Spirit AeroSystems Holdings, Inc. [SPR] Filings

10-Q 1 spr-20240627.htm 10-Q spr-20240627

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 June 27, 2024


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

For the transition period from to

Commission File Number 001-33160

Spirit AeroSystems Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						20-2436320
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3801 South Oliver

Wichita, Kansas 67210

(Address of principal executive offices and zip code)

(316) 526-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 17, 2024, the registrant had 116,620,424 shares of Class A Common Stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS


	PART I — FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61


PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	66
Item 5.	Other Information	67
Item 6.	Exhibits	67
Signatures		70

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Operations

(unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
	($ in millions, except per share data)
Net revenues	$	1,491.9	$	1,364.7	$	3,194.7	$	2,796.1
Operating costs and expenses
Cost of sales	1,725.4		1,395.5		3,863.7		2,827.7
Selling, general and administrative	83.6		70.6		165.1		148.0

Restructuring costs	0.8		0.9		0.8		7.2
Research and development	13.4		13.2		24.0		23.8
Other operating expense	—		4.9		—		4.9
Total operating costs and expenses	1,823.2		1,485.1		4,053.6		3,011.6
Operating loss	(331.3)		(120.4)		(858.9)		(215.5)
Interest expense and financing fee amortization	(82.3)		(73.6)		(162.5)		(146.0)
Other income (expense), net	0.4		(9.9)		2.7		(127.3)
Loss before income taxes and equity in net income (loss) of affiliates	(413.2)		(203.9)		(1,018.7)		(488.8)
Income tax (provision) benefit	(2.1)		(3.0)		(13.1)		1.3
Loss before equity in net income (loss) of affiliates	(415.3)		(206.9)		(1,031.8)		(487.5)
Equity in net income (loss) of affiliates	0.2		0.5		0.1		(0.2)
Net loss	$	(415.1)	$	(206.4)	(1,031.7)		(487.7)
Less noncontrolling interest in earnings of subsidiary	(0.2)		0.1		(0.3)		0.2
Net loss attributable to common shareholders	$	(415.3)	$	(206.3)	$	(1,032.0)	$	(487.5)
Loss per share
Basic	$	(3.56)	$	(1.96)	$	(8.87)	$	(4.64)
Diluted	$	(3.56)	$	(1.96)	$	(8.87)	$	(4.64)

See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
	($ in millions)
Net loss	$	(415.1)	$	(206.4)	$	(1,031.7)	$	(487.7)
Changes in other comprehensive loss, net of tax:

Pension, SERP, and retiree medical adjustments, net of tax effect of ($0.3) and $0.2 for the three months ended, respectively, and $0.2 and ($16.4) for the six months ended, respectively.	(0.2)		(0.5)		0.1		48.7
Unrealized foreign exchange gain (loss) on intercompany loan, net of tax effect of $0.0 and ($0.4) for the three months ended, respectively, and $0.1 and ($0.8) for the six months ended, respectively.	0.1		0.6		(0.3)		1.5
Unrealized gain (loss) on cash flow hedges, net of tax effect of ($0.5) and ($1.1) for the three months ended, respectively, and $0.2 and ($1.1) for the six months ended, respectively.	0.3		0.5		(0.7)		7.7
Reclassification of (gain) loss on cash flow hedges to earnings, net of tax effect of $0.0 and $0.0 for the three months ended, respectively, and $0.0 and $0.0 for the six months ended, respectively.	1.3		(1.3)		0.1		2.1
Foreign currency translation adjustments	0.8		10.4		(4.5)		26.0
Total other comprehensive (loss) gain, net of tax	2.3		9.7		(5.3)		86.0
Less comprehensive income attributable to noncontrolling interest	(0.2)		0.1		(0.3)		0.2
Total comprehensive loss	$	(413.0)	$	(196.6)	$	(1,037.3)	$	(401.5)

See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited)


	June 27, 2024		December 31, 2023
	($ in millions)
Assets
Cash and cash equivalents	$	206.0	$	823.5
Restricted cash	—		0.1
Accounts receivable, net	560.0		585.5
Contract assets, short-term	1,005.3		522.9
Inventory, net	1,893.3		1,767.3
Other current assets	60.9		52.5
Total current assets	3,725.5		3,751.8
Property, plant and equipment, net	2,008.1		2,084.2
Right of use assets	88.8		92.1
Contract assets, long-term	16.0		—
Pension assets	41.4		33.5
Restricted plan assets	50.3		61.1
Deferred income taxes	0.1		0.1
Goodwill	631.2		631.2
Intangible assets, net	188.6		196.2
Other assets	108.6		99.9
Total assets	$	6,858.6	$	6,950.1
Liabilities
Accounts payable	$	1,113.9	$	1,106.8
Accrued expenses	429.1		420.1
Profit sharing	41.8		15.7
Current portion of long-term debt	77.4		64.8
Operating lease liabilities, short-term	9.6		9.1
Advance payments, short-term	102.9		38.3
Contract liabilities, short-term	165.1		192.6
Forward loss provision, short-term	351.7		256.6
Deferred revenue and other deferred credits, short-term	57.7		49.6
Other current liabilities	505.4		44.7
Total current liabilities	2,854.6		2,198.3
Long-term debt	3,984.0		4,018.7
Operating lease liabilities, long-term	80.4		84.3
Advance payments, long-term	257.9		301.9
Pension/OPEB obligation	28.4		30.3
Contract liabilities, long-term	181.4		161.3
Forward loss provision, long-term	568.3		224.1
Deferred revenue and other deferred credits, long-term	55.1		76.7
Deferred grant income liability - non-current	26.9		25.8
Deferred income taxes	18.7		9.1
Other non-current liabilities	316.4		315.5
Stockholders’ Equity
Common Stock, Class A par value $0.01, 200,000,000 shares authorized, 116,619,149 and 116,054,291 shares issued and outstanding, respectively	1.2		1.2
Additional paid-in capital	1,448.5		1,429.1
Accumulated other comprehensive loss	(94.9)		(89.6)
Retained earnings	(415.7)		616.3
Treasury stock, at cost (41,587,480 shares each period, respectively)	(2,456.7)		(2,456.7)
Total stockholders’ equity	(1,517.6)		(499.7)
Noncontrolling interest	4.1		3.8
Total equity	(1,513.5)		(495.9)
Total liabilities and equity	$	6,858.6	$	6,950.1

