UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

(Mark One)

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

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

Delaware		20-2436320
(State of Incorporation)		(I.R.S. Employer
		Identification Number)

3801 South Oliver
Wichita, Kansas 67210
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code:
(316) 526-9000

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

     Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

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

     As of August 3, 2009, the registrant had outstanding 104,665,952 shares of class A common stock, $0.01 par value per share and 34,281,016 shares of class B common stock, $0.01 par value per share.

 

 

TABLE OF CONTENTS

				Page
PART I- FINANCIAL INFORMATION
Item 1.		Condensed Consolidated Financial Statements (unaudited)			3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			37
Item 4.		Controls and Procedures			37
PART II- OTHER INFORMATION
Item 1.		Legal Proceedings			38
Item 1A.		Risk Factors			38
Item 4.		Submission of Matters to a Vote of Security Holders			40
Item 6.		Exhibits			41
Signatures					42
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Operations
(unaudited)

		For the Three								For the Six
		Months Ended								Months Ended
		July 2, 2009				June 26, 2008				July 2, 2009				June 26, 2008
		($ in millions, except per share data)
Net revenues		$	1,059.6			$	1,062.1			$	1,947.0			$	2,098.5
Operating costs and expenses
Cost of sales			1,021.6				874.5				1,758.9				1,731.8
Selling, general and administrative			34.7				40.9				73.1				80.0
Research and development			13.7				10.6				27.6				20.4
Total operating costs and expenses			1,070.0				926.0				1,859.6				1,832.2
Operating income (loss)			(10.4	)			136.1				87.4				266.3
Interest expense and financing fee amortization			(9.8	)			(10.5	)			(18.9	)			(19.6	)
Interest income			2.0				5.0				4.6				10.7
Other income, net			4.2				0.2				5.7				1.6
Income (loss) before income taxes			(14.0	)			130.8				78.8				259.0
Income tax benefit (provision)			5.8				(44.4	)			(24.4	)			(87.4	)
Income (loss) before equity in net loss of affiliates			(8.2	)			86.4				54.4				171.6
Equity in net loss of affiliate			(0.1	)			—				—				—
Net income (loss)		$	(8.3	)		$	86.4			$	54.4			$	171.6
Earnings (loss) per share
Basic		$	(0.06	)		$	0.63			$	0.39			$	1.25
Diluted		$	(0.06	)		$	0.62			$	0.39			$	1.23

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Balance Sheets
(unaudited)

		July 2,				December 31,
		2009				2008
		($ in millions)
Current assets
Cash and cash equivalents		$	88.9			$	216.5
Accounts receivable, net			263.8				149.3
Current portion of long-term receivable			55.7				108.9
Inventory, net			2,093.1				1,882.0
Income tax receivable-current			38.0				3.8
Deferred tax asset-current			65.4				62.1
Other current assets			13.2				10.7
Total current assets			2,618.1				2,433.3
Property, plant and equipment, net			1,167.6				1,068.3
Pension assets			59.7				60.1
Deferred tax asset-non-current			149.5				146.0
Other assets			66.1				52.6
Total assets		$	4,061.0			$	3,760.3
Current liabilities
Accounts payable		$	434.3			$	316.9
Accrued expenses			159.1				161.8
Current portion of long-term debt			6.3				7.1
Advance payments, short-term			206.2				138.9
Deferred revenue, short-term			64.3				110.5
Other current liabilities			18.7				8.1
Total current liabilities			888.9				743.3
Long-term debt			729.7				580.9
Advance payments, long-term			812.5				923.5
Deferred revenue and other deferred credits			60.1				58.6
Pension/OPEB obligation			48.3				47.3
Deferred grant income liability			86.5				38.8
Other liabilities			60.6				70.4
Shareholders’ equity
Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued and outstanding			—				—
Common stock, Class A par value $0.01, 200,000,000 shares authorized, 104,686,385 and 103,209,466 issued and outstanding, respectively			1.0				1.0
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 36,368,243 and 36,679,760 shares issued and outstanding, respectively			0.4				0.4
Additional paid-in capital			945.6				939.7
Noncontrolling interest			0.5				0.5
Accumulated other comprehensive loss			(117.6	)			(134.2	)
Retained earnings			544.5				490.1
Total shareholders’ equity			1,374.4				1,297.5
Total liabilities and shareholders’ equity		$	4,061.0			$	3,760.3

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows
(unaudited)

		For the Six				For the Six
		Months Ended				Months Ended
		July 2, 2009				June 26, 2008
		($ in millions)
Operating activities
Net income		$	54.4			$	171.6
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation expense			62.2				57.8
Amortization expense			4.7				4.6
Accretion of long-term receivable			(4.5	)			(9.3	)
Employee stock compensation expense			6.0				7.5
Loss from the ineffectiveness of hedge contracts			—				0.6
Gain from foreign currency transactions			(4.7	)			—
Loss on disposition of assets			—				(0.4	)
Deferred taxes			(4.6	)			0.5
Pension and other post retirement benefits, net			1.0				(14.3	)
Grant income			(0.5	)			—
Changes in assets and liabilities
Accounts receivable			(109.4	)			(52.9	)
Inventory, net			(203.0	)			(310.2	)
Accounts payable and accrued liabilities			109.2				36.2
Advance payments			(43.7	)			183.9
Deferred revenue and other deferred credits			(45.7	)			0.3
Income taxes receivable/payable			(37.6	)			10.3
Other			0.2				(7.8	)
Net cash provided by (used in) operating activities			(216.0	)			78.4
Investing Activities
Purchase of property, plant and equipment			(106.7	)			(119.4	)
Long-term receivable			57.7				56.5
Other			0.7				1.5
Net cash (used in) investing activities			(48.3	)			(61.4	)
Financing Activities
Proceeds from revolving credit facility			250.0				75.0
Payments on revolving credit facility			(100.0	)			(75.0	)
Proceeds from issuance of debt			—				9.4
Principal payments of debt			(3.9	)			(7.9	)
Proceeds from governmental grants			0.6				1.4
Debt issuance and financing costs			(10.2	)			(6.8	)
Net cash provided by (used in) financing activities			136.5				(3.9	)
Effect of exchange rate changes on cash and cash equivalents			0.2				0.9
Net increase (decrease) in cash and cash equivalents for the period			(127.6	)			14.0
Cash and cash equivalents, beginning of period			216.5				133.4
Cash and cash equivalents, end of period		$	88.9			$	147.4
Supplemental Information
Change in value of financial instruments		$	0.2			$	3.8
Property acquired through capital leases		$	1.9			$	3.3

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

1. Organization and Basis of Interim Presentation

     Spirit AeroSystems Holdings, Inc. (“Holdings” or the “Company”) was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of The Boeing Company’s (“Boeing”) operations in Wichita, Kansas, Tulsa, Oklahoma and McAlester, Oklahoma (the “Boeing Acquisition”). Holdings provides manufacturing and design expertise in a wide range of products and services for aircraft original equipment manufacturers and operators through its subsidiary, Spirit AeroSystems, Inc. (“Spirit”). Onex Corporation (“Onex”) of Toronto, Canada maintains majority voting power of Holdings. In April 2006, Holdings acquired the aerostructures division of BAE Systems (Operations) Limited (“BAE Aerostructures”), which builds structural components for Airbus, Boeing and Hawker Beechcraft Corporation. Prior to this acquisition, Holdings sold essentially all of its production to Boeing. Since Spirit’s incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Cessna, Bombardier, Mitsubishi Aircraft Corporation, Southwest Airlines, and Continental Airlines. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma, Prestwick, Scotland, and in Wichita. Spirit opened a new manufacturing facility in Subang, Malaysia in early 2009 for the production of composite panels for wing components and expects to open another manufacturing facility in Kinston, North Carolina in 2010 that will initially produce components for the Airbus A350 XWB aircraft.

     Spirit is the majority participant in the Kansas Industrial Energy Supply Company (“KIESC”), a tenancy-in-common with other Wichita companies established to purchase natural gas.

