MAX shipsets in 2021, a decrease from 606 shipsets in 2019, indicating ongoing production challenges[354]. - The company has implemented mandatory vaccination rules for all U.S. employees to comply with federal requirements, which may impact labor availability[244]. Program-Specific Financials - The B787 program incurred incremental forward loss charges of $46.4 million in Q2 2021 and $45.5 million in Q3 2021 due to reduced production volumes[249][250]. - The A350 program recorded forward loss charges of $55.2 million for the year ended December 31, 2021, driven by customer-driven production rate changes and quality-related costs[253]. - The company recognized an unfavorable change in estimates of $246.5 million during the twelve months ended December 31, 2021, primarily due to reduced production volumes on the B787 and A350 programs[277]. Pension and Employee Benefits - The company made contributions of $154.7 million to improve the funded status of the Belfast defined benefit plans during 2021, including a one-time special contribution of $137.6 million to the Shorts Pension plan[263]. - The projected benefit obligation would decrease by $163.4 million or increase by $173.9 million if the discount rate changed by 25 basis points[265]. Organizational Changes - The new organizational structure, effective October 1, 2021, includes three primary segments: Commercial, Defense & Space, and Aftermarket[240]. - The Commercial, Defense & Space, and Aftermarket segments represented approximately 79%, 15%, and 6% of net revenues for the twelve months ended December 31, 2021, respectively[290]. Market Conditions - The company anticipates that domestic air travel demand will improve in the near term, while international air travel demand will continue to lag behind[247]. - The company’s financial results are heavily dependent on global commercial aviation demand, which has been impacted by COVID-19[411].

Financial Performance - Full-year 2021 revenue increased by 16% to $3953 million from $3405 million in 2020[7] - The company's GAAP diluted loss per share for 2021 was $(5.19), while the adjusted diluted loss per share was $(3.46)[11] - Free cash flow for 2021 was $(214) million, an improvement compared to $(864) million in 2020[15] - The company plans to repay a total of $1 billion of debt through 2023[18] Segment Performance - Commercial segment revenue increased by 15% to $3128 million in 2021 from $2711 million in 2020, but the operating margin was (7.1)% compared to (22.9)%[20, 21] - Defense & Space segment revenue increased by 19% to $585 million in 2021 from $491 million in 2020, with an operating margin of 7.6% compared to 9.6%[23, 24] - Aftermarket segment revenue increased by 19% to $240 million in 2021 from $202 million in 2020, with an improved operating margin of 21.0% compared to 18.3%[26, 27] Operational Highlights - Deliveries increased to 1028 shipsets in 2021 compared to 920 in 2020[8] - 737 shipset deliveries increased to 162 in 2021 compared to 71 in 2020[8] - 787 shipset deliveries decreased to 37 in 2021 compared to 112 in 2020[8] Strategic Priorities - The company's priorities for 2022 include diversification, de-leveraging, and driving margins[5] - The company aims for a revenue mix of 40% Commercial, 40% Defense & Space, and 20% Aftermarket[5]

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) Q4 2021 Earnings Conference Call February 2, 2021 11:00 AM ET Company Participants Aaron Hunt - Director, IR Thomas Gentile - President & CEO Samantha Marnick - EVP, President, Commercial Division & COO Mark Suchinksi - SVP & CFO Conference Call Participants Myles Walton - UBS Doug Harned - Bernstein David Strauss - Barclays Robert Spingarn - Melius Research Sheila Kahyaoglu - Jefferies Peter Arment - Baird George Shapiro - Shapiro Research Ken Herbert - RBC Cai ...

Third Quarter 2021 Earnings Review Tom Gentile President and Chief Executive Officer Sam Marnick Executive Vice President and Chief Operating Officer; President of Commercial Division Mark Suchinski Senior Vice President and Chief Financial Officer November 3, 2021 Spirit's Strategy Values Vision Diversified Aerospace Design and Manufacturing Champion Strategic Priorities (Where to Compete) Execution Requirements (How to Compete) Safety Quality Customer Focus Delivery Diversify Aftermarket - Repairs - Geogr ...

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) Q3 2021 Earnings Conference Call November 3, 2021 11:00 AM ET Company Participants Aaron Hunt - Senior Leader, Sales & Marketing Thomas Gentile - President, CEO & Director Samantha Marnick - EVP, President, Commercial Division & COO Mark Suchinksi - SVP & CFO Conference Call Participants David Strauss - Barclays Bank Seth Seifman - JPMorgan Chase & Co. Louis Raffetto - UBS Sheila Kahyaoglu - Jefferies Douglas Harned - Sanford C. Bernstein & Co. Robert Stallard - ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Spirit AeroSystems Holdings, Inc., including statements of operations, comprehensive loss, balance sheets, changes in stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, significant events, and financial performance for the periods ended September 30, 2021, and October 1, 2020 [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of **$113.6 million** for the three months ended September 30, 2021, an improvement from a **$155.5 million** net loss in the prior year. For the nine months, the net loss was **$420.5 million**, also an improvement from **$574.4 million** in the prior year, driven by increased revenue and reduced operating losses Condensed Consolidated Statements of Operations | Metric | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Revenue | 980.0 | 806.3 | 2,882.9 | 2,528.2 |\n| Operating Loss | (156.6) | (176.9) | (380.2) | (711.4) |\n| Net Loss | (113.6) | (155.5) | (420.5) | (574.4) |\n| Basic Loss per Share | (1.09) | (1.50) | (4.04) | (5.53) |\n| Diluted Loss per Share | (1.09) | (1.50) | (4.04) | (5.53) | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) The company reported a total comprehensive loss of **$124.8 million** for the three months ended September 30, 2021, and **$429.7 million** for the nine months ended September 30, 2021, including net loss and other comprehensive income/loss components such as pension adjustments, foreign exchange gains/losses, and unrealized losses on hedges Condensed Consolidated Statements of Comprehensive (Loss) Income | Metric | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Net Loss | (113.6) | (155.5) | (420.5) | (574.4) |\n| Total Other Comprehensive (Loss) Gain | (11.2) | 51.7 | (9.2) | (20.4) |\n| Total Comprehensive Loss | (124.8) | (103.8) | (429.7) | (594.8) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets decreased to **$7,740.8 million** from **$8,383.9 million** at December 31, 2020, primarily due to a decrease in cash and cash equivalents, while total liabilities also decreased and total stockholders' equity saw a significant reduction from **$856.5 million** to **$424.3 million** Condensed Consolidated Balance Sheets | Metric | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Cash and cash equivalents | 1,430.6 | 1,873.3 |\n| Total current assets | 3,816.3 | 4,485.0 |\n| Total assets | 7,740.8 | 8,383.9 |\n| Total current liabilities | 1,850.5 | 1,709.4 |\n| Long-term debt | 3,546.7 | 3,532.9 |\n| Total liabilities and equity | 7,740.8 | 8,383.9 |\n| Total stockholders' equity | 424.3 | 856.5 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased from **$856.5 million** at December 31, 2020, to **$424.3 million** at September 30, 2021, primarily due to net losses and other comprehensive losses, partially offset by employee equity awards Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | Balance Dec 31, 2020 ($M) | Balance Sep 30, 2021 ($M) | |:---|:---|:---|\n| Total Stockholders' Equity | 856.5 | 424.3 |\n| Net Loss (9 months) | (306.9) (Jul 1, 2021) / (113.6) (Sep 30, 2021) | (420.5) (Total for 9 months) |\n| Dividends Declared (9 months) | (2.2) (Jul 1, 2021) / (1.0) (Sep 30, 2021) | (3.2) (Total for 9 months) |\n| Employee Equity Awards (9 months) | 13.3 (Jul 1, 2021) / 6.3 (Sep 30, 2021) | 19.6 (Total for 9 months) |\n| Other Comprehensive (Loss) Gain (9 months) | 2.0 (Jul 1, 2021) / (11.2) (Sep 30, 2021) | (9.2) (Total for 9 months) | - Cash dividends