See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(unaudited)


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interest

	Shares	Amount												Total
	($ in millions, except share data)
Balance — December 31, 2023	116,054,291	$	1.2	$	1,429.1	$	(2,456.7)	$	(89.6)	$	616.3	$	3.8	$	(495.9)
Net loss	—	—		—		—		—		(616.7)		—		(616.7)


Stock-based compensation - ESPP	—	—		0.7		—		—		—		—		0.7
Employee equity awards	375,822	—		10.1		—		—		—		—		10.1

Net shares settled	(153,407)	—		(4.5)		—		—		—		—		(4.5)


Other	—	—		—		—		—		—		0.1		0.1
Other comprehensive loss	—	—		—		—		(7.6)		—		—		(7.6)
Balance — March 28, 2024	116,276,706	$	1.2	$	1,435.4	$	(2,456.7)	$	(97.2)	$	(0.4)	$	3.9	$	(1,113.8)
Net loss	—	—		—		—		—		(415.3)		—		(415.3)

Stock-based compensation - ESPP	—	—		0.5		—		—		—		—		0.5
Employee equity awards	92,745	—		9.4		—		—		—		—		9.4

Net shares settled	(22,048)	—		(0.6)		—		—		—		—		(0.6)
ESPP shares issued	271,746	—		3.8		—		—		—		—		3.8


Other	—	—		—		—		—		—		0.2		0.2
Other comprehensive loss	—	—		—		—		2.3		—		—		2.3
Balance — June 27, 2024	116,619,149	$	1.2	$	1,448.5	$	(2,456.7)	$	(94.9)	$	(415.7)	$	4.1	$	(1,513.5)


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interest

	Shares	Amount												Total
	($ in millions, except share data)
Balance — December 31, 2022	105,252,421	$	1.1	$	1,179.5	$	(2,456.7)	$	(203.9)	$	1,232.5	$	3.7	$	(243.8)
Net loss	—	—		—		—		—		(281.2)		—		(281.2)


Employee equity awards	266,321	—		9.0		—		—		—		—		9.0
Stock forfeitures	(230,108)	—		—		—		—		—		—		—
Net shares settled	(137,007)	—		(4.8)		—		—		—		—		(4.8)


Other	—	—		—		—		—		—		(0.1)		(0.1)

Other comprehensive gain	—	—		—		—		76.3		—		—		76.3
Balance — March 30, 2023	105,151,627	$	1.1	$	1,183.7	$	(2,456.7)	$	(127.6)	$	951.3	$	3.6	$	(444.6)
Net loss	—	—		—		—		—		(206.3)		—		(206.3)

Employee equity awards	94,563	—		10.2		—		—		—		—		10.2
Stock forfeitures	(504)	—		—		—		—		—		—		—
Net shares settled	(36,632)	—		(1.0)		—		—		—		—		(1.0)
ESPP shares issued	79,840	—		3.2		—		—		—		—		3.2


Other	—	—		—		—		—		—		(0.1)		(0.1)
Other comprehensive loss	—	—		—		—		9.7		—		—		9.7
Balance — June 29, 2023	105,288,894	$	1.1	$	1,196.1	$	(2,456.7)	$	(117.9)	$	745.0	$	3.5	$	(628.9)

(a) Cash dividends declared per common share were $0.00 and $0.00 for the three and six months ended June 27, 2024 and June 29, 2023, respectively.

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	For the Six Months Ended
	June 27, 2024		June 29, 2023
Operating activities	($ in millions)
Net loss	$	(1,031.7)	$	(487.7)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense	155.6		157.7
Amortization of deferred financing fees	3.4		3.5
Accretion of customer supply agreement	1.4		1.2
Employee stock compensation expense	20.7		19.8
Loss from derivative instruments	—		2.1
(Gain) loss from foreign currency transactions	(5.3)		8.5

Loss on disposition of assets	0.8		0.3
Deferred taxes	10.2		(11.5)
Pension and other post-retirement plans (income) expense	(5.6)		62.6
Grant liability amortization	(0.6)		(0.6)
Equity in net (income) loss of affiliates	(0.1)		0.2
Forward loss provision	439.4		(32.5)
Gain on settlement of financial instrument	(0.8)		(0.9)
Change in fair value of acquisition consideration and settlement	—		(2.4)
Gain on settlement of New Market Tax Credit incentive program	(5.7)		—
Changes in assets and liabilities
Accounts receivable, net	30.6		(17.1)
Inventory, net	(131.9)		(161.4)
Contract assets	(498.8)		(92.7)
Accounts payable and accrued liabilities	7.6		88.8
Profit sharing/deferred compensation	26.1		(26.9)
Advance payments	20.6		41.1
Income taxes receivable/payable	1.4		7.2
Contract liabilities	(7.3)		(7.3)
Pension plans employer contributions	(1.4)		178.4
Deferred revenue and other deferred credits	(11.2)		21.7
Other	1.5		18.9
Net cash used in operating activities	(981.1)		(229.0)
Investing activities
Purchase of property, plant, and equipment	(60.3)		(51.3)



Net cash used in investing activities	(60.3)		(51.3)
Financing activities


Customer financing	465.0		180.0
Borrowings under revolving credit facility	—		1.6
Principal payments of debt	(30.9)		(31.2)
Payments on term loans	(1.5)		(1.5)

Payment of New Market Tax Credit incentive program financing	(1.9)		—



Taxes paid related to net share settlement awards	(5.1)		(5.9)
Proceeds from issuance of ESPP stock	3.8		2.6
Debt issuance and financing costs	(0.5)		(0.5)




Net cash provided by financing activities	428.9		145.1
Effect of exchange rate changes on cash and cash equivalents	0.7		4.8
Net decrease in cash, cash equivalents, and restricted cash for the period	(611.8)		(130.4)
Cash, cash equivalents, and restricted cash, beginning of period	845.9		678.4
Cash, cash equivalents, and restricted cash, end of period	$	234.1	$	548.0