     Spirit participates in two joint ventures, Spirit-Progresstech LLC (“Spirit-Progresstech”) and Taikoo Spirit AeroSystems Composite Co. Ltd. (“TSACCL”), of which Spirit’s ownership interest is 50% and 25.5%, respectively. Spirit-Progresstech provides aerospace engineering support services and TSACCL was formed to develop and implement a state of the art composite and metal bond component repair station in the Asia-Pacific region.

     The accompanying unaudited interim condensed consolidated financial statements include the Company’s financial statements and the financial statements of its majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Article 10 of Regulation S-X. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20% to 50% ownership), including Spirit-Progresstech and TSACCL, are accounted for under the equity method. KIESC is fully consolidated as Spirit owns 77.8% of the entity’s equity. All intercompany balances and transactions have been eliminated in consolidation. Spirit’s U.K. subsidiary uses local currency, the British pound, as its functional currency. All other foreign subsidiaries use local currency as their functional currency with the exception of our Malaysian subsidiary, which uses the British pound.

     As part of the monthly consolidation process, the functional currencies of our international subsidiaries 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 as defined by SFAS No. 52, Foreign Currency Translation (as amended).

     In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the six months ended July 2, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. Certain reclassifications have been made to the prior year financial statements and notes to conform to the 2009 presentation. The Company adjusted its balance sheet to reflect retrospective presentation of noncontrolling interests from Other liabilities to the Shareholders’ equity section at July 2, 2009 and December 31, 2008 in accordance with reporting requirements under SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160). The adoption of SFAS 160 did not have a material impact on the Company’s results of operations or statement of cash flows. In connection with the preparation of the condensed consolidated financial statements and in accordance with the recently issued SFAS No. 165, Subsequent Events (SFAS 165), the Company evaluated subsequent events after the balance sheet date of July 2, 2009 through August 7, 2009, which is the date these financial statements were issued. Staff Position FSP Emerging Issues Task Force (EITF) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), was effective for the Company beginning January 1, 2009. The adoption of FSP EITF 03-6-1 did not have a material impact on our consolidated financial statements.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 20, 2009.

2. New Accounting Pronouncements

     In June 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (SFAS 168). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP in the United States. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company does not expect the adoption of SFAS 168 to have a material impact on our financial position or results of operations.

     In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167), which changes the consolidation guidance applicable to a variable interest entity (VIE). It also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, through qualitative analysis rather than quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. Other special purpose entities, which were previously exempt from the application of this standard, will be subject to the provisions of this standard when it becomes effective. SFAS 167 also requires enhanced disclosures about an enterprise’s involvement with a VIE. SFAS 167 will be effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009. The Company is currently evaluating the impact of adoption of SFAS 167.

     In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (SFAS 166). SFAS 166 requires additional disclosures about the transfer and derecognition of financial assets and eliminates the concept of qualifying special-purpose entities under SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company does not expect the adoption of SFAS 166 to have a material impact on our financial position or results of operations.

     In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165). SFAS 165 prescribes the period after the balance sheet date during which management should evaluate transactions for potential recognition, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date and the required disclosures an entity should make about transactions or events occurring after the balance sheet date. This statement is effective for interim or annual periods ending after June 15, 2009. The adoption of SFAS 165 did not have a material impact on the financial statements of the Company.

     In April 2009, the FASB issued Staff Position FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP No. 157-4). This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and activity for the asset and liability have significantly decreased. FSP No. 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP No. 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The adoption of FSP No. 157-4 did not have a material impact on our financial position or results of operations. The Company adopted the provisions of FSP No. 157-4 effective for the period ended July 2, 2009. See Note 10 for the Company’s disclosures about its derivative and hedging activities.

     In April 2009, the FASB issued Staff Position FSP No. 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise From Contingencies (FSP No. 141(R)-1). This FSP amends and clarifies FASB Statement No. 141 (revised 2007), Business Combinations, to address application issues on the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP No. 141(R)-1 is effective for assets and liabilities arising from contingencies in business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of FSP No. 141(R)-1 to have a material impact on our financial position or results of operations.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     In April 2009, the FASB issued Staff Position FSP No. 107-1 and ABP 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP No. 107-1 and APB 28-1). This FSP requires disclosures about fair value of financial instruments for interim periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information for interim reporting periods. The Company adopted the provisions of FSP No. 107-1 and APB 28-1 effective for the period ended July 2, 2009. See Note 11 for the Company’s disclosures about its estimated fair value on long-term debt.

     In December 2008, the FASB issued Staff Position FSP No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP No. 132(R)-1). This FSP amends SFAS No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on employers’ disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by this FSP are required for fiscal years ending after December 15, 2009. The Company does not expect the adoption of FSP No. 132(R)-1 to have a material impact on our financial position or results of operations.

     In November 2008, the FASB ratified EITF Issue No. 08-06 (EITF 08-06), Equity Method Investment Accounting Considerations. EITF 08-06 addresses the accounting for equity method investments as a result of the accounting changes prescribed by SFAS No. 141(R) and SFAS No. 160. EITF 08-06 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-06 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The adoption of EITF 08-06 did not have a material impact on the Company’s financial position or results of operations.

     In June 2008, the FASB issued Staff Position (FSP) Emerging Issues Task Force (EITF) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). Under FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to undistributed earnings that would otherwise have been available to common shareholders. FSP EITF 03-6-1 was effective for the Company beginning January 1, 2009. The adoption of FSP EITF 03-6-1 did not have a material impact on our consolidated financial statements.

     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS 161), which requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. The Company adopted the provisions of SFAS 161 effective January 1, 2009. See Note 10 for the Company’s disclosures about its derivative and hedging activities.

     In February 2008, the FASB issued Staff Position FSP No. 157-2, Partial Deferral of the Effective Date of Statement 157 (FSP No. 157-2), which delayed the adoption date until January 1, 2009 for non-financial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. The adoption of FSP No. 157-2 did not have a material impact on the Company’s financial position or results of operations.

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. As a result of adopting SFAS 160 in first quarter of 2009, the Company adjusted its balance sheet to reflect retrospective presentation prescribed by SFAS 160 of noncontrolling interests in the amount of $0.5 from Other liabilities to the Shareholders’ equity section at April 2, 2009 and December 31, 2008. The Company considered SFAS 154, Accounting Changes and Errors Corrections (as amended), to ensure this change in accounting principle is properly accounted for. The adoption of SFAS 160 did not have a material impact on the Company’s results of operations or statement of cash flows.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

3. Accounts Receivable

     Accounts receivable, net consists of the following:

		July 2,				December 31,
		2009				2008
Trade receivables		$	250.0			$	101.2
Volume-based pricing accrual			8.8				29.7
Employee receivables			0.2				1.9
Other			4.9				16.6
Total			263.9				149.4
Less: allowance for doubtful accounts			(0.1	)			(0.1	)
Accounts receivable, net		$	263.8			$	149.3

4. Inventory

     Inventories are summarized as follows:

		July 2,				December 31,
		2009				2008
Raw materials		$	199.1			$	176.3
Work-in-process			1,454.0				1,260.3
Finished goods			27.5				27.5
Product inventory			1,680.6				1,464.1
Capitalized pre-production			412.5				417.9
Total inventory, net		$	2,093.1			$	1,882.0

     Inventories are summarized by platform as follows:

		July 2,				December 31,
		2009				2008
B737		$	340.3			$	309.6
B747(1)			189.6				154.2
B767			23.5				16.6
B777			154.3				166.4
B787(2)			853.6				768.3
Airbus — All platforms			127.3				70.7
Gulfstream(3)			277.2				224.7
Rolls-Royce			48.8				43.7
Cessna Citation Columbus			22.5				20.0
Aftermarket			26.9				25.7
Other in-process inventory related to long-term contracts and other programs(4)			29.1				82.1
Total inventory		$	2,093.1			$	1,882.0

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     Capitalized pre-production costs include certain costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically recovered over a certain number of ship set deliveries and the Company believes these amounts will be fully recovered.

     At July 2, 2009, work-in-process inventory included $307.4 of deferred production costs, which is comprised of $271.3 related to B787, $64.1 on certain other contracts for the excess of production costs over the estimated average cost per ship set, and ($28.0) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. These balances were $162.0, including $169.4 related to the B787 and $30.6 for certain other contracts, and ($38.0) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated cost per ship set for units delivered under the current production blocks, respectively, at December 31, 2008. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts will be fully recovered.