declared per common share were **$0.01** for the three months ended September 30, 2021 and October 1, 2020, and **$0.03** for the nine months ended September 30, 2021 and October 1, 2020[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash provided by operating activities significantly improved to **$13.3 million** from a net cash outflow of **$612.8 million** in the prior year, while investing activities used **$106.4 million** and financing activities used **$345.8 million**, primarily due to debt redemption Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|\n| Net cash provided by (used in) operating activities | 13.3 | (612.8) |\n| Net cash used in investing activities | (106.4) | (183.4) |\n| Net cash used in financing activities | (345.8) | (105.6) |\n| Net decrease in cash, cash equivalents, and restricted cash | (442.7) | (905.1) |\n| Cash, cash equivalents, and restricted cash, end of period | 1,450.4 | 1,462.1 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical context and detailed breakdowns for the financial statements, covering organizational structure, significant accounting policies, the ongoing impact of COVID-19 and the B737 MAX program, changes in estimates, and specifics on various financial accounts and transactions [1. Organization, Basis of Interim Presentation and Recent Developments](index=9&type=section&id=1.%20Organization%2C%20Basis%20of%20Interim%20Presentation%20and%20Recent%20Developments) This section outlines the company's core business of manufacturing and design for aircraft OEMs, its global operational footprint, and the basis for preparing its unaudited interim financial statements, also highlighting the significant negative impact of the COVID-19 pandemic on the aviation industry and the company's operations, as well as the status of the B737 MAX program's return to service - Spirit AeroSystems Holdings, Inc. provides manufacturing and design expertise in fuselage, propulsion, and wing products and services for aircraft OEMs and operators globally[24](index=24&type=chunk) - The COVID-19 pandemic continued to have a significant negative effect on the aviation industry and the Company's business during the three and nine months ended September 30, 2021, with uncertainty remaining regarding its duration and full impact[30](index=30&type=chunk) - The B737 MAX resumed deliveries in Q4 **2020** after the FAA rescinded its grounding order, with regulators in several countries ungrounding the aircraft, but China remains a significant country not to allow its return to service[33](index=33&type=chunk) - As a federal contractor, the Company implemented mandatory COVID-19 vaccination rules for all U.S. employees by December **8**, **2021**, following President Biden's executive order[32](index=32&type=chunk) [2. Adoption of New Accounting Standards](index=10&type=section&id=2.%20Adoption%20of%20New%20Accounting%20Standards) The company adopted ASU No. **2019**-**12** (Simplifying the Accounting for Income Taxes) and ASU No. **2020**-**09** (Financial Disclosures about Guarantors and Issuers of Guaranteed Securities) during the period, neither of which had a material impact on its financial position or results of operations - Adoption of ASU No. **2019**-**12** (Simplifying the Accounting for Income Taxes) did not materially impact financial position or results of operations[34](index=34&type=chunk) - Adoption of ASU No. **2020**-**09** (Financial Disclosures about Guarantors and Issuers of Guaranteed Securities) had no impact on financial position or results of operations[35](index=35&type=chunk) [3. New Accounting Pronouncements](index=10&type=section&id=3.%20New%20Accounting%20Pronouncements) The company is currently evaluating the potential impact of ASU No. **2020**-**04** (Reference Rate Reform) on its consolidated financial statements, which provides temporary optional guidance for accounting for reference rate reform - The Company is evaluating the potential impact of ASU No. **2020**-**04** (Reference Rate Reform) on its consolidated financial statements[36](index=36&type=chunk) [4. Changes in Estimates](index=10&type=section&id=4.%20Changes%20in%20Estimates) During the third quarter of **2021**, the company recognized **$73.2 million** in unfavorable changes in estimates, primarily due to net forward loss charges of **$70.4 million** on the B787 and A350 programs, and unfavorable cumulative catch-up adjustments of **$2.8 million** on the B737 program and non-recurring programs - Unfavorable changes in estimates totaled **$73.2 million** for the three months ended September **30**, **2021**, including **$70.4 million** in net forward loss charges and **$2.8 million** in unfavorable cumulative catch-up adjustments[41](index=41&type=chunk) - Forward losses in Q3 **2021** were primarily driven by the B787 program due to reduced production volumes and fixed overhead absorption, and an additional loss on the A350 program due to production schedule changes[41](index=41&type=chunk) Changes in Estimates | Changes in Estimates | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Total (Unfavorable) Favorable Cumulative Catch-up Adjustment | (2.8) | 4.6 | (2.5) | (30.6) |\n| Total Changes in Estimates (Forward Loss) on Loss Programs | (70.4) | (128.4) | (195.0) | (342.2) |\n| Total Changes in Estimates | (73.2) | (123.8) | (197.5) | (372.8) |\n| EPS Impact (diluted) | (0.69) | (0.77) | (1.86) | (2.33) | [5. Accounts Receivable and Allowance for Credit Losses](index=12&type=section&id=5.%20Accounts%20Receivable%20and%20Allowance%20for%20Credit%20Losses) Net accounts receivable increased to **$527.6 million** as of September 30, 2021, from **$484.4 million** at December 31, 2020, including **$37.7 million** related to a grant claim under the Aviation Manufacturing Jobs Protection Program, and the company sold **$1,487.7 million** of accounts receivable through factoring arrangements for the nine months ended September 30, 2021 Accounts Receivable and Allowance for Credit Losses | Metric | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Trade receivables | 475.0 | 458.9 |\n| Other | 59.2 | 31.1 |\n| Less: allowance for credit losses | (6.6) | (5.6) |\n| Accounts receivable, net | 527.6 | 484.4 | - Other receivables as of September **30**, **2021**, include **$37.7 million** from the Department of Transportation's Aviation Manufacturing Jobs Protection Program grant[45](index=45&type=chunk) - For the nine months ended September **30**, **2021**, **$1,487.7 million** of accounts receivable from Boeing, Airbus, and Rolls-Royce were sold through factoring arrangements, resulting in a net loss on sale of **$4.8 million**[46](index=46&type=chunk) [6. Contract Assets and Contract Liabilities](index=12&type=section&id=6.%20Contract%20Assets%20and%20Contract%20Liabilities) Net contract assets (liabilities) shifted from a net liability of **$96.8 million** at December 31, 2020, to a net asset of **$21.4 million** at September 30, 2021, reflecting an increase in contract assets due to more over-time revenue recognition and a decrease in contract liabilities from less deferred revenue Contract Assets and Contract Liabilities | Metric | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | Change ($M) | |:---|:---|:---|:---|\n| Contract assets | 411.0 | 372.8 | 38.2 |\n| Contract liabilities | (389.6) | (469.6) | 80.0 |\n| Net contract assets (liabilities) | 21.4 | (96.8) | 118.2 | - The increase in contract assets reflects more over-time revenue recognition relative to billed revenues, while the decrease in contract liabilities reflects less deferred revenue recorded in excess of revenue recognized[51](index=51&type=chunk) - The Company recognized **$156.1 million** of revenue that was included in the contract liability balance at the beginning of the period ended September **30**, **2021**[51](index=51&type=chunk) [7. Revenue Disaggregation and Outstanding Performance Obligations](index=13&type=section&id=7.