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Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
	For the Six Months Ended
	June 27, 2024		June 29, 2023
Cash and cash equivalents, beginning of the period	$	823.5	$	658.6
Restricted cash, short-term, beginning of the period	0.1		0.2
Restricted cash, long-term, beginning of the period	22.3		19.6
Cash, cash equivalents, and restricted cash, beginning of the period	$	845.9	$	678.4

Cash and cash equivalents, end of the period	$	206.0	$	525.7
Restricted cash, short-term, end of the period	—		0.2
Restricted cash, long-term, end of the period	28.1		22.1
Cash, cash equivalents, and restricted cash, end of the period	$	234.1	$	548.0

See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

1. Organization, Basis of Interim Presentation and Recent Developments

Unless the context otherwise indicates or requires, as used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our,” and the “Company” refer to Spirit AeroSystems Holdings, Inc. and its consolidated subsidiaries. References to “Spirit” refer only to our subsidiary, Spirit AeroSystems, Inc., and references to “Holdings” refer only to Spirit AeroSystems Holdings, Inc.

The Company provides manufacturing and design expertise in a wide range of fuselage, propulsion, and wing products and services for aircraft original equipment manufacturers (“OEM”) and operators through its subsidiaries including Spirit. The Company’s headquarters are in Wichita, Kansas, with manufacturing and assembly facilities in Tulsa, Oklahoma; Prestwick, Scotland; Wichita, Kansas; Kinston, North Carolina; Subang, Malaysia; Saint-Nazaire, France; Biddeford, Maine; Woonsocket, Rhode Island; Belfast, Northern Ireland; Casablanca, Morocco; and Dallas, Texas.

The accompanying unaudited interim condensed consolidated financial statements include the Company’s financial statements and the financial statements of its majority-owned or controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company’s fiscal quarters are 13 weeks in length. Since the Company’s fiscal year ends on December 31, the number of days in the Company’s first and fourth quarters varies slightly from year to year. All intercompany balances and transactions have been eliminated in consolidation.

As part of the monthly consolidation process, the Company’s international subsidiaries that have functional currencies other than the U.S. dollar are translated to U.S. dollars using the end-of-month translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts. The subsidiaries in Prestwick, Scotland and Subang, Malaysia use the British pound as their functional currency. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments and elimination of intercompany balances and transactions) considered necessary to fairly present the results of operations for the interim period. The results of operations for the six months ended June 27, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

In connection with the preparation of the condensed consolidated financial statements, the Company evaluated subsequent events through the date the financial statements were issued. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (the “2023 Form 10-K”).

The Company’s significant accounting policies are described in Note 3 Summary of Significant Accounting Policies to our consolidated financial statements in the 2023 Form 10-K.

Agreement and Plan of Merger with The Boeing Company

On June 30, 2024, the Company entered into an Agreement and Plan of Merger with The Boeing Company, (“Boeing”). See Note 26 Subsequent Events.

Liquidity

These consolidated financial statements have been prepared in accordance with US generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

The Company has incurred net losses of $1,032.0, $616.2, $545.7, and $540.8, for the six months ended June 27, 2024, and the years ended December 31, 2023, 2022, and 2021, respectively, and cash used in operating activities of $981.1, $225.8, $394.6, and $63.2, respectively for the same periods. The Company’s cash and cash equivalents were $206.0 and $823.5 as of June 27, 2024, and December 31, 2023, respectively. The B737 MAX 9 derivative fleet was temporarily grounded by the Federal Aviation Administration (“FAA”) while certain safety inspections were completed and to allow the FAA time to review

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

any required maintenance actions following the January 5, 2024 in-flight incident on a B737 MAX 9 aircraft flown by Alaska Airlines. The B737 MAX 9 fleet returned to service on January 26, 2024, after mandatory inspections were completed. The Company is participating in investigations relating to this incident. Management is currently unable to fully estimate what impact this incident, including any impacts of investigations, will have on the Company’s near or long-term financial position, results of operations and cash flows.

Further, certain changes made to the production and delivery process implemented by Boeing have had an immediate impact to the Company’s results of operations and cash flows. On March 2, 2024, Boeing announced they would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work. As a result, the Company has experienced higher levels of inventory and contract assets and lower operational cash flows due to the inability to physically ship and invoice end items to Boeing in a timeframe aligned with production activities. Additionally, during late 2023 the Company was preparing its production line to accommodate an expected increase in production rates that has now been delayed due to the FAA’s imposed limitation on Boeing increasing its production rates. The Company’s ability to align its factory costs which include both internal and supply chain related spending to react to sudden changes in customer-determined production rates will likely have a material impact on the Company’s results of operations and cash flows. On April 18, 2024, the Company entered into a Memorandum of Agreement (“MOA”) with Boeing, where Boeing advanced $425.0 to the Company in order to support the Company’s liquidity. This MOA was amended on June 20, 2024 to increase the advance by an additional $40.0 and to revise certain repayment amounts and extend near-term repayment dates. As of the date of this filing, the Company has repaid $40.0 of the MOA advances. The Company’s liquidity has been impacted by higher levels of inventory and contract assets, lower operational cash flows due to a decrease in expected deliveries to Boeing, higher factory costs to maintain rate readiness (attributed to product quality verification process enhancements, including moving such processes from Renton, Washington, to Wichita, Kansas), Boeing no longer allowing for traveled work on the B737 fuselage to its factories, and the FAA’s imposition of limitations on Boeing increasing production rates. Based upon expected production volumes and deliveries, the terms of this advance require installments be repaid through October 2024.

Additionally, the Company was in negotiations with Airbus related to pricing adjustments on the A220 and A350 programs during 2023 and continuing into 2024 with a goal of completing those negotiations in early 2024. As a result of the announcement on March 1, 2024, that the Company is currently engaged in discussions with Boeing about a possible acquisition of the Company by Boeing, followed by the signing of the Merger Agreement and Term Sheet on June 30, 2024, there was a shift in the strategic discussions with Airbus relevant to pricing adjustments on the A220 and A350 programs, and management has determined that it is uncertain on timing or amount of any pricing adjustments that should be included in its current forecast.