     Sales significantly under estimates or costs significantly over estimates could result in the realization of losses on these contracts in future periods.

     The following is a roll forward of the inventory obsolescence and surplus reserve included in the inventory balances at July 2, 2009:

Balance-December 31, 2008		$	31.2
Charges to costs and expenses			2.0
Write-offs, net of recoveries			(10.9	)
Exchange rate			0.2
Balance-July 2, 2009		$	22.5

5. Property, Plant and Equipment

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

		July 2,				December 31,
		2009				2008
Land		$	17.0			$	15.5
Buildings (including improvements)			266.5				206.5
Machinery and equipment			547.7				512.8
Tooling			464.6				428.9
Construction in progress			235.6				204.3
Total			1,531.4				1,368.0
Less: accumulated depreciation			(363.8	)			(299.7	)
Property, plant and equipment, net		$	1,167.6			$	1,068.3

     Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $0.7 and $1.6 for the three months ended July 2, 2009 and June 26, 2008, respectively, and $2.5 and $3.1 for the six months ended July 2, 2009 and June 26, 2008, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized $23.9 and $27.0 of repair and maintenance expense for the three months ended July 2, 2009 and June 26, 2008, respectively, and $44.2 and $49.6 for the six months ended July 2, 2009 and June 26, 2008, respectively.

     We capitalize certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal use computer software in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Depreciation expense related to capitalized software was $3.5 and $5.5 for the three months ended July 2, 2009 and June 26, 2008, respectively, and $7.3 and $11.3 for the six months ended July 2, 2009 and June 26, 2008, respectively.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

6. Current Portion of Long-Term Receivable

     In connection with the Boeing Acquisition, Boeing is required to make future non-interest bearing payments to Spirit attributable to the acquisition of title of various tooling and other capital assets to be determined by Spirit. Spirit will retain usage rights and custody of the assets for their remaining useful lives without compensation to Boeing. Since Spirit retains the risks and rewards of ownership to such assets, Spirit recorded such amounts as consideration to be returned from Boeing. The discounted receivable is accreted as interest income until payments occur and are recorded as a component of other current assets. The accretion of interest income was $2.0 and $4.4 for the three months ended July 2, 2009 and June 26, 2008, respectively, and $4.5 and $9.3 for the six months ended July 2, 2009 and June 26, 2008, respectively.

     The following is a schedule of future payments from this receivable:

2009		$	57.7

     A discount rate of 9.75% was used to record these payments at their estimated present value of $55.7 and $108.9 at July 2, 2009 and December 31, 2008, respectively. At July 2, 2009, the remaining discounted balance of this receivable was all current.

7. Other Assets

     Other assets are summarized as follows:

		July 2,				December 31,
		2009				2008
Intangible assets
Patents		$	2.0			$	2.0
Favorable leasehold interests			9.7				9.7
Customer relationships			28.3				25.3
Total intangible assets			40.0				37.0
Less: Accumulated amortization-patents			(0.6	)			(0.6	)
Accumulated amortization-favorable leasehold interest			(2.8	)			(2.5	)
Accumulated amortization-customer relationships			(11.5	)			(8.7	)
Intangible assets, net			25.1				25.2
Deferred financing costs, net			21.8				14.3
Fair value of derivative instruments			1.0				3.8
Goodwill			3.0				2.7
Equity in net assets of affiliates			4.0				3.9
Other			11.2				2.7
Total		$	66.1			$	52.6

     Deferred financing costs are recorded net of $17.5 and $14.7 of accumulated amortization at July 2, 2009 and December 31, 2008, respectively. During the second quarter of 2009, the Company incurred $10.2 of additional deferred financing costs in connection with the amendment to its revolving credit facility on June 8, 2009.

     The Company recognized $1.1 and $1.2 of amortization expense of intangibles for the three months ended July 2, 2009 and June 26, 2008, respectively, and $2.0 and $2.6 for the six months ended July 2, 2009 and June 26, 2008, respectively.

8. Advance Payments and Deferred Revenue/Credits

     Advance payments. Advance payments are those payments made to Spirit by third parties in contemplation of the future performance of services, receipt of goods, incurrence of expenditures, or for other assets to be provided by Spirit on a contract and are repayable if such obligation is not satisfied. The amount of advance payments to be recovered against units expected to be delivered within a year is classified as a short-term liability, with the balance of the unliquidated advance payments classified as a long-term liability. Progress payments differ from advance payments in that progress payments are made for work completed prior to receipt of payment.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     Deferred revenue. Deferred revenue consists of nonrefundable amounts received in advance of revenue being earned for specific contractual deliverables. These payments are classified as deferred revenue when received, and recognized as revenue as the production units are delivered.

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

		July 2,				December 31,
		2009				2008
B737		$	74.1			$	87.3
B747			11.3				8.0
B787			974.6				1,019.9
Airbus — All platforms			22.8				52.6
Gulfstream			42.5				42.5
Other			17.8				21.2
Total advance payments and deferred revenue/credits		$	1,143.1			$	1,231.5

9. Government Grants

     As part of our site construction projects in Kinston, North Carolina and Subang, Malaysia, we have the potential benefit of grants related to government funding of a portion of these buildings and other specific capital assets. Due to the terms of the lease agreements, we are deemed to own the construction projects. During the construction phase of the facilities, as amounts eligible under the terms of the grants are expended, we will record that spending as Property, Plant and Equipment (construction-in-progress) and Deferred Grant Income Liability (less the present value of any future minimum lease payments). Upon completion of the facilities, the Deferred Grant Income will be amortized as a component of production cost. This amortization is based on specific terms associated with the different grants. In North Carolina, the Deferred Grant Income related to the capital investment criteria, which represents half of the grant, will be amortized over the lives of the assets purchased to satisfy the capital investment performance criteria. The other half of the Deferred Grant Income will be amortized over a ten year period in a manner consistent with the job performance criteria. In Malaysia, the Deferred Grant Income will be amortized based on the lives of the eligible assets constructed with the grant funds as there are no performance criteria. As of July 2, 2009, we recorded $86.5 within Property, Plant and Equipment and Deferred Grant Income Liability related to the use of grant funds in North Carolina and Malaysia. Of this amount, $80.9 in capital represents transactions where funds have been paid directly to contractors by an agency of the Malaysian Government in the case of Malaysia, and by the escrow agent in North Carolina, so they are not reflected on the Statement of Cash Flows.

     Deferred grant income liability, net consists of the following:

		July 2,				December 31,
		2009				2008
Beginning Balance		$	38.8			$	—
Grant liability recorded			44.5				38.8
Grant income recognized			(0.5	)			—
Exchange rate			3.7				—
Total deferred grant income liability		$	86.5			$	38.8

     The asset related to the deferred grant income, net consists of the following:

		July 2,				December 31,
		2009				2008
Beginning Balance		$	38.8			$	—
Amount paid by Spirit (reimbursed by third parties)			0.6				2.3
Amount paid by escrow agent			43.9				37.0
Depreciation offset to amortization of grant income			(0.5	)			—
Exchange rate			3.7				(0.5	)
Total asset value related to deferred grant income		$	86.5			$	38.8

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

10. Derivative and Hedging Activities

     Effective for the first quarter of 2009, we adopted SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133, which expands the quarterly and annual disclosure requirements about our derivative instruments and hedging activities.

     The Company enters into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. The Company also enters into foreign currency forward contracts to reduce the risks associated with the changes in foreign exchange rates on sales. All gain/ loss on hedges is included in revenue and hedge contract revenue denominated in currencies other than the entities’ functional currencies. The Company does not use these contracts for speculative or trading purposes. On the inception date, the Company designates a derivative contract as either a fair value or cash flow hedge in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138 (SFAS 133) and links the contract to either a specific asset or liability on the balance sheet, or to forecasted commitments or transactions. The Company formally documents the hedging relationship between the hedging instrument and the hedged item as well as its risk-management objective and strategy for undertaking the hedge, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on a quarterly basis, whether the derivative item is effective in offsetting changes in fair value or cash flows.