%20Revenue%20Disaggregation%20and%20Outstanding%20Performance%20Obligations) Total revenue for the nine months ended September 30, 2021, increased to **$2,882.9 million**, with **75.9%** recognized over time, and Boeing and Airbus remained the largest customers, contributing **55.3%** and **23.9%** of total revenue, respectively, while remaining performance obligations totaled **$11,787.8 million**, with a significant portion expected after **2024** Revenue Disaggregation and Outstanding Performance Obligations | Revenue Type | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Contracts with performance obligations satisfied over time | 774.9 | 510.6 | 2,187.3 | 1,511.9 |\n| Contracts with performance obligations satisfied at a point in time | 205.1 | 295.7 | 695.6 | 1,016.3 |\n| Total Revenue | 980.0 | 806.3 | 2,882.9 | 2,528.2 | Revenue Disaggregation and Outstanding Performance Obligations | Customer | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Boeing | 566.1 | 493.8 | 1,595.8 | 1,539.9 |\n| Airbus | 211.6 | 160.1 | 687.8 | 575.3 |\n| Other | 202.3 | 152.4 | 599.3 | 413.0 |\n| Total Revenue | 980.0 | 806.3 | 2,882.9 | 2,528.2 | Revenue Disaggregation and Outstanding Performance Obligations | Unsatisfied Performance Obligations | Amount ($M) | |:---|:---|\n| Remaining in 2021 | 887.7 |\n| 2022 | 3,396.8 |\n| 2023 | 4,146.5 |\n| 2024 and After | 3,353.3 |\n| Total | 11,787.8 | [8. Inventory](index=14&type=section&id=8.%20Inventory) Total inventory, net, decreased to **$1,325.7 million** at September 30, 2021, from **$1,422.3 million** at December 31, 2020, primarily due to reductions in raw materials and work-in-process, and the company expensed **$172.2 million** in excess capacity production costs and **$7.1 million** in abnormal costs related to workforce adjustments for the nine months ended September 30, 2021 Inventory | Inventory Component | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Raw materials | 306.8 | 337.3 |\n| Work-in-process | 937.6 | 1,000.6 |\n| Finished goods | 54.4 | 58.1 |\n| Product inventory | 1,298.8 | 1,396.0 |\n| Capitalized pre-production | 26.9 | 26.3 |\n| Total inventory, net | 1,325.7 | 1,422.3 | - Cost of sales for the nine months ended September **30**, **2021**, includes **$172.2 million** for excess capacity production costs and **$7.1 million** for abnormal costs related to workforce adjustments due to COVID-19[62](index=62&type=chunk) [9. Property, Plant and Equipment, net](index=15&type=section&id=9.%20Property%2C%20Plant%20and%20Equipment%2C%20net) Net property, plant, and equipment decreased to **$2,406.9 million** at September 30, 2021, from **$2,503.8 million** at December 31, 2020, and the company incurred **$102.7 million** in repair and maintenance costs and **$11.4 million** in capitalized software depreciation for the nine months ended September 30, 2021 Property, Plant and Equipment, net | Asset Category | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Land | 30.7 | 30.8 |\n| Buildings | 1,210.7 | 1,166.7 |\n| Machinery and equipment | 2,214.1 | 2,120.5 |\n| Tooling | 1,047.8 | 1,036.1 |\n| Capitalized software | 292.0 | 282.5 |\n| Construction-in-progress | 185.6 | 220.0 |\n| Total | 4,980.9 | 4,856.6 |\n| Less: accumulated depreciation | (2,574.0) | (2,352.8) |\n| Property, plant and equipment, net | 2,406.9 | 2,503.8 | - Repair and maintenance costs were **$102.7 million** for the nine months ended September **30**, **2021**, and depreciation expense related to capitalized software was **$11.4 million** for the same period[63](index=63&type=chunk)[64](index=64&type=chunk) [10. Leases](index=15&type=section&id=10.%20Leases) The company's total net lease cost for the nine months ended September 30, 2021, was **$33.2 million**, with operating lease liabilities and finance lease obligations totaling **$88.8 million** and **$175.4 million**, respectively, as of September 30, 2021, and weighted average remaining lease terms of **35.7 years** for operating leases and **5.1 years** for finance leases Leases | Lease Cost Component | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Operating lease cost | 3.3 | 2.2 | 8.3 | 6.6 |\n| Finance lease cost: Amortization of assets | 7.2 | 5.7 | 19.6 | 16.0 |\n| Finance lease cost: Interest on lease liabilities | 1.8 | 1.6 | 5.3 | 4.7 |\n| Total net lease cost | 12.3 | 9.5 | 33.2 | 27.3 | Leases | Lease Liabilities (Sep 30, 2021) | Total Lease Payments ($M) | Less: Imputed Interest ($M) | Total Lease Obligations ($M) | |:---|:---|:---|:---|\n| Operating Leases | 226.0 | (137.2) | 88.8 |\n| Financing Leases | 196.7 | (21.3) | 175.4 | - As of September **30**, **2021**, the weighted average remaining lease term for operating leases was **35.7 years** and for finance leases was **5.1 years**[76](index=76&type=chunk) [11. Other Assets, Goodwill, and Intangible Assets](index=18&type=section&id=11.%20Other%20Assets%2C%20Goodwill%2C%20and%20Intangible%20Assets) Total other current assets decreased significantly to **$121.1 million** at September 30, 2021, from **$336.3 million** at December 31, 2020, primarily due to a reduction in income tax receivable, while goodwill increased to **$623.6 million**, mainly from the Bombardier Acquisition and Applied Aerodynamics acquisition, and intangible assets, net, remained stable at **$216.2 million** Other Assets, Goodwill, and Intangible Assets | Other Current Assets | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Prepaid expenses | 28.0 | 16.3 |\n| Income tax receivable | 88.0 | 315.3 |\n| Other assets - short-term | 5.1 | 4.7 |\n| Total other current assets | 121.1 | 336.3 | Other Assets, Goodwill, and Intangible Assets | Goodwill by Segment (Sep 30, 2021) | Balance at Dec 31, 2020 ($M) | Acquisitions ($M) | Adjustments/Other ($M) | Balance at Sep 30, 2021 ($M) | |:---|:---|:---|:---|:---|\n| Fuselage Systems | 42.9 | — | 134.9 | 177.8 |\n| Propulsion Systems | 33.1 | — | 382.0 | 415.1 |\n| Wing Systems | 2.5 | — | 10.1 | 12.6 |\n| Not Allocated | 486.8 | 18.1 | (486.8) | 18.1 |\n| Total | 565.3 | 18.1 | 40.2 | 623.6 | Other Assets, Goodwill, and Intangible Assets | Intangible Assets | Sep 30, 2021 ($M) | Dec 31, 2020 ($M) | |:---|:---|:---|\n| Patents | 2.0 | 2.0 |\n| Favorable leasehold interests | 2.8 | 2.8 |\n| Developed technology asset | 92.0 | 94.0 |\n| Customer relationships intangible asset | 137.2 | 124.1 |\n| Total intangible assets | 234.0 | 222.9 |\n| Intangible assets, net | 216.2 | 215.2 | [12. Advance Payments](index=20&type=section&id=12.%20Advance%20Payments) As of September 30, 2021, the company had **$212.1 million** in advance payments from Boeing for the B787 program and **$125.6 million** for the B737 program that had not yet been repaid, with repayments for the B787 program suspended and resuming at a lower rate, while B737 advances were extended and included additional prepayments from Boeing - As of September **30**, **2021**, **$212.1 million** in advance payments from Boeing for the B787 program remained unrepaid[91](index=91&type=chunk) - As of September **30**, **2021**, **$125.6 million** in advance payments from Boeing for the B737 program remained unrepaid, following extensions and additional prepayments[92](index=92&type=chunk) [13. Fair Value Measurements](index=21&type=section&id=13.%20Fair%20Value%20Measurements) The estimated fair value of the company's long-term debt was **$3,486.7 million** as of September 30, 2021, compared to a carrying amount of **$3,362.7 million**, with most debt instruments classified as Level **1** or Level **2** in the fair value hierarchy Fair Value Measurements | Debt Instrument | Sep 30, 2021 Carrying Amount ($M) | Sep 30, 2021 Fair Value ($M) | Dec 31, 2020 Carrying Amount ($M) | Dec 31, 2020 Fair Value ($M) | |:---|:---|:---|:---|:---|\n| Senior secured term loan B | 388.5 | 389.5 | 389.6 | 395.0 |\n| Floating rate notes | — | — | 299.7 | 297.5 |\n| Senior notes due 2023 | 299.2 | 304.5 | 298.8 | 293.8 |\n| Senior secured first lien notes due 2025 | 494.9 | 524.4 | 493.9 | 521.2 |\n| Senior secured second lien notes due 2025 | 1,186.6 | 1,257.6 | 1,184.2 | 1,279.1 |\n| Senior notes due 2026 | 298.4 | 318.8 | 298.1 | 313.9 |\n| Senior notes due 2028 | 695.1 | 691.9 | 694.6 | 689.2 |\n| Total | 3,362.7 | 3,486.7 | 3,658.9 | 3,789.7 | [14. Derivative and Hedging Activities](index=21&type=section&id=14.