These recent developments in 2024 resulted in a significant reduction in projected revenue and operating cash flows over the next twelve months. As of August 5, 2024, management has developed a plan to improve liquidity because of the changes highlighted above. These plans are primarily dependent upon finalization of active discussions related to the timing or amounts of repayment for certain customer advances, and management is also evaluating additional strategies to improve liquidity to support operations, including, but not limited to, additional customer advances, and restructuring of operations to increase efficiency and decrease expenses. These plans are dependent on many factors, including achieving forecasted B737 deliveries, or negotiating pricing adjustments on certain loss-making programs. Management expects these plans will sufficiently improve the Company’s liquidity needs to enable continuation of operations for at least the next twelve months.

2. New Accounting Pronouncements

In December 2022, the FASB issued ASU No. 2022-06, which defers the sunset date of Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting from December 31, 2022 to December 31, 2024. ASU No. 2022-06 was effective upon issuance. ASU No. 2022-06 provides temporary optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting, providing optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. To date, the Company has not had a modification to which the application of this guidance is applicable. The Company will continue evaluating the potential impact of adopting this guidance on its consolidated financial statements, the impact of which is not expected to be material.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU No. 2023-07 is effective on a retrospective basis for fiscal years beginning after December 15, 2023,

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted, including in an interim period. The Company will continue evaluating the potential impact of adopting this guidance.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies FASB Accounting Standards Codification 740 to enhance the transparency and decision usefulness of income tax disclosures. ASU No. 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. The Company has not elected early adoption and implementation of this guidance. The guidance will be adopted and implemented for the Company’s fiscal year beginning January 1, 2025. The adoption is not expected to have a material impact to our financial position or results of operations.

In March 2024, the FASB issued ASU No. 2024-01 Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards which clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or if it is not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity regarding scope application. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption. ASU 2024-01 is effective January 1, 2025, including interim periods, and is not expected to have a significant impact on our financial statements.

In March 2024, the FASB issued ASU 2024-02 Codification Improvements - Amendments to Remove References to the Concepts Statements which amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and is not expected to have a significant impact on our financial statements.

3. Changes in Estimates

The Company has a periodic forecasting process in which management assesses the progress and performance of the Company’s programs. This process requires management to review each program’s progress by evaluating the program schedule, changes to identified risks and opportunities, changes to estimated revenues and costs for the accounting contracts (and options if applicable), and any outstanding contract matters. Risks and opportunities include but are not limited to management’s judgment about the cost associated with the Company’s ability to achieve the schedule, technical requirements (e.g., a newly-developed product versus a mature product), and any other program requirements. Due to the span of years it may take to completely satisfy the performance obligations for the accounting contracts (and options, if any) and the scope and nature of the work required to be performed on those contracts, the estimation of total revenue and costs is subject to many variables and, accordingly, is subject to change based upon judgment. The Company’s estimate of costs depends on maintaining continuing, uninterrupted production at its manufacturing facilities and its suppliers’ facilities. The continued fragility of the global aerospace supply chain may lead to interruptions in deliveries of or increased prices for components or raw materials used in the Company’s products, labor disruptions, and could delay production and/or materially adversely affect the Company’s business. When adjustments in estimated total consideration or estimated total cost are required, any changes from prior estimates for fully satisfied performance obligations are recognized in the current period as a cumulative catch-up adjustment for the inception-to-date effect of such changes. Cumulative catch-up adjustments are driven by several factors including production efficiencies, assumed rate of production, the rate of overhead absorption, changes to scope of work, and contract modifications. Cumulative catch-up adjustments are primarily related to changes in the estimated margin of contracts with performance obligations that are satisfied over time.

Changes in estimates could materially adversely affect the Company’s future financial performance. While certain increases in raw material costs can generally be passed on to the Company’s customers, in most instances the Company must fully absorb cost overruns. Some of the factors that may cause the costs incurred in fulfilling contracts to vary substantially from current estimates are technical problems, production rate changes, production stoppages, materials shortages, supplier difficulties, realization targets, existence of and execution to recovery plans caused by these factors, and multiple other events, including those identified in Item 1A. “Risk Factors” of the 2023 Form 10-K. The risk particularly applies to products such as the B787, A220, and A350, which are in forward loss positions.

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

During the second quarter ended June 27, 2024, the Company recognized unfavorable changes in estimates of $265.2, which included net forward loss charges of $213.5, and unfavorable cumulative catch-up adjustments related to periods prior to the second quarter of 2024 of $51.7. The forward losses in the second quarter were primarily driven by current production performance, and supply chain cost growth on the A350 and A220 programs, schedule changes, additional labor and supply chain cost growth on the B787 program, and increased costs related to supply chain growth on the B767 program. The forward losses on the B787 program include net incremental losses for anticipated performance obligations from 2026 to 2028 of $62.4 related to the production of units through line unit 1605. The unfavorable cumulative catch-up adjustments primarily relate to increased production costs associated with changes implemented by Boeing in March 2024 to introduce a new product verification process in Wichita, KS on the B737 program and schedule changes and increased production costs on the B777 program. This change in business process for the B737 units has delayed delivery acceptances and caused a buildup of undelivered units in Wichita, KS. Additionally, the Company is maintaining a higher cost profile for an expected increase in production rates that has now been delayed due to the FAA’s imposed limitation on Boeing increasing its production rates, and production cost overruns on the A320 program.

During the second quarter ended June 29, 2023, the Company recognized unfavorable changes in estimates of $126.3, which included net forward loss charges of $104.7, and unfavorable cumulative catch-up adjustments related to periods prior to the second quarter of 2023 of $21.6. The forward losses in the quarter ended June 29, 2023 were primarily driven by supply chain costs including certain non-recurring cost estimates, schedule revisions, supplier price negotiations, and schedule changes and other supply chain cost growth on the A350 program, additional labor and supply chain cost growth on the B787 program, and foreign exchange movement and supply chain issues on the A220 program. Forward losses for the quarter ended June 29, 2023 also include strike disruption charges of $28.3 reflected as changes in estimates during the period related to wages, other employee benefits, and production schedule disruptions. For additional discussion of strike impacts, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Form 10-K. The unfavorable cumulative catch-up adjustments primarily relate to increased labor costs resulting from negotiations with the International Association of Machinists and Aerospace Workers (“IAM”) union, increased supply chain costs on the B737 program, and production cost overruns, estimates of the impact of production schedule changes, and increased costs for materials, freight, labor and overhead on the A320 program.