     Changes in the fair value of derivative instruments are reported in Accumulated Other Comprehensive Income, net of tax. In the case of interest rate swaps, amounts are subsequently reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. If the actual interest rate on the fixed rate portion of debt is less than LIBOR, the monies received are recorded as an offset to interest expense. Conversely, if the actual interest rate on the fixed rate portion of debt is greater than LIBOR, then the Company pays the difference, which is recorded to interest expense. Reclassifications of the amounts related to the foreign currency forward contracts are recorded to revenues in the same period in which the contract is settled. Any change in the fair value resulting from ineffectiveness is immediately recognized in earnings.

     The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has applied these valuation techniques for the six months ended July 2, 2009 and believes it has obtained the most accurate information available for the types of derivative contracts it holds. The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement.

     The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative expires or is sold, terminated or exercised; the derivative is no longer designated as a hedging instrument because it is unlikely that a forecasted transaction will occur; or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the Company continues to carry the derivative instrument on the balance sheet at its fair value with subsequent changes in fair value included in earnings, and gains and losses that were accumulated in Other Comprehensive Income are recognized immediately in earnings.

     To the extent that derivative instruments do not qualify for hedge accounting treatment, they are “marked-to-market” with the changes in fair market value of the instruments reported in the results of operations for the current period.

     The Company’s hedge agreements do not include provisions requiring collateral. Certain of the Company’s derivative instruments are covered by master netting arrangements whereby, in the event of a default as defined by the senior secured credit facility or termination event, the non-defaulting party has the right to offset any amounts payable against any obligation of the defaulting party under the same counterparty agreement.

     The entire asset classes of the Company, including hedges, are pledged as collateral for both the term loan and the revolving credit facility under the Company’s senior secured credit facility (see Note 12).

Interest Rate Swaps

     As required under our senior secured credit facility (see Note 12), we enter into floating-to-fixed interest rate swap agreements periodically. As of July 2, 2009, the interest swap agreements had notional amounts totaling $800.0, of which $300.0 is a forward-starting swap effective from July 2009 to replace the swap expiring in July 2009.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

																		Effective				Fair Value,
Principal Amount						Expires				Variable Rate				Fixed Rate				Fixed Rate (2)				July 2, 2009
$	300					July 2009				LIBOR					4.30	%			6.05	%		$	(2.3	)
$	100					July 2010				LIBOR					4.37	%			6.12	%		$	(4.3	)
$	100					July 2011				LIBOR					4.27	%			6.02	%		$	(6.3	)
$	300	(1)				July 2011				LIBOR					3.23	%			4.98	%		$	(10.7	)
																		Total				$	(23.6	)

The purpose of entering into these swaps was to reduce the Company’s exposure to variable interest rates. The interest rate swaps settle on a quarterly basis when interest payments are made. These settlements occur through the maturity date. The fair value of the interest rate swaps was a liability (unrealized loss) of ($23.6) and ($23.0) at July 2, 2009 and December 31, 2008, respectively.

Foreign Currency Forward Contracts

     In April 2006, the Company acquired BAE Aerostructures, which became Spirit Europe, headquartered in Prestwick, Scotland. The functional currency of Spirit Europe is the British pound sterling with approximately 83% of revenues from contracts denominated in British pounds and 75% of purchases denominated in British pounds for the Company’s 2008 fiscal year. As a result of the BAE Acquisition, we have certain sales, expenses, assets and liabilities that are denominated in British pounds sterling. However, sales of Spirit Europe’s products to Boeing and some procurement costs are denominated in U.S. dollars and Euros. As a consequence, movements in exchange rates could cause net sales and our expenses to fluctuate, affecting our profitability and cash flows. In addition, even when revenues and expenses are matched, we must translate British pound sterling denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated financial statements. Consequently, increases and decreases in the value of the U.S. dollar as compared to the British pound sterling will affect our reported results of operations and the value of our assets and liabilities on our consolidated balance sheet, even if our results of operations or the value of those assets and liabilities has not changed in its original currency. These transactions could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets, liabilities and shareholders’ equity.

     We use foreign currency forward contracts to reduce our exposure to currency exchange rate fluctuations. The objective of these contracts is to minimize the impact of currency exchange rate movements on our operating results. The hedges are being accounted for as cash flow hedges in accordance with SFAS 133. Gains and losses from these cash flow hedges are recorded to Other Comprehensive Income until the underlying transaction for which the hedge was placed is recognized and then the value in Other Comprehensive Income is reclassified to earnings. The last of these cash flow hedges were settled in the second quarter of 2009. The Company may enter into additional cash flow hedges in the future. The fair value of the forward contracts was a net liability of $0.3 and $2.6 as of July 2, 2009 and December 31, 2008, respectively.

Notional Amount

						Foreign
		USD				Currency
Year		Buy/(Sell)				Buy/(Sell)
2009		$	—			£	—
2010 (1)			0.3				(0.2	)
2011-2013 (1)			—				(0.2	)
		$	0.3			£	(0.4	)

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     The following table summarizes the Company’s fair value of outstanding derivatives at July 2, 2009 and December 31, 2008:

		Fair Values of Derivative Instruments
		Other Asset Derivatives								Other Liability Derivatives
		July 2, 2009				December 31, 2008				July 2, 2009				December 31, 2008
Derivatives designated as hedging instruments under SFAS 133
Interest rate swaps
Current		$	—			$	—			$	16.3			$	4.0
Non-current			—				—				7.3				19.0
Foreign currency forward contracts
Current			—				—				—				2.4
Non-current			—				—				—				—
Total derivatives designated as hedging instruments under SFAS 133			—				—				23.6				25.4
Derivatives not designated as hedging instruments under SFAS 133
Interest rate swaps
Current			—				—				—				—
Non-current			—				—				—				—
Foreign currency forward contracts
Current			0.4				—				0.4				—
Non-current			1.0				3.8				1.3				4.0
Total derivatives not designated as hedging instruments under SFAS 133			1.4				3.8				1.7				4.0
Total derivatives		$	1.4			$	3.8			$	25.3			$	29.4

     The impact on Other Comprehensive Income (OCI) and earnings from cash flow hedges for the three months ended July 2, 2009 and June 26, 2008 was as follows:

Location of

Location of (Gain)

(Gain) or

or Loss

Loss

Recognized in

Reclassified

Amount of (Gain) or Loss

Income on

Amount of (Gain) or Loss

Amount of Gain or (Loss)

from

Reclassified from

Derivative

Income on Derivative

Recognized in OCI, net of

Accumulated

Accumulated OCI into

(Ineffective

(Ineffective Portion and

tax, on Derivative

OCI into

Income

Portion and

Amount Excluded from

Derivatives in SFAS 133

(Effective Portion)

Income

(Effective Portion)

Amount Excluded

Effectiveness Testing)

Cash Flow Hedging

For the three months ended

(Effective

For the three months ended

from Effectiveness

For the three months ended

Relationships

July 2, 2009

June 26, 2008

Portion)

July 2, 2009

June 26, 2008

Testing)

July 2, 2009

June 26, 2008

Interest rate swaps

$

(1.3

)

$

2.2

Interest expense

$

4.0

$

1.3

Other (income)/ expense

$

—

$

0.3

Foreign currency forward contracts

(0.2

)

0.5

Sales/ Revenue

1.8

(0.8

)

Other (income)/ expense

0.1

—

Total

$

(1.5

)

$

2.7

$

5.8

$

0.5

$

0.1

$

0.3

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     The impact on Other Comprehensive Income (OCI) and earnings from cash flow hedges for the six months ended July 2, 2009 and June 26, 2008 was as follows:

										Location of										Location of (Gain)
										(Gain) or										or Loss
										Loss										Recognized in		Amount of (Gain) or Loss
										Reclassified		Amount of (Gain) or Loss								Income on		Recognized in Income on
		Amount of Gain or (Loss)								from		Reclassified from								Derivative		Derivative (Ineffective
		Recognized in OCI, net of								Accumulated		Accumulated OCI into								(Ineffective		Portion and Amount
		tax, on Derivative								OCI into		Income								Portion and		Excluded from
Derivatives in SFAS 133		(Effective Portion)								Income		(Effective Portion)								Amount Excluded		Effectiveness Testing)
Cash Flow Hedging		For the six months ended								(Effective		For the six months ended								from Effectiveness		For the six months ended
Relationships		July 2, 2009				June 26, 2008				Portion)		July 2, 2009				June 26, 2008				Testing)		July 2, 2009				June 26, 2008
Interest rate swaps		$	(2.7	)		$	(2.6	)		Interest expense		$	7.3			$	1.0			Other (income)/ expense		$	—			$	0.6
Foreign currency forward contracts			—				(0.2	)		Sales/ Revenue			3.2				(1.4	)		Other (income)/ expense			0.1				—
Total		$	(2.7	)		$	(2.8	)				$	10.5			$	(0.4	)				$	0.1			$	0.6

     The impact on earnings from foreign currency forward contracts that do not qualify as cash flow hedges under SFAS 133, was insignificant for the three months ended July 2, 2009 and June 26, 2008.