%20Derivative%20and%20Hedging%20Activities) The company terminated its **$150 million** interest rate swap agreement in February 2021, resulting in a reclassified loss of **$0.7 million** from AOCI to earnings for the nine months ended September 30, 2021, and also entered into foreign currency forward contracts with a notional amount of **$280.3 million** to hedge British Pound exposure, recognizing a loss of **$5.5 million** in AOCI for the same period - The Company terminated its **$150 million** notional interest rate swap agreement on February **24**, **2021**, resulting in a **$0.7 million** loss reclassified from AOCI to earnings for the nine months ended September **30**, **2021**[98](index=98&type=chunk)[99](index=99&type=chunk) Derivative and Hedging Activities | Derivative Type | Notional Amount Sep 30, 2021 ($M) | Notional Amount Dec 31, 2020 ($M) | Other Liabilities Sep 30, 2021 ($M) | |:---|:---|:---|:---|\n| Foreign currency exchange contracts | 280.3 | — | 5.6 | - For the nine months ended September **30**, **2021**, a loss of **$5.5 million** related to foreign currency exchange contracts was recognized in AOCI[102](index=102&type=chunk) [15. Debt](index=23&type=section&id=15.%20Debt) Total debt, including current and noncurrent portions, was **$3,594.5 million** at September 30, 2021, with the company redeeming **$300.0 million** in Floating Rate Notes in February 2021, and key debt instruments including a **$400.0 million** senior secured term loan B, **$500.0 million** First Lien **2025** Notes, **$300.0 million** **2026** Notes, **$1,200.0 million** Second Lien **2025** Notes, **$300.0 million** **2023** Notes, and **$700.0 million** **2028** Notes, all while remaining in compliance with debt covenants Debt | Debt Instrument | Sep 30, 2021 Current ($M) | Sep 30, 2021 Noncurrent ($M) | Dec 31, 2020 Current ($M) | Dec 31, 2020 Noncurrent ($M) | |:---|:---|:---|:---|:---|\n| Senior secured term loan B | 3.9 | 384.6 | 3.9 | 385.7 |\n| Floating rate notes | — | — | 299.7 | — |\n| Senior notes due 2023 | — | 299.2 | — | 298.8 |\n| Senior secured first lien notes due 2025 | — | 494.9 | — | 493.9 |\n| Senior secured second lien notes due 2025 | — | 1,186.6 | — | 1,184.2 |\n| Senior notes due 2026 | — | 298.4 | — | 298.1 |\n| Senior notes due 2028 | — | 695.1 | — | 694.6 |\n| Present value of finance lease obligations | 42.6 | 132.8 | 35.3 | 121.5 |\n| Other | 1.3 | 55.1 | 1.8 | 56.1 |\n| Total | 47.8 | 3,546.7 | 340.7 | 3,532.9 | - Spirit redeemed the outstanding **$300.0 million** principal amount of Floating Rate Notes on February **24**, **2021**[122](index=122&type=chunk) - As of September **30**, **2021**, the Company was in compliance with all covenants in its Credit Agreement and indentures governing its notes[109](index=109&type=chunk)[124](index=124&type=chunk) [16. Pension and Other Post-Retirement Benefits](index=25&type=section&id=16.%20Pension%20and%20Other%20Post-Retirement%20Benefits) The company recognized net periodic pension income of **$74.0 million** for the three months and **$103.9 million** for the nine months ended September 30, 2021, primarily due to a **$61.0 million** curtailment gain from the closure of the Shorts Pension plan to future accruals, with employer contributions for **2021** projected to be **$10.2 million** for U.S. SERP/medical plans and **$182.6 million** for U.K. Shorts Pension schemes Pension and Other Post-Retirement Benefits | Component of Net Periodic Pension Expense (Income) | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Service cost | 11.2 | 0.2 | 32.9 | 0.7 |\n| Interest cost | 15.8 | 5.4 | 43.3 | 20.1 |\n| Expected return on plan assets | (40.0) | (16.6) | (119.0) | (49.5) |\n| Curtailment loss (gain) | (61.0) | — | (61.0) | 33.9 |\n| Net periodic pension expense (income) | (74.0) | (8.4) | (103.9) | 46.1 | - The closure of the Shorts Pension to future accrual of benefits resulted in a curtailment gain of **$61.0 million** for the three and nine months ended September **30**, **2021**[126](index=126&type=chunk) - Projected employer contributions for **2021** include **$10.2 million** for U.S. SERP and post-retirement medical plans, **$1.9 million** for the U.K. pension plan, and **$182.6 million** for Shorts Pension schemes[129](index=129&type=chunk) [17. Stock Compensation](index=26&type=section&id=17.%20Stock%20Compensation) The company recognized **$19.6 million** in stock compensation expense for the nine months ended September 30, 2021, during which **557,851** time-based RSUs, **30,024** time-based RSAs, **161,954** performance-based RSUs, and **29,514** restricted Common Stock shares were granted Stock Compensation | Metric | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Stock compensation expense | 6.2 | 6.2 | 19.6 | 17.1 | - During the nine months ended September **30**, **2021**, the company granted **557,851** time-based RSUs, **30,024** time-based RSAs, **161,954** performance-based RSUs, and **29,514** restricted Common Stock shares to employees and directors[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) [18. Income Taxes](index=28&type=section&id=18.%20Income%20Taxes) The company recorded an incremental valuation allowance of **$122.5 million** against U.S. deferred tax assets and **$70.7 million** against U.K. deferred tax assets for the nine months ended September 30, 2021, resulting in a net U.S. deferred tax liability of **$13.7 million** and a net U.K. deferred tax liability of **$10.9 million**, with the effective tax rate for the nine months ended September 30, 2021, being **0.15%**, significantly lower than **37.3%** in the prior year, primarily due to these valuation allowances - An incremental valuation allowance of **$122.5 million** was recorded for U.S. deferred tax assets for the nine months ended September **30**, **2021**, bringing the total to **$272.5 million** and resulting in a net U.S. deferred tax liability of **$13.7 million**[139](index=139&type=chunk) - An incremental valuation allowance of **$70.7 million** was recorded for U.K. deferred tax assets for the nine months ended September **30**, **2021**, bringing the total to **$261.5 million** and resulting in a net U.K. deferred tax liability of **$10.9 million**[140](index=140&type=chunk) - The effective tax rate for the nine months ended September **30**, **2021**, was **0.15%**, a significant decrease from **37.3%** in the prior year, primarily due to the valuation allowances[144](index=144&type=chunk) [19. Equity](index=29&type=section&id=19.%20Equity) The company reported basic and diluted loss per share of **$1.09** for the three months and **$4.04** for the nine months ended September 30, 2021, with common shares excluded from diluted EPS calculations due to net losses making their effect antidilutive, and the total authorization remaining under the share repurchase program is **$925.0 million**, but repurchases are currently on hold Equity | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Oct 1, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Oct 1, 2020 | |:---|:---|:---|:---|:---|\n| Basic Loss per Share | (1.09) | (1.50) | (4.04) | (5.53) |\n| Diluted Loss per Share | (1.09) | (1.50) | (4.04) | (5.53) |\n| Weighted-average shares outstanding (Basic, in millions) | 104.3 | 103.9 | 104.2 | 103.8 | - Common shares were excluded from diluted EPS calculations for the three and nine months ended September **30**, **2021** and October **1**, **2020**, because the company incurred a net loss, making their effect antidilutive[153](index=153&type=chunk)[154](index=154&type=chunk) - The remaining authorization under the share repurchase program is **$925.0 million**, but repurchases are currently on hold due to the B737 MAX grounding and COVID-19 impacts, and restrictions from the Credit Agreement[150](index=150&type=chunk) [20. Commitments, Contingencies and Guarantees](index=30&type=section&id=20.