Changes in estimates are summarized below:


	For the Three Months Ended				For the Six Months Ended
Changes in Estimates	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
(Unfavorable) Favorable Cumulative Catch-up Adjustment by Segment
Commercial	$	(48.8)	$	(15.7)	$	(71.9)	$	(20.9)
Defense & Space	(2.9)		(5.9)		(2.5)		(6.3)
Aftermarket	—		—		—		—
Total (Unfavorable) Favorable Cumulative Catch-up Adjustment	$	(51.7)	$	(21.6)	$	(74.4)	$	(27.2)

Changes in Estimates on Loss Programs (Forward Loss) by Segment
Commercial	$	(212.2)	$	(101.9)	$	(706.0)	$	(211.8)
Defense & Space	(1.3)		(2.8)		(2.9)		(2.9)
Aftermarket	—		—		—		—
Total Changes in Estimates (Forward Loss) on Loss Programs	$	(213.5)	$	(104.7)	$	(708.9)	$	(214.7)

Total Change in Estimate	$	(265.2)	$	(126.3)	$	(783.3)	$	(241.9)
EPS Impact (diluted per share based upon applicable forecasted effective tax rate)	$	(2.30)	$	(1.20)	$	(6.82)	$	(2.30)

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

4. Accounts Receivable and Allowance for Credit Losses

Accounts Receivable, net

Accounts receivable represent the Company’s unconditional rights to consideration, subject to the payment terms of the contract, for which only the passage of time is required before payment. Unbilled receivables are reflected under contract assets on the Condensed Consolidated Balance Sheets. See also Allowance for Credit Losses, below.

Accounts receivable, net consists of the following:


	June 27, 2024		December 31, 2023
Trade receivables	$	534.2	$	555.8
Other	38.9		42.0
Less: allowance for credit losses	(13.1)		(12.3)
Accounts receivable, net	$	560.0	$	585.5

The Company has agreements (through its subsidiaries) to sell, on a revolving basis, certain trade accounts receivable balances with Boeing, Airbus Group SE and its affiliates (collectively, “Airbus”), and Rolls-Royce PLC and its affiliates (collectively, “Rolls-Royce”) to third-party financial institutions. These programs were primarily entered into as a result of customers seeking payment term extensions with the Company and they continue to allow the Company to monetize the receivables prior to their payment date, subject to payment of a discount. No guarantees are delivered under the agreements. The Company’s ability to continue using such agreements is primarily dependent upon the strength of the applicable customer’s financial condition. Transfers under these agreements are accounted for as sales of receivables resulting in the receivables being derecognized from the Company’s Condensed Consolidated Balance Sheets. For the six months ended June 27, 2024, $1,613.6 of accounts receivable were sold via these arrangements. The proceeds from these sales of receivables are included in cash from operating activities in the Condensed Consolidated Statements of Cash Flows. The recorded net loss on sale of receivables was $21.5 for the six months ended June 27, 2024 and is included in other income and expense. See Note 20 Other Income (Expense), Net.

Allowance for Credit Losses

During the six months ended June 27, 2024, there have been no significant changes in the factors that influenced management’s current estimate of expected credit losses, nor changes to the Company’s accounting policies or Current Expected Credit Losses methodology. The beginning balances, current period activity, and ending balances of the allocation for credit losses on accounts receivable and contract assets were not material.

5. Contract Assets and Contract Liabilities

Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets, current are those that are expected to be billed to our customer within 12 months. Contract assets, long-term are those that are expected to be billed to our customer over periods greater than 12 months. No impairments to contract assets were recorded for the period ended June 27, 2024 or the period ended June 29, 2023. See also Note 4 Accounts Receivable and Allowance for Credit Losses.

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

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)


	June 27, 2024		December 31, 2023		Change
Contract assets	$	1,021.3	$	522.9	$	498.4
Contract liabilities	(346.5)		(353.9)		7.4
Net contract assets (liabilities)	$	674.8	$	169.0	$	505.8

For the period ended June 27, 2024, the increase in contract assets reflects the net impact of more over time revenue recognition in relation to billed revenues during the period as well as the impact of changes implemented by Boeing in March 2024 to introduce a new product verification process in Wichita, KS. This change in business process has delayed delivery acceptances and caused a buildup of undelivered units in Wichita, KS. The decrease in contract liabilities reflects the net impact of less deferred revenues recorded in excess of revenue recognized during the period. The Company recognized $36.6 of revenue that was included in the contract liability balance at the beginning of the period.


	June 29, 2023		December 31, 2022		Change
Contract assets	$	597.4	$	502.2	$	95.2
Contract liabilities	(349.4)		(356.4)		7.0
Net contract assets (liabilities)	$	248.0	$	145.8	$	102.2

For the period ended June 29, 2023, the increase in contract assets reflects the net impact of more over time revenue recognition in relation to billed revenues during the period. The decrease in contract liabilities reflects the net impact of less deferred revenues recorded in excess of revenue recognized during the period. The Company recognized $53.9 of revenue that was included in the contract liability balance at the beginning of the period.