     Gains and losses accumulated in Other Comprehensive Income for interest rate swaps are reclassified into earnings as each interest rate period is reset. During the next twelve months, the Company estimates that ($10.4) will be reclassified from Other Comprehensive Income, net of tax, as a charge to earnings from interest rate swaps. Interest rate swaps are placed for a period of time not to exceed the maturity of the Company’s senior secured term loan. None of the gains or losses reclassified to earnings were attributable to the discontinuance of cash flow hedges.

     Gains and losses accumulated in Other Comprehensive Income for foreign currency forward contracts are reclassified into earnings as the underlying transactions for which the contracts were entered into are realized. During the next twelve months, the Company estimates that zero dollars will be reclassified from Other Comprehensive Income, net of tax, as a charge to earnings from foreign currency forward contracts. None of the gains or losses reclassified to earnings were attributable to the discontinuance of cash flow hedges.

11. Fair Value Measurements

     SFAS No. 157, Fair Value Measurements (SFAS 157), 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. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard 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 our interest rate swaps and foreign currency forward contracts.

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

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

		Fair Value Measurements
														At July 2, 2009
		July 2, 2009												Using
														Quoted Prices in				Significant
		Total												Active Markets				Other				Significant
		Carrying				Assets				Liabilities				for Identical				Observable				Unobservable
		Amount in				Measured at				Measured at				Assets				Inputs				Inputs
Description		Balance Sheet				Fair Value				Fair Value				(Level 1)				(Level 2)				(Level 3)
Interest Rate Swaps		$	(23.6	)		$	—			$	(23.6	)		$	—			$	(23.6	)		$	—
Foreign Currency Forward Contracts		$	(0.3	)		$	1.4			$	(1.7	)		$	—			$	(0.3	)		$	—

		Fair Value Measurements
														At December 31, 2008
		December 31, 2008												Using
														Quoted Prices in				Significant
		Total												Active Markets				Other				Significant
		Carrying				Assets				Liabilities				for Identical				Observable				Unobservable
		Amount in				Measured at				Measured at				Assets				Inputs				Inputs
Description		Balance Sheet				Fair Value				Fair Value				(Level 1)				(Level 2)				(Level 3)
Interest Rate Swaps		$	(23.0	)		$	—			$	(23.0	)		$	—			$	(23.0	)		$	—
Foreign Currency Forward Contracts		$	(2.6	)		$	3.8			$	(6.4	)		$	—			$	(2.6	)		$	—

     The fair value of the interest rate swaps and foreign currency forward contracts are determined by using mark-to-market reports generated for each derivative and evaluated for counterparty risk. In the case of the interest rate swaps, the Company evaluated its counterparty risk using credit default swaps, historical default rates and credit spreads.

     The Company’s long-term debt consists of obligations with variable interest rates. The estimated fair value of our debt obligations is based on the quoted market prices for such obligations. The estimated fair value of the senior secured term loan at July 2, 2009 with a carrying value of $575.0 is $542.6. The estimated fair value of the senior secured term loan at December 31, 2008 with a carrying value of $577.9 was $479.7. The estimated fair value of the Malaysia term loan at July 2, 2009 with a carrying value of $8.7 is $7.1. The estimated fair value of the Malaysia term loan at December 31, 2008 with a carrying value of $8.9 was $7.4.

12. Debt

Credit Agreement

     In connection with the Boeing Acquisition, Spirit executed an $875.0 credit agreement that consisted of a $700.0 senior secured term loan used to fund the acquisition and pay all related fees and expenses associated with the acquisition and the credit agreement, and a $175.0 senior secured revolving credit facility. In March 2008, the revolving credit facility was increased to $650.0. In June 2009, Spirit entered into an amendment No. 2 to its senior secured credit facility, whereby the revolving credit facility was increased from $650.0 to $729.0. The maturity date with respect to $408.8 of the revolver was extended to June 30, 2012. The maturity date for the remaining $320.2 of the revolver will continue to be June 30, 2010. Commitment fees associated with the portion of the revolver that was extended to June 30, 2012 increased from a rate of 50 basis points on the undrawn amount to 75 basis points. Commitment fees associated with the undrawn portion of the revolver that terminates on June 30, 2010 continue to be 50 basis points. The applicable margin payable on revolving loans in respect of which the underlying revolving credit commitment has been extended to June 30, 2012 (“Extending Revolving Loans”) has been increased. The applicable margin continues to be determined in accordance with a performance grid based on total leverage ratio and, for Extending Revolving Loans, ranges from 4.00% to 3.00% per annum in the case of

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

LIBOR advances and from 3.00% to 2.00% per annum in the case of alternate base rate advances. The applicable margin payable in respect of loans that are not Extending Revolving Loans continues to range from 2.75% to 2.25% per annum in the case of LIBOR advances and from 1.75% to 1.25% per annum in the case of alternate base rate advances. As of July 2, 2009, Spirit had $150.0 of outstanding borrowings under the revolving credit facility. The entire asset classes of Spirit, including inventory and property, plant and equipment, are pledged as collateral for both the term loan and the revolving credit facility.

     The amended credit agreement contains customary affirmative and negative covenants, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or transfers of assets, payments of dividends, transactions with affiliates, change in control and other matters customarily restricted in such agreements. The amended credit agreement contains a revised Covenant Leverage Ratio and a new Interest Coverage Ratio. The Covenant Leverage Ratio (as defined in the credit agreement) financial covenant was modified to provide that the maximum Covenant Leverage Ratio as of the last day of any fiscal quarter through the final maturity date of the credit agreement shall not exceed 2.5:1 through maturity. The new Interest Coverage Ratio (as defined in the credit agreement) financial covenant was added to provide that the Interest Coverage Ratio as of the last day of any fiscal quarter through the final maturity date of the credit agreement shall not be less than 4:1. The Financial Covenant ratios are calculated each quarter in accordance with the credit agreement. Failure to meet these financial covenants would be an event of default under the senior secured credit facility. As of July 2, 2009, we were and expect to continue to be in full compliance with all covenants contained within our credit agreement.

Malaysian Term Loan

     On June 2, 2008, Spirit’s wholly owned subsidiary, Spirit AeroSystems Malaysia SDN BHD (“Spirit Malaysia”) entered into a Facility Agreement (“Malaysia Facility Agreement”) for a term loan facility of Ringgit Malaysia (RM) 69.2 (approximately USD $20.0) (the “Malaysia Facility”), with EXIM Bank to be used towards partial financing of plant and equipment (including the acquisition of production equipment), materials, inventory and administrative costs associated with the establishment of an aerospace-related composite component assembly plant, plus potential additional work packages in Malaysia at the Malaysia International Aerospace Center in Subang, Selangor, Malaysia (the “Project”). Funds for the Project will be available on a drawdown basis over a twenty-four month period from the date of the Malaysia Facility Agreement. Spirit Malaysia is scheduled to make periodic draws against the Malaysia Facility.

     The indebtedness repayment requires quarterly principal installments of RM 3.3 (USD $1.0) from September 2011 through May 2017, or until the entire loan principal has been repaid.

     Outstanding amounts drawn under the Malaysia Facility are subject to a fixed interest rate of 3.5% per annum, payable quarterly.