%20Commitments%2C%20Contingencies%20and%20Guarantees) The company is involved in several legal proceedings, including a consolidated class action and derivative lawsuits related to accounting process compliance and B737 MAX disclosures, with a **$44.7 million** liability recognized for a ruling in favor of a former CEO, and faces potential claims related to B787 rework, with an inability to reasonably estimate the amount at this time, while service warranty and extraordinary rework balance was **$73.7 million** as of September 30, 2021 - The company is a nominal defendant in consolidated class action and shareholder derivative lawsuits related to accounting process compliance and B737 MAX disclosures[156](index=156&type=chunk)[157](index=157&type=chunk)[160](index=160&type=chunk) - A **$44.7 million** liability was recognized as of September **30**, **2021**, following a U.S. District Court ruling in favor of the company's former Chief Executive Officer for withheld benefits[161](index=161&type=chunk) - The company cannot reasonably estimate potential claims related to B787 rework due to uncertainties regarding claim receipt, outcome, factual/commercial issues, and novel legal issues[167](index=167&type=chunk) Commitments, Contingencies and Guarantees | Service Warranty and Extraordinary Rework | Amount ($M) | |:---|:---|\n| Balance, December 31, 2020 | 76.9 |\n| Charges to costs and expenses | 10.1 |\n| Payouts | (13.1) |\n| Exchange rate | (0.2) |\n| Balance, September 30, 2021 | 73.7 | [21. Other Income (Expense), Net](index=34&type=section&id=21.%20Other%20Income%20(Expense)%2C%20Net) Other income, net, significantly increased to **$94.8 million** for the three months and **$138.7 million** for the nine months ended September 30, 2021, compared to net expenses in the prior year, primarily driven by higher pension income, including a curtailment gain from the Shorts Pension closure, and foreign currency gains Other Income (Expense), Net | Other Income (Expense) Component | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Foreign currency (losses) gains | 11.3 | (3.4) | 3.8 | 1.4 |\n| Loss on sale of accounts receivable | (1.8) | (2.0) | (4.8) | (6.7) |\n| Pension income (loss) | 84.8 | 9.0 | 137.3 | (56.4) |\n| Total Other Income (Expense), Net | 94.8 | (10.0) | 138.7 | (65.4) | - Pension income for the three and nine months ended September **30**, **2021**, includes **$74.2 million** and **$105.3 million**, respectively, related to pension plans, including a **$61.0 million** curtailment gain from the Shorts Pension closure[179](index=179&type=chunk) [22. Segment Information](index=34&type=section&id=22.%20Segment%20Information) The company operates in three principal segments: Fuselage Systems, Propulsion Systems, and Wing Systems, with Boeing and Airbus being major customers, and for the nine months ended September 30, 2021, Fuselage Systems generated **$1,410.5 million** in revenue with an operating loss of **$145.5 million**, Propulsion Systems generated **$716.2 million** in revenue with an operating income of **$66.8 million**, and Wing Systems generated **$725.9 million** in revenue with an operating loss of **$50.9 million** - The company's principal operating segments are Fuselage Systems, Propulsion Systems, and Wing Systems, with Boeing and Airbus representing approximately **79%** of net revenues for the three months ended September **30**, **2021**[178](index=178&type=chunk) Segment Information | Segment | 3 Months Ended Sep 30, 2021 Revenue ($M) | 3 Months Ended Oct 1, 2020 Revenue ($M) | 9 Months Ended Sep 30, 2021 Revenue ($M) | 9 Months Ended Oct 1, 2020 Revenue ($M) | |:---|:---|:---|:---|:---|\n| Fuselage Systems | 481.2 | 421.1 | 1,410.5 | 1,299.7 |\n| Propulsion Systems | 247.8 | 170.8 | 716.2 | 565.6 |\n| Wing Systems | 243.0 | 168.3 | 725.9 | 582.2 |\n| All Other | 8.0 | 46.1 | 30.3 | 80.7 |\n| Total | 980.0 | 806.3 | 2,882.9 | 2,528.2 | Segment Information | Segment | 3 Months Ended Sep 30, 2021 Operating Income (Loss) ($M) | 3 Months Ended Oct 1, 2020 Operating Income (Loss) ($M) | 9 Months Ended Sep 30, 2021 Operating Income (Loss) ($M) | 9 Months Ended Oct 1, 2020 Operating Income (Loss) ($M) | |:---|:---|:---|:---|:---|\n| Fuselage Systems | (53.9) | (96.7) | (145.5) | (434.6) |\n| Propulsion Systems | 21.9 | (15.6) | 66.8 | (38.2) |\n| Wing Systems | (15.8) | (23.2) | (50.9) | (52.1) |\n| All Other | 2.4 | 19.1 | 5.1 | 28.9 |\n| Total Segment Operating Income (Loss) | (45.4) | (116.4) | (124.5) | (496.0) | [23. Restructuring Costs](index=36&type=section&id=23.%20Restructuring%20Costs) Restructuring costs decreased significantly to **$0.8 million** for the three months and **$8.1 million** for the nine months ended September 30, 2021, compared to **$19.5 million** and **$68.4 million** in the prior year, respectively, primarily related to site closures and workforce reductions aimed at aligning costs with reduced production levels due to the COVID-19 pandemic and B737 MAX grounding Restructuring Costs | Restructuring Costs | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Total restructuring costs | 0.8 | 19.5 | 8.1 | 68.4 | - Restructuring costs for the three and nine months ended September **30**, **2021**, largely include costs related to McAlester and San Antonio site closures[193](index=193&type=chunk) - In the prior year, restructuring costs were primarily comprised of involuntary workforce reductions and a Voluntary Retirement Program (VRP)[193](index=193&type=chunk) [24. Acquisitions](index=37&type=section&id=24.%20Acquisitions) The company acquired Applied Aerodynamics for **$29.6 million** in Q3 **2021**, resulting in **$18.1 million** in goodwill, while the Bombardier Acquisition, completed in Q4 **2020**, involved a total enterprise value of **$895 million**, including **$275 million** cash and assumed liabilities, and resulted in **$527.0 million** in goodwill, with the purchase price allocation for Bombardier finalized, with adjustments to intangible assets and forward loss liabilities - During Q3 **2021**, the Company acquired Applied Aerodynamics, Inc. for **$29.6 million**, resulting in **$18.1 million** of goodwill and **$6.2 million** of intangible assets[196](index=196&type=chunk) - The Bombardier Acquisition, completed on October **30**, **2020**, had a total enterprise value of **$895 million**, including **$275 million** cash consideration and assumed net pension liabilities of approximately **$316 million**[203](index=203&type=chunk) - The final purchase price allocation for the Bombardier Acquisition resulted in **$527.0 million** in goodwill, **$62.0 million** in developed technology, and **$131.0 million** in customer relationships[208](index=208&type=chunk)[209](index=209&type=chunk) Acquisitions | Pro-forma Results (9 Months Ended Oct 1, 2020) | As Reported ($M) | Pro-forma ($M) | |:---|:---|:---|\n| Revenue | 2,528.2 | 3,041.3 |\n| Net (loss) income | (574.4) | (632.7) |\n| Earnings Per Share - Diluted | (5.53) | (6.10) | [25. Subsequent Events](index=40&type=section&id=25.%20Subsequent%20Events) Effective October **1**, **2021**, the company implemented a new organizational structure with three primary business divisions: Commercial, Defense & Space, and Aftermarket, and additionally, a **$44.7 million** liability was recognized as of September 30, 2021, following a court ruling in favor of a former CEO - A new organizational structure with Commercial, Defense & Space, and Aftermarket divisions became effective October **1**, **2021**, with financial performance to be reported under these segments starting Q4 **2021**[216](index=216&type=chunk) - A **$44.7 million** liability was recognized as of September **30**, **2021**, due to a court ruling in favor of the company's former Chief Executive Officer regarding withheld benefits[217](index=217&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and operational results, highlighting the ongoing impacts of COVID-19 and the B737 MAX program, changes in estimates, and a detailed comparison of financial results for the three and nine months ended September 30, 2021, versus the prior year, also covering liquidity, capital resources, and forward-looking statements [COVID-19 Impact and Outlook](index=42&type=section&id=COVID-19%20Impact%20and%20Outlook) The COVID-19 pandemic continues to significantly impact the aviation industry and the company's business, leading to reduced production rates from customers, and while signs of recovery were observed, the duration and full impact remain uncertain, with the company receiving a **$75.5 million** grant under the Aviation Manufacturing Jobs Protection Program and implementing mandatory vaccination rules for U.S. employees - The COVID-19 pandemic continues to have a significant negative effect on aviation demand, the company's business, and the industry, leading to decreased production rates from customers[220](index=220&type=chunk) - The company received a **$75.5 million** grant under the Aviation Manufacturing Jobs Protection Program, with **$37.8 million** received as of September **30**, **2021**[220](index=220&type=chunk) - Mandatory COVID-19 vaccination rules for U.S. federal contractors, effective December **8**, **2021**, may result in attrition of critically skilled labor and difficulty securing future labor needs[223](index=223&type=chunk) [B737 Program Update](index=42&type=section&id=B737%20Program%20Update) The B737 MAX program is critical, historically generating over **50%** of net revenues, with deliveries resuming in Q4 **2020** and most regulators ungrounding the aircraft except China, and ongoing demand challenges from the grounding are exacerbated by COVID-19, with narrowbody production rates expected to recover before widebody rates - The B737 MAX program is critical, accounting for approximately **56%**, **53%**, and **19%** of net revenues in **2018**, **2019**, and **2020**, respectively[224](index=224&type=chunk) - B737 MAX deliveries resumed in Q4 **2020** after the FAA rescinded the grounding order, with most international regulators following suit, except China[225](index=225&type=chunk) - Ongoing demand challenges from the B737 MAX grounding are exacerbated by the COVID-19 pandemic, with narrowbody production rates expected to recover before widebody rates[226](index=226&type=chunk) [B787 Program Update](index=43&type=section&id=B787%20Program%20Update) Boeing's B787 production rate changes led to an incremental forward loss charge of **$192.5 million** in **2020**, with further assessments of rework and reduced production volumes resulting in additional forward loss charges of **$29.3 million** in Q1 **2021**, **$46.4 million** in Q2 **2021**, and **$45.5 million** in Q3 **2021** - Boeing's B787 production rate changes to **5** aircraft per month resulted in an incremental forward loss charge of **$192.5 million** for the year ended December **31**, **2020**[227](index=227&type=chunk) - The company recorded incremental forward loss charges of **$29.3 million** in Q1 **2021**, **$46.4 million** in Q2 **2021**, and **$45.5 million** in Q3 **2021** for the B787 program, driven by rework and reduced production volumes[228](index=228&type=chunk) [Recoverability and Impairment Tests of Current and Noncurrent Assets](index=43&type=section&id=Recoverability%20and%20Impairment%20Tests%20of%20Current%20and%20Noncurrent%20Assets) Management's estimates for asset recoverability and impairment are highly judgmental, influenced by program schedules, costs, and market conditions, especially given COVID-19 uncertainties, and as of September 30, 2021, no events required an update to impairment analyses for long-lived assets (**$2,406.9 million** net book value) or goodwill (**$623.6 million**) - Estimates for asset recoverability and impairment tests involve significant judgment due to variables like program delivery schedules, costs, and market conditions, with increased difficulty due to COVID-19 uncertainties[230](index=230&type=chunk)[231](index=231&type=chunk) - As of September **30**, **2021**, the net book value of long-lived assets was **$2,406.9 million**, and the balance of intangible assets was **$216.2 million**, with no events requiring an update to impairment analysis for these assets[232](index=232&type=chunk) - Goodwill balance was **$623.6 million** as of September **30**, **2021**, primarily from the FMI, Bombardier, and Applied acquisitions, with no events requiring an update to goodwill impairment analysis[233](index=233&type=chunk)[234](index=234&type=chunk) [Change to Organizational Structure](index=44&type=section&id=Change%20to%20Organizational%20Structure) Effective October **1**, **2021**, the company adopted a new organizational structure with three primary business divisions: Commercial, Defense & Space, and Aftermarket, and financial performance will be reported based on these new segments starting with the **2021** fiscal year-end results - A new organizational structure, effective October **1**, **2021**, established three primary business divisions: Commercial, Defense & Space, and Aftermarket[235](index=235&type=chunk) - The company intends to report financial performance based on these new segments starting with the **2021** fiscal year-end results[235](index=235&type=chunk) [Results of Operations Overview](index=44&type=section&id=Results%20of%20Operations%20Overview) For the three months ended September 30, 2021, revenue increased by **21.5%** to **$980.0 million**, and the operating loss improved to **$156.6 million** from **$176.9 million** in the prior year, while for the nine months, revenue increased by **14.0%** to **$2,882.9 million**, and the operating loss improved to **$380.2 million** from **$711.4 million** Results of Operations Overview | Metric | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Revenue | 980.0 | 806.3 | 2,882.9 | 2,528.2 |\n| Gross loss | (56.2) | (97.1) | (126.5) | (412.8) |\n| Operating loss | (156.6) | (176.9) | (380.2) | (711.4) |\n| Net loss | (113.6) | (155.5) | (420.5) | (574.4) | Results of Operations Overview | Shipset Deliveries | 3 Months Ended Sep 30, 2021 | 3 Months Ended Oct 1, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Oct 1, 2020 | |:---|:---|:---|:---|:---|\n| B737 | 47 | 15 | 111 | 52 |\n| B787 | 5 | 30 | 31 | 92 |\n| A320 Family | 105 | 108 | 331 | 365 |\n| Total Boeing | 68 | 69 | 191 | 198 |\n| Total Airbus | 132 | 133 | 417 | 465 |\n| Total Business and Regional Jets | 50 | 4 | 139 | 26 |\n| Total | 250 | 206 | 747 | 689 | Results of Operations Overview | Prime Customer Revenue | 3 Months Ended Sep 30, 2021 ($M) | 3 Months Ended Oct 1, 2020 ($M) | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|:---|:---|\n| Boeing | 566.1 | 493.8 | 1,595.8 | 1,539.9 |\n| Airbus | 211.6 | 160.1 | 687.8 | 575.3 |\n| Other | 202.3 | 152.4 | 599.3 | 413.0 |\n| Total net revenues | 980.0 | 806.3 | 2,882.9 | 2,528.2 | [Three Months Ended September 30, 2021 as Compared to Three Months Ended October 1, 2020](index=46&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%20as%20Compared%20to%20Three%20Months%20Ended%20October%201%2C%202020) For the three months ended September 30, 2021, revenue increased by **21.5%** to **$980.0 million**, driven by higher B737 production and incremental revenue from acquired programs, while gross loss decreased by **$40.9 million** due to lower forward losses and higher B737 production, operating loss improved by **$20.3 million**, and other income, net, increased significantly due to pension income and foreign currency gains [Revenue](index=46&type=section&id=Revenue) Net revenue increased by **$173.7 million** (**21.5%**) to **$980.0 million**, driven by higher B737 production and incremental revenue from A220 wing and Bombardier programs, with total deliveries increasing to **250** shipsets from **206** in the prior year - Net revenue for the three months ended September **30**, **2021**, increased by **$173.7 million** (**21.5%**) to **$980.0 million**, driven by higher B737 production and incremental revenue from acquired A220 wing and Bombardier programs[243](index=243&type=chunk) - Total shipset deliveries increased to **250** in Q3 **2021** from **206** in Q3 **2020**, with business/regional jet deliveries significantly increasing to **50** from **4**[244](index=244&type=chunk) [Gross (Loss) Profit](index=46&type=section&id=Gross%20(Loss)%20Profit) Gross loss decreased by **$40.9 million** to (**$56.2 million**) from (**$97.1 million**), primarily due to lower forward losses on B787 and A350 programs and higher B737 program production rates, partially offset by **$11.0 million** in warranty expense and **$57.1 million** in excess capacity production costs - Gross loss decreased to (**$56.2 million**) from (**$97.1 million**), driven by lower forward losses on B787 and A350 programs and higher B737 program production rates[245](index=245&type=chunk) - The period included **$11.0 million** of warranty expense, **$57.1 million** of excess capacity production costs, and **$2.8 million** of unfavorable cumulative catch-up adjustments[245](index=245&type=chunk) [SG&A and Research and Development](index=46&type=section&id=SG%26A%20and%20Research%20and%20Development) SG&A expense increased by **$34.0 million**, and research and development expense increased by **$5.3 million**, primarily due to a charge related to the former CEO's ruling and incremental expenses from the