6. Revenue Disaggregation and Outstanding Performance Obligations

Disaggregation of Revenue

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

The following tables show disaggregated revenues for the periods ended June 27, 2024 and June 29, 2023:


	For the Three Months Ended				For the Six Months Ended
Revenue	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
Contracts with performance obligations satisfied over time	$	1,053.1	$	999.3	$	2,335.2	$	2,112.1
Contracts with performance obligations satisfied at a point in time	438.8		365.4		859.5		684.0
Total Revenue	$	1,491.9	$	1,364.7	$	3,194.7	$	2,796.1

The following table disaggregates revenue by major customer:


	For the Three Months Ended				For the Six Months Ended
Customer	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
Boeing	$	862.3	$	835.6	$	1,950.9	$	1,756.7
Airbus	337.1		274.7		654.2		542.4
Other	292.5		254.4		589.6		497.0
Total Revenue	$	1,491.9	$	1,364.7	$	3,194.7	$	2,796.1

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

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


	For the Three Months Ended				For the Six Months Ended
Location	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
United States	$	1,123.1	$	1,074.1	$	2,473.8	$	2,223.8
International
United Kingdom	158.6		171.5		315.9		341.8
Other	210.2		119.1		405.0		230.5
Total International	368.8		290.6		720.9		572.3
Total Revenue	$	1,491.9	$	1,364.7	$	3,194.7	$	2,796.1

Remaining Performance Obligations

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


	Remaining in 2024		2025		2026		2027 and after
Unsatisfied performance obligations	$	2,540.1	$	3,912.1	$	1,365.9	$	1,153.7

7. Inventory

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


	June 27, 2024		December 31, 2023
Raw materials	$	464.8	$	414.4
Work-in-process(1)	1,396.1		1,283.7
Finished goods	12.7		48.4
Product inventory	1,873.6		1,746.5
Capitalized pre-production	19.7		20.8
Total inventory, net	$	1,893.3	$	1,767.3

(1)Work-in-process inventory includes direct labor, direct material, overhead, and purchases on contracts for which revenue is recognized at a point in time as well as sub-assembly parts that have not been issued to production on contracts for which revenue is recognized over time using an input method. For the periods ended June 27, 2024 and December 31, 2023, work-in-process inventory includes $331.1 and $262.0, respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the periods.

Product inventory, summarized in the table above, is shown net of valuation reserves of $150.2 and $150.2 as of June 27, 2024 and December 31, 2023, respectively.

Excess capacity and abnormal production costs are excluded from inventory and recognized as expense in the period incurred. Cost of sales for the three and six months ended June 27, 2024 includes period expense of $46.3 and $72.4, respectively, for excess capacity production costs related to temporary B737 MAX and A220 production schedule changes, and $0.8 of restructuring costs. Cost of sales for the three and six months ended June 29, 2023 includes period expense of $53.2 and $96.5, respectively, for excess capacity production costs related to temporary B737 MAX, A320 and A220 production schedule

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

changes, $0.9 and $7.2, respectively, of restructuring costs, and abnormal production costs of $7.3 related to the temporary production pause, partially offset by ($2.4) of benefit related to the settlement of a contingent consideration obligation related to a prior year acquisition.

8. Property, Plant and Equipment, net

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


	June 27, 2024		December 31, 2023
Land	$	30.5	$	30.5
Buildings (including improvements)	1,316.6		1,307.6
Machinery and equipment	2,491.5		2,460.6
Tooling	1,074.1		1,064.8
Capitalized software	339.5		338.4
Construction-in-progress	133.3		119.0
Total	5,385.5		5,320.9
Less: accumulated depreciation	(3,377.4)		(3,236.7)
Property, plant and equipment, net	$	2,008.1	$	2,084.2

Capitalized interest was $1.6 and $1.8 for the three months ended June 27, 2024 and June 29, 2023, respectively, and $2.8 and $3.4 for the six months ended June 27, 2024 and June 29, 2023, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs of $53.6 and $49.6 for the three months ended June 27, 2024 and June 29, 2023, respectively, and $97.7 and $92.3 for the six months ended June 27, 2024 and June 29, 2023, respectively.

The Company capitalizes certain costs, such as software coding, installation, and testing, that are incurred to purchase or to create and implement internal-use computer software. Depreciation expense related to capitalized software was $4.6 and $5.8 for the three months ended June 27, 2024 and June 29, 2023, respectively, and $9.0 and $11.9 for the six months ended June 27, 2024 and June 29, 2023, respectively.

The Company reviews capital and amortizing intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the period ended June 27, 2024, there were no events which would require the Company to update its impairment analysis.

9. Leases

The Company determines if an arrangement is a lease at the inception of a signed agreement. Operating leases are included in right-of-use (“ROU”) assets (long-term), short-term operating lease liabilities, and long-term operating lease liabilities on the Company’s Condensed Consolidated Balance Sheets. Finance leases are included in Property, Plant and Equipment, current maturities of long-term debt, and long-term debt.

ROU assets represent the right of the Company to use an underlying asset for the length of the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

To determine the present value of lease payments, the Company uses its estimated incremental borrowing rate or the implicit rate, if readily determinable. The estimated incremental borrowing rate is based on information available at the lease commencement date, including any recent debt issuances and publicly available data for instruments with similar characteristics. The ROU asset also includes any lease payments made and excludes lease incentives.

The Company’s lease terms may include options to extend or terminate the lease and, when it is reasonably certain that an option will be exercised, those options are included in the net present value calculation. Leases with a term of 12 months or

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

less, which are primarily related to automobiles and manufacturing equipment, are not recorded on the Condensed Consolidated Balance Sheets. The aggregate amount of lease cost for leases with a term of 12 months or less is not material.

The Company has lease agreements that include lease and non-lease components, which are generally accounted for separately. For certain leases (primarily related to IT equipment), the Company does account for the lease and non-lease components as a single lease component. A portfolio approach is applied to effectively account for the ROU assets and liabilities for those specific leases referenced above. The Company does not have any material leases containing variable lease payments or residual value guarantees. The Company also does not have any material subleases.

The Company currently has operating and finance leases for items such as manufacturing facilities, corporate offices, manufacturing equipment, transportation equipment, and vehicles. The majority of the Company’s active leases have remaining lease terms that range between less than one year to 17 years, some of which include options to extend the leases for up to 30 years, and some of which include options to terminate the leases within one year.