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

		July 2,				December 31,
		2009				2008
Senior secured debt (short and long-term)		$	575.0			$	577.9
Revolving credit facility			150.0				—
Malaysian term loan			8.7				8.9
Present value of capital lease obligations			2.3				1.2
Total		$	736.0			$	588.0

13. Pension and Other Post-Retirement Benefits

		Defined Benefit Plans
		For the Three								For the Six
		Months Ended								Months Ended
		July 2,				June 26,				July 2,				June 26,
Components of Net Periodic Pension Income		2009				2008				2009				2008
Service cost		$	1.5			$	1.8			$	2.9			$	3.7
Interest cost			9.7				9.7				19.4				19.3
Expected return on plan assets			(13.9	)			(18.0	)			(27.8	)			(35.9	)
Amortization of prior service cost			—				—				—				—
Amortization of net (gain)/loss			1.9				(1.2	)			4.1				(2.9	)
Net periodic pension income		$	(0.8	)		$	(7.7	)		$	(1.4	)		$	(15.8	)

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

		Other Benefits
		For the Three								For the Six
		Months Ended								Months Ended
		July 2,				June 26,				July 2,				June 26,
Components of Net Periodic Benefit Cost		2009				2008				2009				2008
Service cost		$	0.7			$	0.4			$	1.0			$	0.8
Interest cost			0.7				0.4				1.4				1.0
Expected return on plan assets			—				—				—				—
Amortization of prior service cost			—				—				—				—
Amortization of net (gain)/loss			—				(0.2	)			—				(0.3	)
Net periodic benefit cost		$	1.4			$	0.6			$	2.4			$	1.5

Employer Contributions

     We expect to contribute zero dollars to the U.S. qualified pension plan and less than $0.2 to both the Supplemental Executive Retirement Plan (SERP) and post-retirement medical plans in 2009. Our projected contributions to the U.K. pension plan for 2009 were $7.3, of which $4.1 was contributed by the end of the second quarter of 2009. We anticipate contributing an additional $3.2 to the U.K. pension plan during the remainder of 2009. The entire amount contributed and the projected contributions can vary based on exchange rate fluctuations.

14. Stock Compensation

     The Company has established various stock compensation plans which include restricted share grants and stock purchase plans. Compensation values are based on the value of the Company’s common stock at the grant date. The common stock value is added to equity and charged to period expense or included in inventory and cost of sales.

     For the three months ended July 2, 2009, the Company recognized a total of $3.2 of stock compensation expense, net of forfeitures, as compared to $3.8 of stock compensation expense, net of forfeitures, recognized for the three months ended June 26, 2008. Of the total $3.2 of stock compensation expense recorded for the three months ended July 2, 2009, $3.1 was recorded as expense in Selling, general and administrative expense while the remaining $0.1 was capitalized in inventory and is recognized through Cost of sales consistent with the accounting methods we follow in accordance with SOP 81-1. Of the $3.8 of stock compensation expense recorded for the three months ended June 26, 2008, $3.7 was recorded as expense in Selling, general and administrative expense while the remaining $0.1 was capitalized in inventory in accordance with SOP 81-1.

     For the six months ended July 2, 2009, the Company recognized a total of $6.0 of stock compensation expense, net of forfeitures, as compared to $7.5 of stock compensation expense, net of forfeitures, recognized for the six months ended June 26, 2008. Of the total $6.0 of stock compensation expense recorded for the six months ended July 2, 2009, $5.8 was recorded as expense in Selling, general and administrative expense while the remaining $0.2 was capitalized in inventory and is recognized through Cost of sales consistent with the accounting methods we follow in accordance with SOP 81-1. Of the $7.5 of stock compensation expense recorded for the six months ended June 26, 2008, $7.3 was recorded as expense in Selling, general and administrative expense while the remaining $0.2 was capitalized in inventory in accordance with SOP 81-1.

     The fair value of vested class A and class B shares granted under the Company’s stock compensation plans was $0.3 and $24.5, respectively, at July 2, 2009, based on the market value of the Company’s common stock on that date.

     On May 5, 2009, 852,294 class A shares with a value of $11.0 were granted under the Company’s Long-Term Incentive Plan and will vest annually in three equal installments beginning on the two-year anniversary of the grant date. Also on May 5, 2009, 56,451 class A shares with a value of $0.7 were granted under the Company’s Director Stock Plan and will vest on the one-year anniversary of the grant date. In the second quarter of 2009, 5,521 class A shares granted under the Long-Term Incentive Plan and 20,816 class A shares granted under the Company’s Director Stock Plan with grant date fair values of $0.2 and $0.6, respectively, vested.

      On June 15, 2009, which was the four-year anniversary of the Executive Incentive Plan grant date for certain participants in the plan, those participants acquired an incremental 8.81% interest in the shares granted to them such that their total cumulative interest in the shares granted to them would be 80%. The total number of additional shares in which an interest was acquired on June 15, 2009 was 639,114. The participants have a nonforfeitable interest in those shares; however, as per the plan document, the shares are still restricted until the sooner of a liquidity event or June 15, 2015. Participants do not have the unrestricted rights of stockholders until

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

those shares vest. Other participants will acquire the cumulative 80% interest as they reach the four-year anniversary date of their grant dates throughout the remainder of 2009 and 2010.

15. Income Taxes

     The process for calculating our income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total deferred tax assets, net of deferred tax liabilities, as of July 2, 2009 and December 31, 2008 were $206.2 and $204.7, respectively.

     We file income tax returns in all jurisdictions in which we operate. We established reserves to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. These reserves have been established based on management’s assessment as to the potential exposure attributable to permanent differences and interest applicable to both permanent and temporary differences. All tax reserves are analyzed quarterly and adjustments made as events occur that warrant modification.

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

      The 31.0% effective tax rate for the six months ended July 2, 2009 differs from the 33.75% effective tax rate for the same period in the prior year, primarily due to the reinstatement of the U.S. Research and Experimentation Tax Credit (“R&E Tax Credit”) on October 3, 2008, partially offset by a decrease in state income tax credits. The 31.0% estimated annualized effective rate may fluctuate due to discrete events and changes to the Company’s liability assessment for uncertain tax positions.

     The Company’s 2005 and 2006 U.S. Federal income tax returns are currently being examined. The Company reasonably expects no material change in its recorded unrecognized tax benefit liability in the next 12 months.

16. Shareholders’ Equity

Earnings (loss) per Share Calculation

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

		For the Three Months Ended
		July 2, 2009												June 26, 2008
						Shares				Per Share								Shares				Per Share
		Income				(in millions) (1)				Amount				Income				(in millions)				Amount
Basic EPS
Income available to common shareholders		$	(8.3	)			138.0			$	(0.06	)		$	86.4				137.0			$	0.63
Diluted potential common shares							—												2.8
Diluted EPS
Income available to common shareholders + assumed vesting		$	(8.3	)			138.0			$	(0.06	)		$	86.4				139.8			$	0.62

		For the Six Months Ended
		July 2, 2009												June 26, 2008
						Shares				Per Share								Shares				Per Share
		Income				(in millions)				Amount				Income				(in millions)				Amount
Basic EPS
Income available to common shareholders		$	54.4				137.9			$	0.39			$	171.6				136.9			$	1.25
Diluted potential common shares							2.0												2.9
Diluted EPS
Income available to common shareholders + assumed vesting		$	54.4				139.9			$	0.39			$	171.6				139.8			$	1.23

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

Other Comprehensive Income

Components of Other Comprehensive Income, net of tax, consist of the following:

		For the Three Months Ended
		July 2, 2009				June 26, 2008
Net income (loss)		$	(8.3	)		$	86.4
Other Comprehensive Income (loss), net of tax
Unrealized gain (loss) on investments
Unrealized gain (loss) on interest rate swaps, net of tax			(1.3	)			2.2
Pension, SERP, and Retiree Medical adjustments, net of tax			(1.3	)			—
Unrealized (loss) on foreign currency forward contracts, net of tax			(0.2	)			0.5
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax			3.8				0.5
Foreign currency translation adjustments			14.6				(2.0	)
Total Other Comprehensive Income		$	7.3			$	87.6

		For the Six Months Ended
		July 2, 2009				June 26, 2008
Net income		$	54.4			$	171.6
Other Comprehensive Income (loss), net of tax
Unrealized gain (loss) on investments
Unrealized gain (loss) on interest rate swaps, net of tax			(2.7	)			(2.6	)
Pension, SERP, and Retiree Medical adjustments, net of tax			(2.5	)			—
Unrealized gain (loss) on foreign currency forward contracts, net of tax			—				(0.2	)
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax			6.8				—
Foreign currency translation adjustments			15.0				(1.0	)
Total Other Comprehensive Income		$	71.0			$	167.8

17. Related Party Transactions

     On March 26, 2007, Hawker Beechcraft, Inc. (“Hawker”), of which Onex Partners II LP (an affiliate of Onex) owns approximately a 49% interest, acquired Raytheon Aircraft Acquisition Company and substantially all of the assets of Raytheon Aircraft Services Limited. Spirit’s Prestwick facility provides wing components for the Hawker 800 Series manufactured by Hawker. For the three months ended July 2, 2009 and June 26, 2008, sales to Hawker were $3.3 and $7.4, respectively, and $7.6 and $12.5 for the six months ended July 2, 2009 and June 26, 2008, respectively.