recently acquired Belfast site - SG&A expense increased by **$34.0 million**, and research and development expense increased by **$5.3 million**, primarily due to a charge related to the former CEO's ruling and incremental expenses from the Belfast site[246](index=246&type=chunk) [Restructuring Costs](index=46&type=section&id=Restructuring%20Costs) Restructuring costs decreased by **$18.7 million** to **$0.8 million**, reflecting lower cost-alignment and headcount reduction activities compared to the prior year, primarily related to McAlester site closure - Restructuring costs decreased by **$18.7 million** to **$0.8 million**, reflecting lower cost-alignment and headcount reduction activity, primarily related to the McAlester site closure[247](index=247&type=chunk) [Operating (Loss) Income](index=46&type=section&id=Operating%20(Loss)%20Income) Operating loss improved by **$20.3 million** to (**$156.6 million**), reflecting the decreased gross loss on sales and changes in restructuring, SG&A, and R&D costs - Operating loss improved by **$20.3 million** to (**$156.6 million**), driven by decreased gross loss on sales and changes in restructuring, SG&A, and research and development costs[248](index=248&type=chunk) [Interest Expense and Financing Fee Amortization](index=47&type=section&id=Interest%20Expense%20and%20Financing%20Fee%20Amortization) Interest expense and financing fee amortization increased by **$5.8 million**, primarily due to interest expense recognized on the repayable investment agreement with the UK Government (BEIS) - Interest expense and financing fee amortization increased by **$5.8 million**, primarily due to interest expense on the repayable investment agreement with the UK Government (BEIS)[249](index=249&type=chunk) [Other (Expense) Income, net](index=47&type=section&id=Other%20(Expense)%20Income%2C%20net) Other income, net, increased significantly to **$94.8 million** from a net expense of **$10.0 million**, mainly due to increased net pension income (including a curtailment gain from Shorts Pension closure) and higher foreign currency gains - Other income, net, increased to **$94.8 million** from a net expense of **$10.0 million**, primarily due to increased net pension income (including a curtailment gain from Shorts Pension closure) and foreign currency gains[250](index=250&type=chunk) [Provision for Income Taxes](index=47&type=section&id=Provision%20for%20Income%20Taxes) The effective tax rate for the three months ended September 30, 2021, was **6.6%**, compared to **35.5%** in the prior year, with this decrease primarily attributable to the impact of valuation allowances recognized on U.S. and U.K. deferred tax assets, as the company reported a pre-tax loss - The effective tax rate for the three months ended September **30**, **2021**, was **6.6%**, compared to **35.5%** in the prior year, primarily due to valuation allowances on U.S. and U.K. deferred tax assets[253](index=253&type=chunk)[254](index=254&type=chunk) - The net valuation allowance increased by **$38.1 million** in the U.S. and **$10.1 million** in the U.K. for the three months ended September **30**, **2021**[252](index=252&type=chunk) [Segments (Fuselage, Propulsion, Wing, All Other)](index=47&type=section&id=Segments%20(Fuselage%2C%20Propulsion%2C%20Wing%2C%20All%20Other)) Fuselage Systems revenue increased by **14%** to **$481.2 million**, with operating margins improving to (**11%**) due to lower forward losses, Propulsion Systems revenue increased by **45%** to **$247.8 million**, with operating margins improving to **9%** due to increased B737 MAX sales, Wing Systems revenue increased by **44%** to **$243.0 million**, with operating margins improving to (**7%**) due to lower forward losses and increased B737 program profit, and All Other segment revenue decreased by **$38.1 million** Segments (Fuselage, Propulsion, Wing, All Other) | Segment | 3 Months Ended Sep 30, 2021 Revenue ($M) | 3 Months Ended Oct 1, 2020 Revenue ($M) | 3 Months Ended Sep 30, 2021 Operating Margin (%) | 3 Months Ended Oct 1, 2020 Operating Margin (%) | |:---|:---|:---|:---|:---|\n| Fuselage Systems | 481.2 | 421.1 | (11%) | (23%) |\n| Propulsion Systems | 247.8 | 170.8 | 9% | (9%) |\n| Wing Systems | 243.0 | 168.3 | (7%) | (14%) |\n| All Other | 8.0 | 46.1 | N/A | N/A | - Fuselage Systems operating margins improved due to lower forward losses on B787 and A350 programs and a prior year forward loss on the B767 program[260](index=260&type=chunk) - Propulsion Systems operating margins improved due to increased profit and margins on B737 program sales, lower excess capacity costs, and decreased forward losses on B787 and BR725 programs[262](index=262&type=chunk) [Nine Months Ended September 30, 2021 as Compared to Nine Months Ended October 1, 2020](index=49&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%20as%20Compared%20to%20Nine%20Months%20Ended%20October%201%2C%202020) For the nine months ended September 30, 2021, net revenue increased by **14.0%** to **$2,882.9 million**, driven by higher B737 production and acquired programs, gross loss significantly decreased by **$286.3 million**, and operating loss improved by **$331.2 million**, while other income, net, saw a substantial increase due to pension income, and the effective tax rate was significantly impacted by valuation allowances [Revenue](index=49&type=section&id=Revenue) Net revenue increased by **$354.7 million** (**14.0%**) to **$2,882.9 million**, driven by higher B737 production, incremental revenue from acquired A220 wing and Bombardier programs, and increased aftermarket sales, with total shipset deliveries increasing to **747** from **689** - Net revenue for the nine months ended September **30**, **2021**, increased by **$354.7 million** (**14.0%**) to **$2,882.9 million**, driven by higher B737 production and incremental revenue from acquired A220 wing and Bombardier programs[265](index=265&type=chunk) - Total shipset deliveries increased to **747** in the nine months ended September **30**, **2021**, from **689** in the prior year, with business/regional jet deliveries increasing to **139** from **26**[266](index=266&type=chunk) [Gross (Loss) Profit](index=49&type=section&id=Gross%20(Loss)%20Profit) Gross loss decreased by **$286.3 million** to (**$126.5 million**) from (**$412.8 million**), reflecting greater profit from higher B737 production rates, lower forward losses on B787 and A350 programs, and reduced excess capacity and abnormal production costs, with the period including **$195.0 million** in net forward loss charges - Gross loss decreased to (**$126.5 million**) from (**$412.8 million**), driven by higher B737 production rates, lower forward losses on B787 and A350 programs, and reduced excess capacity and abnormal production costs[267](index=267&type=chunk) - The period included **$172.2 million** of excess capacity production costs, **$7.1 million** of net workforce adjustments, and **$195.0 million** of net forward loss charges[268](index=268&type=chunk) [SG&A and Research and Development](index=50&type=section&id=SG%26A%20and%20Research%20and%20Development) SG&A expense increased by **$32.1 million**, primarily due to the charge related to the former CEO's ruling and incremental expenses from the Belfast site, and research and development expense increased by **$6.2 million** - SG&A expense increased by **$32.1 million**, primarily due to the charge related to the former CEO's ruling and incremental expenses from the Belfast site[269](index=269&type=chunk) - Research and development expense increased by **$6.2 million** for the nine months ended September **30**, **2021**[269](index=269&type=chunk) [Restructuring Costs](index=50&type=section&id=Restructuring%20Costs) Restructuring costs decreased by **$60.3 million** to **$8.1 million**, reflecting lower cost-alignment and headcount reduction activities compared to the prior year, primarily related to McAlester and San Antonio site closures - Restructuring costs decreased by **$60.3 million** to **$8.1 million**, reflecting lower cost-alignment and headcount reduction activity, primarily related to McAlester and San Antonio site closures[270](index=270&type=chunk) [Operating (Loss) Income](index=50&type=section&id=Operating%20(Loss)%20Income) Operating loss improved by **$331.2 million** to (**$380.2 million**), reflecting decreased gross loss on sales and reductions in restructuring costs, with the prior year also including **$22.9 million** in loss on disposal charges - Operating loss improved by **$331.2 million** to (**$380.2 million**), driven by decreased gross loss on sales and reductions in restructuring costs[271](index=271&type=chunk) - The prior year included **$22.9 million** in loss on disposal charges related to long-lived assets on the B787 and A350 programs[271](index=271&type=chunk) [Interest Expense and Financing Fee Amortization](index=50&type=section&id=Interest%20Expense%20and%20Financing%20Fee%20Amortization) Interest expense and financing fee amortization increased by **$43.9 million**, primarily due to interest expense recognized on the repayable investment agreement with the UK Government (BEIS) - Interest expense and financing fee amortization increased by **$43.9 million**, primarily due to interest expense on the repayable investment agreement with the UK Government (BEIS)[272](index=272&type=chunk) [Other (Expense) Income, net](index=50&type=section&id=Other%20(Expense)%20Income%2C%20net) Other income, net, increased significantly to **$138.7 million** from a net expense of **$65.4 million**, primarily due to net pension income in the current year (including a curtailment gain from Shorts Pension closure) contrasting with a net pension loss in the prior year - Other income, net, increased to **$138.7 million** from a net expense of **$65.4 million**, primarily due to net pension income (including a curtailment gain from Shorts Pension closure) in the current period, contrasting with a net pension loss in the prior year[273](index=273&type=chunk) [Provision for Income Taxes](index=50&type=section&id=Provision%20for%20Income%20Taxes) The effective tax rate for the nine months ended September 30, 2021, was **0.15%**, significantly lower than **37.3%** in the prior year, with this decrease primarily due to the impact of valuation allowances recognized against U.S. and U.K. deferred tax assets, as the company reported a pre-tax loss - The effective tax rate for the nine months ended September **30**, **2021**, was **0.15%**, compared to **37.3%** in the prior year, primarily due to valuation allowances on U.S. and U.K. deferred tax assets[276](index=276&type=chunk)[277](index=277&type=chunk) - The net valuation allowance increased by **$122.5 million** in the U.S. and **$70.7 million** in the U.K. for the nine months ended September **30**, **2021**[275](index=275&type=chunk) [Segments (Fuselage, Propulsion, Wing, All Other)](index=51&type=section&id=Segments%20(Fuselage%2C%20Propulsion%2C%20Wing%2C%20All%20Other)) Fuselage Systems revenue increased by **9%** to **$1,410.5 million**, with operating margins improving to (**10%**) due to lower forward losses and higher B737 production, Propulsion Systems revenue increased by **27%** to **$716.2 million**, with operating margins improving to **9%** due to increased B737 MAX profit, Wing Systems revenue increased by **25%** to **$725.9 million**, with operating margins remaining relatively flat at (**7%**), and All Other segment revenue decreased by **$50.4 million** Segments (Fuselage, Propulsion, Wing, All Other) | Segment | 9 Months Ended Sep 30, 2021 Revenue ($M) | 9 Months Ended Oct 1, 2020 Revenue ($M) | 9 Months Ended Sep 30, 2021 Operating Margin (%) | 9 Months Ended Oct 1, 2020 Operating Margin (%) | |:---|:---|:---|:---|:---|\n| Fuselage Systems | 1,410.5 | 1,299.7 | (10%) | (33%) |\n| Propulsion Systems | 716.2 | 565.6 | 9% | (7%) |\n| Wing Systems | 725.9 | 582.2 | (7%) | (9%) |\n| All Other | 30.3 | 80.7 | N/A | N/A | - Fuselage Systems operating margins improved due to lower forward losses on B787 and A350 programs and greater profit from higher B737 program production rates[282](index=282&type=chunk) - Propulsion Systems operating margins improved due to increased profit on the B737 MAX program, lower forward losses on B787 and BR725 programs, and reduced restructuring and excess capacity costs[283](index=283&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is adversely affected by the B737 MAX grounding and COVID-19, and as of September 30, 2021, it had **$1,430.6 million** in cash and cash equivalents and **$3,594.5 million** in debt, with management believing current cash and operating cash flows, along with other liquidity sources, will be sufficient for the next twelve months and foreseeable future, and the company received **$227.9 million** of a **$300 million** federal income tax refund and sold **$1,487.7 million** of accounts receivable through factoring arrangements - Liquidity is adversely affected by the B737 MAX grounding and COVID-19 pandemic, with continued uncertainty regarding recovery[286](index=286&type=chunk) - As of September **30**, **2021**, the company had **$1,430.6 million** in cash and cash equivalents and a total debt balance of **$3,594.5 million**[287](index=287&type=chunk) - The company received **$227.9 million** of a **$300 million** federal income tax refund in Q3 **2021** and sold **$1,487.7 million** of accounts receivable through factoring arrangements for the nine months ended September **30**, **2021**[289](index=289&type=chunk)[290](index=290&type=chunk) [Cash Flows](index=53&type=section&id=Cash%20Flows) For the nine months ended September 30, 2021, net cash provided by operating activities was **$13.3 million**, a significant improvement from a **$612.8 million** outflow in the prior year, driven by improved operating income and working capital, while investing activities used **$106.4 million**, and financing activities used **$345.8 million**, primarily due to debt redemption Cash Flows | Cash Flow Activity | 9 Months Ended Sep 30, 2021 ($M) | 9 Months Ended Oct 1, 2020 ($M) | |:---|:---|:---|\n| Net cash provided by (used in) operating activities | 13.3 | (612.8) |\n| Net cash used in investing activities | (106.4) | (183.4) |\n| Net cash used in financing activities | (345.8) | (105.6) |\n| Net decrease in cash, cash equivalents and restricted cash | (442.7) | (905.1) |\n| Cash, cash equivalents, and restricted cash, end of period | 1,450.4 | 1,462.1 | - The **$626.1 million** increase in net cash inflow from operating activities was primarily due to improved operating income, working capital, and the income tax refund received[294](index=294&type=chunk) - The increased cash outflow from financing activities was primarily driven by the redemption of **$300 million** in Senior Floating Rate Notes in the current period[296](index=296&type=chunk) [Pension and Other Post-Retirement Benefit Obligations](index=54&type=section&id=Pension%20and%20Other%20Post-Retirement%20Benefit%20Obligations) The U.S. pension plan remained fully funded, with no anticipated cash contributions in **2021**, and the Shorts Pension plan was closed to future benefit accruals effective December **10**, **2021**, resulting in a **$61.0 million** curtailment gain, with projected contributions for **2021** including **$10.2 million** for U.S. SERP/medical plans and **$182.6 million** for U.K. Shorts Pension schemes - The U.S. pension plan remained fully funded at September **30**, **2021**, with no anticipated cash contributions for **2021**[297](index=297&type=chunk) - The Shorts Pension plan was closed to future benefit accruals effective December **10**, **2021**, resulting in a **$61.0 million** curtailment gain for the three and nine months ended September **30**, **2021**[298](index=298&type=chunk) - Projected contributions for **2021** include **$10.2 million** for U.S. SERP/medical plans and **$182.6 million** for U.K. Shorts Pension schemes[299](index=299&type=chunk) [Derivatives Accounted for as Hedges](index=55&type=section&id=Derivatives%20Accounted%20for%20as%20Hedges) The company terminated its **$150 million** interest rate swap agreement in February 2021, reclassifying a **$0.7 million** loss from AOCI to earnings, and also entered into foreign currency forward contracts with a notional amount of **$280.3 million** to hedge British Pound exposure, recognizing a **$5.5 million** loss in AOCI for the nine months ended September 30, 2021 - The **$150 million** interest rate swap agreement was terminated on February **24**, **2021**, resulting in a **$0.7 million** loss reclas