Components of lease expense:


	For the Three Months Ended				For the Six Months Ended
	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
Operating lease cost	$	3.6	$	3.5	$	7.1	$	7.2
Finance lease cost:
Amortization of assets	10.0		8.5		19.6		17.1
Interest on lease liabilities	1.9		2.0		4.0		3.8
Total net lease cost	$	15.5	$	14.0	$	30.7	$	28.1

Supplemental cash flow information related to leases was as follows:


	For the Three Months Ended				For the Six Months Ended
	June 27, 2024		June 29, 2023		June 27, 2024		June 29, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3.7	$	3.5	$	7.4	$	7.0
Operating cash flows from finance leases	$	1.9	$	1.9	$	4.0	$	3.8
Financing cash flows from finance leases	$	13.2	$	12.6	$	26.5	$	23.9

ROU assets obtained in exchange for lease obligations:
Operating leases	$	1.2	$	0.4	$	1.4	$	0.5

Supplemental balance sheet information related to leases:


	June 27, 2024		December 31, 2023
Finance leases:
Property and equipment, gross	$	341.2	$	336.9
Accumulated amortization	(155.5)		(135.8)
Property and equipment, net	$	185.7	$	201.1

The weighted average remaining lease term as of June 27, 2024 for operating and finance leases was 33.8 years and 4.6 years, respectively. The weighted average discount rate as of June 27, 2024 for operating and finance leases was 6.2% and 6.4%, respectively. The weighted average remaining lease term as of December 31, 2023 for operating and finance leases was

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

33.2 years and 4.7 years, respectively. The weighted average discount rate as of December 31, 2023 for operating and finance leases was 6.2% and 6.3%, respectively. See Note 14 Debt for current and non-current finance lease obligations.

As of June 27, 2024, remaining maturities of lease liabilities were as follows:


	2024		2025		2026		2027		2028		2029 and thereafter		Total Lease Payments		Less: Imputed Interest		Total Lease Obligations
Operating Leases	$	7.5	$	14.8	$	12.3	$	9.7	$	8.8	$	174.0	$	227.1	$	(137.1)	$	90.0
Financing Leases	$	27.2	$	43.6	$	28.3	$	13.0	$	6.9	$	22.3	$	141.3	$	(19.1)	$	122.2

As of June 27, 2024, the Company had additional operating and financing lease commitments that have not yet commenced of approximately $0.5 and $6.5, respectively, for manufacturing equipment, software, and facilities that are in various phases of construction or customization for the Company’s ultimate use, with lease terms between 3 and 5 years. The Company’s involvement in the construction and design process for these assets is generally limited to project management.

10. Other Assets, Goodwill, and Intangible Assets

Other current assets are summarized as follows:


	June 27, 2024		December 31, 2023
Prepaid expenses	$	47.8	$	34.8
Income tax receivable	3.2		5.3
Other assets - short-term	9.9		12.4
Total other current assets	$	60.9	$	52.5

Other assets are summarized as follows:


	June 27, 2024		December 31, 2023
Deferred financing
Deferred financing costs	$	—	$	0.9
Less: Accumulated amortization - deferred financing costs	—		(0.9)
Deferred financing costs, net	$	—	$	—
Other

Supply agreements (1)	$	1.8	$	3.5
Equity in net assets of affiliates	0.8		0.8
Restricted cash - collateral requirements	28.1		22.3
Rotables	45.6		44.0
Other	32.3		29.3
Total other long-term assets	$	108.6	$	99.9

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

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

Goodwill is summarized as follows:


			Changes in Goodwill Balance
	Balance at								Balance at
Segment	December 31, 2023		Acquisitions		Adjustments/Other		Currency Exchange		June 27, 2024
Commercial	$	296.6	$	—	$	—	$	—	$	296.6
Defense & Space	$	13.2	$	—	$	—	$	—	$	13.2
Aftermarket	$	321.4	$	—	$	—	$	—	$	321.4
	$	631.2	$	—	$	—	$	—	$	631.2

The total goodwill value includes no accumulated impairment loss in any of the periods presented. The Company assesses goodwill for impairment annually or more frequently if events or circumstances indicate that the fair value of a reporting unit that includes goodwill may be lower than its carrying value. For the period ended June 27, 2024, there were no events or circumstances which would require the Company to update its goodwill impairment analysis.

Intangible assets are summarized as follows:


	June 27, 2024		December 31, 2023
Intangible assets

Favorable leasehold interests	$	2.8	$	2.8
Developed technology asset	103.1		103.1
Customer relationships intangible asset	139.6		139.6

Total intangible assets	245.5		245.5

Less: Accumulated amortization - favorable leasehold interest	(2.2)		(2.1)
Accumulated amortization - developed technology asset	(25.3)		(21.9)
Accumulated amortization - customer relationship	(29.4)		(25.3)
Intangible assets, net	$	188.6	$	196.2

Amortization expense was $3.8 and $3.9 for the for the three months ended June 27, 2024 and June 29, 2023, respectively, and $7.6 and $7.6 for the six months ended June 27, 2024 and June 29, 2023, respectively.

The amortization for each of the five succeeding years relating to intangible assets currently recorded in the Condensed Consolidated Balance Sheets and the weighted average amortization is estimated to be the following as of June 27, 2024:


Year	Customer relationships		Favorable leasehold interest		Developed technology		Total
remaining in 2024	$	4.1	$	0.1	$	3.4	$	7.6
2025	8.2		0.1		6.9		15.2
2026	8.2		0.1		6.9		15.2
2027	8.2		0.1		6.9		15.2
2028	8.2		0.1		6.9		15.2
2029	7.8		0.1		6.9		14.8

Weighted average amortization period	14.0 years		5.0 years		11.4 years		12.9 years

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

11. Advance Payments

Advances on the B787 Program. Boeing has made advance payments to Spirit under the B787 Special Business Provisions and General Terms Agreement (collectively, the “B787 Supply Agreement”) that are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. Advance repayments were initially scheduled to be spread evenly over the remainder of the first 1,000 B787 shipsets delivered to Boeing. On April 8, 2014, Spirit signed a memorandum of agreement with Boeing that suspended advance repayments related to the B787 program for a period of twelve months beginning April 1, 2014. Repayment recommenced on April 1, 2015, and any repayments that otherwise would have become due during such twelve-month period will offset the purchase price for shipsets 1001 through 1120. On December 21, 2018, Spirit signed a memorandum of agreement with Boeing that again suspended the advance repayments beginning with line unit 818. The advance repayments resumed in 2022 at a lower rate of $0.45 per shipset at line unit number 1135 and will continue through line number 1605.