     A member of the Holdings’ Board of Directors is also a member of the Board of Directors of Hawker.

     Since February 2007, an executive of the Company has been a member of the Board of Directors of one of the Company’s suppliers, Precision Castparts Corp. of Portland, Oregon, a manufacturer of complex metal components and products. For the three months ended July 2, 2009 and June 26, 2008, the Company purchased $10.5 and $15.2 of products, respectively, from this supplier. For the six months ended July 2, 2009 and June 26, 2008, the Company purchased $24.0 and $32.9 of products, respectively, from this supplier.

     A member of Holdings’ Board of Directors is the president and chief executive officer of Aviall, Inc., the parent company of one of our customers, Aviall Services, Inc. and a wholly owned subsidiary of Boeing. On September 18, 2006, Spirit entered into a distribution agreement with Aviall Services, Inc. Net revenues under the distribution agreement were $1.6 and $1.3 for the three months ended July 2, 2009 and June 26, 2008, respectively, and $3.3 and $2.9 for the six months ended July 2, 2009 and June 26, 2008, respectively.

     The Company paid less than $0.1 and $0.2 to a subsidiary of Onex for services rendered for the three months ended July 2, 2009 and June 26, 2008, respectively, and $0.1 and $0.2 for the six months ended July 2, 2009 and June 26, 2008, respectively. Management believes the amounts charged were reasonable in relation to the services provided.

     Boeing owns and operates significant information technology systems utilized by the Company and, as required under the acquisition agreement for the Boeing Acquisition, is providing those systems and support services to Spirit under a Transition Services

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

Agreement. A number of services covered by the Transition Services Agreement have now been established by the Company, and the Company is scheduled to continue to use the remaining systems and support services it has not yet established. The Company incurred fees of $2.0 and $6.6 for services performed for the three months ended July 2, 2009 and June 26, 2008, respectively, and $7.5 and $12.4 for the six months ended July 2, 2009 and June 26, 2008, respectively. The amounts owed to Boeing and recorded as accrued liabilities were $11.1 and $9.5 at July 2, 2009 and December 31, 2008, respectively.

     The spouse of one of the Company’s executives is a special counsel at a law firm utilized by the Company and at which the executive was previously employed. The Company paid fees of $0.5 and $0.3 to the firm for the three month periods ended July 2, 2009 and June 26, 2008, respectively, and $0.9 for each of the six month periods ended July 2, 2009 and June 26, 2008, respectively.

     An executive of the Company is a member of the Board of Directors of a Wichita, Kansas bank that provides banking services to Spirit. In connection with the banking services provided to Spirit, the Company pays fees consistent with commercial terms that would be available to unrelated third parties. Such fees are not material to Spirit.

18. Commitments, Contingencies and Guarantees

Litigation

     From time to time we are subject to, and are presently involved in, litigation or other legal proceedings arising in the ordinary course of business. While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available, it is the opinion of the Company that none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity. Consistent with the requirements of SFAS No. 5, Accounting for Contingencies, we had no accruals at July 2, 2009 or December 31, 2008 for loss contingencies. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

     From time to time, in the ordinary course of business and like others in the industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take appropriate action. We have been subject to certain requests for information and investigations in the past and could be subject to such requests for information and investigations in the future. Additionally, we are subject to federal and state requirements for protection of the environment, including those for disposal of hazardous waste and remediation of contaminated sites. As a result, we are required to participate in certain government investigations regarding environmental remediation actions.

     In 2005, a lawsuit was filed against Spirit, Onex, and Boeing alleging age discrimination in the hiring of employees by Spirit when Boeing sold its Wichita commercial division to Onex. The complaint was filed in U.S. District Court in Wichita, Kansas and seeks class-action status, an unspecified amount of compensatory damages and more than $1.5 billion in punitive damages. The Asset Purchase Agreement requires Spirit to indemnify Boeing for damages resulting from the employment decisions that were made by us with respect to former employees of Boeing Wichita, which relate or allegedly relate to the involvement of, or consultation with, employees of Boeing in such employment decisions. The Company intends to vigorously defend itself in this matter. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

     In December 2005, a federal grand jury sitting in Topeka, Kansas issued subpoenas regarding the vapor degreasing equipment at our Wichita, Kansas facility. The government’s investigation appeared to focus on whether the degreasers were operating within permit parameters and whether chemical wastes from the degreasers were disposed of properly. The subpoenas covered a time period both before and after our purchase of the Wichita, Kansas facility. Subpoenas were issued to Boeing, Spirit and individuals who were employed by Boeing prior to the Boeing Acquisition, but are now employed by us. We responded to the subpoena and provided additional information to the government as requested. On March 25, 2008, the U.S. Attorney’s Office informed the Company that it was closing its criminal file on the investigation. A civil investigation into this matter is ongoing. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

     On February 16, 2007, an action entitled Harkness et al. v. The Boeing Company et al. was filed in the U.S. District Court for the District of Kansas. The defendants were served in early July 2007. The defendants include Spirit AeroSystems Holdings, Inc., Spirit AeroSystems, Inc., the Spirit AeroSystems Holdings Inc. Retirement Plan for the International Brotherhood of Electrical Workers (IBEW), Wichita Engineering Unit (SPEEA WEU) and Wichita Technical and Professional Unit (SPEEA WTPU) Employees, and the Spirit AeroSystems Retirement Plan for International Association of Machinists and Aerospace Workers (IAM) Employees, along with The Boeing Company and Boeing retirement and health plan entities. The named plaintiffs are twelve former Boeing employees,

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

eight of whom were or are employees of Spirit. The plaintiffs assert several claims under ERISA and general contract law and brought the case as a class action on behalf of similarly situated individuals. The putative class consists of approximately 2,500 current or former employees of Spirit. The parties agreed to class certification and are currently in the discovery process. The sub-class members who have asserted claims against the Spirit entities are those individuals who, as of June 2005, were employed by Boeing in Wichita, Kansas, were participants in the Boeing pension plan, had at least 10 years of vesting service in the Boeing plan, were in jobs represented by a union, were between the ages of 49 and 55, and who went to work for Spirit on or about June 17, 2005. Although there are many claims in the suit, the plaintiffs’ claims against the Spirit entities, asserted under various theories, are (1) that the Spirit plans wrongfully failed to determine that certain plaintiffs are entitled to early retirement “bridging rights” to pension and retiree medical benefits that were allegedly triggered by their separation from employment by Boeing and (2) that the plaintiffs’ pension benefits were unlawfully transferred from Boeing to Spirit in that their claimed early retirement “bridging rights” are not being afforded these individuals as a result of their separation from Boeing, thereby decreasing their benefits. The plaintiffs seek a declaration that they are entitled to the early retirement pension benefits and retiree medical benefits, an injunction ordering that the defendants provide the benefits, damages pursuant to breach of contract claims and attorney fees. Boeing has notified Spirit that it believes it is entitled to indemnification from Spirit for any “indemnifiable damages” it may incur in the Harkness litigation, under the terms of the Asset Purchase Agreement (“APA”) between Boeing and Spirit’s corporate predecessor, Mid-Western Aircraft Systems, Inc. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