In the event Boeing does not take delivery of a sufficient number of shipsets to repay the full amount of advances prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $27.0 due on December 15th of each year until the advance payments have been fully recovered by Boeing. As of June 27, 2024, the amount of advance payments received from Boeing under the B787 Supply Agreement and not yet repaid was approximately $176.9.

In support of tooling and capital expenditures for future production rate increases on the B787 program, the memorandum of agreement entered into on October 12, 2023 between Boeing and Spirit (the “2023 MOA”) included an agreement for Boeing to advance Spirit a total of $71.7 in quarterly installments beginning October 2023 through April 2025. Spirit will align the repayment plan to coincide with deliveries to Boeing beginning April 2025 through October 2027. In the event Boeing does not take delivery of a sufficient number of shipsets to repay the full amount of advance prior to October 31, 2027, the remaining balance up to the $71.7 will be due in the fourth quarter of 2027. As of June 27, 2024, the amount of advance payments received by Spirit from Boeing and not yet repaid was approximately $48.0.

Advances on the A350 Program. During the twelve months ended December 31, 2023, the Company received an advance payment from Airbus of $100.0 under an agreement between Airbus S.A.S. and Spirit AeroSystems (Europe) Limited (“Spirit Europe”) signed on June 23, 2023 (the “A350 Agreement”). The A350 Agreement provides for up to $100.0 of advances that are required to be repaid along with a nominal fee to Airbus by way of offset against the purchase price of A350 FLE shipset deliveries in 2025. To the extent actual deliveries in 2025 are insufficient to offset the advance amount, any amount not offset against deliveries will be due and payable to Airbus on December 31, 2025. In connection with the A350 Agreement, Spirit Europe has pledged certain program assets including work in process inventories and raw materials at Spirit’s Scotland facility in an amount sufficient to cover the advances. See also the disclosure under the heading Airbus Term Sheet in Note 26 Subsequent Events.

Advances on the A220 Program. During the three months ended March 28, 2024, the Company received an advance payment from Airbus of $17.0 under a term sheet agreement between Airbus Canada Limited Partnership (“Airbus Canada”) and Shorts Brothers PLC (the Company’s facilities located in Belfast, Northern Ireland), for short term funding for increased freight costs incurred in the period from January to March 2024. See also the disclosure under the heading “Airbus Term Sheet” in Note 26 Subsequent Events.

Airbus Term Sheet. See the disclosure under the heading “Airbus Term Sheet” in Note 26 Subsequent Events.

Other. The Advance payments, long-term line item on the Condensed Consolidated Balance Sheets for the period ended June 27, 2024 includes $18.9 related to payments received from an Aftermarket segment customer for contracted work that was impacted by the sanctions imposed by the U.S. and other governments on Russia following its invasion of Ukraine.

12. Fair Value Measurements

The FASB’s authoritative guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value

Table of Contents

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance discloses three levels of inputs that may be used to measure fair value:

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

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of the interest rate swaps and foreign currency hedge contracts.

Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

At June 27, 2024, the Company’s long-term debt includes a senior secured term loan and senior notes described further under Note 14 Debt. The estimated fair value of the Company’s debt obligations is based on the quoted market prices for such obligations or the historical default rate for debt with similar credit ratings. The following table presents the carrying amount and estimated fair value of long-term debt. See also Note 13 Derivative and Hedging Activities and Note 15 Pension and Other Post-Retirement Benefits.


	June 27, 2024					December 31, 2023
	Carrying Amount		Fair Value			Carrying Amount		Fair Value
Senior secured term loan B (including current portion)	$	572.0	$	575.6	(2)	$	571.0	$	573.1	(2)
Exchangeable senior notes due 2028	222.9		293.8		(2)	222.2		292.6		(2)
Senior notes due 2025	20.8		20.4		(1)	20.8		20.7		(1)
Senior secured notes due 2026	299.3		287.8		(1)	299.1		288.0		(1)
Senior notes due 2028	696.9		653.5		(1)	696.6		616.8		(1)
Senior secured first lien notes due 2029	889.1		959.0		(1)	888.4		973.0		(1)
Senior secured second lien notes due 2030	1,180.8		1,304.6		(1)	1,180.0		1,273.1		(1)
Total	$	3,881.8	$	4,094.7		$	3,878.1	$	4,037.3

(1)Level 1 Fair Value hierarchy

(2)Level 2 Fair Value hierarchy

13. Derivative and Hedging Activities

Derivatives Accounted for as Hedges

Cash Flow Hedges – Foreign Currency Forward Contract

The Company has entered into currency forward contracts, each designated as a cash flow hedge upon the date of execution, for the purpose of reducing the variability of cash flows and hedging against the foreign currency exposure for forecasted payroll, pension and vendor disbursements that are expected to be made in the British Pound Sterling. The hedging program implemented is intended to reduce foreign currency exposure, and the associated forward currency contracts hedge forecasted transactions through March 2025.

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Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

(U.S. Dollars in millions other than per share amounts)

The following table summarizes the notional amounts (representing the gross contract/notional amount of the derivatives outstanding) and fair values of the derivative instruments in the Condensed Consolidated Balance Sheets as of June 27, 2024, and December 31, 2023. The foreign currency exchange contracts are measured within Level 1 of the Fair Value hierarchy. See Note 12 Fair Value Measurements.


	Notional amount				Other assets				Other liabilities
	June 27, 2024		December 31, 2023		June 27, 2024		December 31, 2023		June 27, 2024		December 31, 2023
Derivatives designated as hedging instruments:
Foreign currency exchange contracts	$	177.6	$	169.1	$	2.1	$	3.0	$	—	$	—
Total derivatives at fair value					$	2.1	$	3.0	$	—	$	—

Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the hedged transaction settles. The gain (loss) recognized in AOCI associated with our hedging transactions is presented in the following table:

Three Months Ended

Six Months Ended

June 27, 2024

June 29, 2023

June 27, 2024

June 29, 2023

Recognized in total other comprehensive loss:

Foreign currency exchange contracts

0.8