     On July 21, 2005, the International Union, Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) filed a grievance against Boeing on behalf of certain former Boeing employees in Tulsa and McAlester, Oklahoma, regarding issues that parallel those asserted in Harkness et al. v. The Boeing Company et al. Boeing denied the grievance, and the UAW subsequently filed suit to compel arbitration, which the parties eventually agreed to pursue. The arbitration was conducted in January 2008. In July 2008, the arbitrator issued an opinion and award in favor of the UAW. The arbitrator directed Boeing to reinstate the seniority of the employees and “afford them the benefits appurtenant thereto.” On March 5, 2009, the arbitrator entered an Opinion and Supplemental Award that directed Boeing to award certain benefits to UAW members upon whose behalf the grievance was brought, notwithstanding the prior denial of such benefits by the Boeing Plan Administrator. On April 10, 2009, Boeing filed a Complaint in the United States District Court for the Northern District of Illinois, seeking a ruling that the Arbitrator exceeded his authority in granting the Supplemental Award. Boeing has notified Spirit of its intent to seek indemnification from Spirit for any “indemnifiable damages” it may incur in the UAW matter, pursuant to the terms of the APA. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

     On May 11, 2009, Spirit filed a lawsuit in the United States District Court for the District of Kansas against SPS Technologies (“SPS”), LLC and Precision Castparts Corp. Spirit’s claims are based on the sale by SPS of certain non-conforming nutplate fasteners to Spirit between August 2007 and August 2008. Many of the fasteners were used on assemblies that Spirit sold to a customer. In the fall of 2008, Spirit discovered the non-conformity and notified the customer of the discrepancy. Subsequently, Spirit and the customer removed and replaced nutplates on various in-process aircraft assemblies. Spirit’s lawsuit seeks damages, including damages related to these efforts, under various theories, including breach of contract and breach of implied warranty.

Guarantees

     Contingent liabilities in the form of letters of credit, letters of guarantee and performance bonds have been provided by the Company. These letters of credit reduce the amount of borrowings available under the revolving credit facility. As of July 2, 2009 and December 31, 2008, $18.4 and $14.0 were outstanding in respect of these guarantees, respectively.

Indemnification

     The Company has entered into indemnification agreements with each of its directors, and some of its executive employment agreements include indemnification provisions. Under those agreements, the Company agrees to indemnify each of these individuals against claims arising out of events or occurrences related to that individual’s service as the Company’s agent or the agent of any of its subsidiaries to the fullest extent legally permitted.

Service and Product Warranties and Extraordinary Rework

     The Company provides service and warranty policies on its products. Liability under service and warranty policies is based upon specific claims and a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance or quality issues.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     The following is a roll forward of the service warranty balances at July 2, 2009:

Balance-December 31, 2008		$	6.5
Charges to costs and expenses			3.3
Exchange rate			0.3
Balance-July 2, 2009		$	10.1

19. Segment Information

     The Company operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Essentially all revenues in the three principal segments are from Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. Approximately 95% of the Company’s net revenues for the six months ended July 2, 2009 came from our two largest customers, Boeing and Airbus. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other Wichita companies. The Company’s primary profitability measure to review a segment’s operating performance is segment operating income before unallocated corporate selling, general and administrative expenses and unallocated research and development. Unallocated corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to our operating segments and are not allocated in measuring the operating segments’ profitability and performance and operating margins.

     The Company’s Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and overhaul (MRO).

     The Company’s Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers) and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services.

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

     The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from operating income as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below. Most selling, general and administrative expenses, and all interest expense or income, related financing costs and income tax amounts, are not allocated to the operating segments.

     While some working capital accounts are maintained on a segment basis, much of the Company’s assets are not managed or maintained on a segment basis. Property, plant and equipment, including tooling, is used in the design and production of products for each of the segments and, therefore, is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets and deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to any particular segment. Raw materials and certain component parts are used in the production of aerostructures across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share)

     The following table shows segment information:

		For the Three								For the Six
		Months Ended								Months Ended
		July 2,				June 26,				July 2,				June 26,
		2009				2008				2009				2008
Segment Revenues
Fuselage Systems		$	541.2			$	493.4			$	971.7			$	985.4
Propulsion Systems			278.5				296.9				505.9				571.6
Wing Systems			234.7				264.4				455.6				526.7
All Other			5.2				7.4				13.8				14.8
		$	1,059.6			$	1,062.1			$	1,947.0			$	2,098.5
Segment Operating Income (Loss)
Fuselage Systems		$	59.3			$	92.4			$	134.2			$	181.5
Propulsion Systems			23.2				49.3				61.9				93.8
Wing Systems			(58.8	)			32.9				(39.3	)			65.4
All Other			(2.4	)			(0.3	)			(2.0	)			0.1
Business Segment Operating Income			21.3				174.3				154.8				340.8
Unallocated corporate SG&A			(30.7	)			(38.0	)			(66.2	)			(74.1	)
Unallocated research and development			(1.0	)			(0.2	)			(1.2	)			(0.4	)
Total operating income (loss)		$	(10.4	)		$	136.1			$	87.4			$	266.3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following section may include “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “continue,” “plan,” “forecast,” or other similar words. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.

Recent Events

     On July 23 2009, members of the Wichita engineering union, the Society of Professional Engineering Employees in Aerospace (SPEEA-WEU) rejected the Company’s three and one half year contract offer. The members are working under an extended contract as negotiations continue.

     On July 8, 2009, Textron, the parent company of Cessna, filed a Form 8-K with the Securities and Exchange Commission stating that it had formally cancelled further development of the Cessna Citation Columbus business jet. Spirit had been selected as the supplier for the fuselage and empennage on the Cessna Citation Columbus in February 2008. As of July 2, 2009, Spirit recorded a $10.9 million charge to reflect the estimated impact of this termination. Spirit has submitted termination claims to Cessna seeking recovery of costs incurred.

     On June 23, 2009, Boeing announced that it had postponed the first flight of its delayed 787 Dreamliner due to the discovery of a structural flaw that would, in turn, delay test flights and delivery dates to airline customers for an unspecified amount of time. The impact to Spirit deliveries to Boeing has not yet been determined. A significant additional delay in production or reduction of expected production volumes would exert additional pressure on this low-margin program. You should carefully consider the risks discussed in Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on February 20, 2009, including “Risk Factors — Risk Factors Related to Our Business and Industry — Our business depends, in part, on the success of a new model aircraft, the B787”.

     On June 16, 2009, Spirit announced that it was selected to design and build the pylon for the Bombardier CSeries commercial jet. In addition to the pylon, the work package for both the CS100 and CS300 aircraft models includes systems, strut-to-wing hardware and the aft fairing package. The pylon will be manufactured at Spirit’s Wichita, Kansas facility.

     On April 9, 2009, Boeing announced that it will cut monthly production of its wide body B777 in June 2010 from seven planes a month to five. This production cut will not have a significant effect on our 2009 financial results.

Overview

     We are the largest independent non-OEM (OEM refers to aircraft original equipment manufacturer) parts designer and manufacturer of commercial aerostructures in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial, military and business jet aircraft. We derive our revenues primarily through long-term supply agreements with Boeing and requirements contracts with Airbus. For the three months ended July 2, 2009, we generated net revenues of $1,059.6 million and a net loss of ($8.3) million and for the six months ended July 2, 2009, we generated net revenues of $1,947.0 million and net income of $54.4 million.

     We are organized into three principal reporting segments: (1) Fuselage Systems, which include the forward, mid and rear fuselage sections, (2) Propulsion Systems, which include nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which include facilities in Tulsa and McAlester, Oklahoma, Prestwick, Scotland and Subang, Malaysia that manufacture wings, wing components, flight control surfaces and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other Wichita companies. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 51%, 26%, 22% and 1%, respectively, of our net revenues for the three months ended July 2, 2009. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 50%, 26%, 23% and 1%, respectively, of our net revenues for the six months ended July 2, 2009.

2009 Outlook

     We expect the following results, or ranges of results, for the year ending December 31, 2009:

		2009 Outlook		2008 Actuals
Revenues		$4.2-$4.3 billion		$3.8 billion
Earnings per share, diluted		$1.45-$1.55 per share		$1.91 per share
Effective tax rate		31%-32%		30.9%
Cash flow from operations				$211 million
Capital expenditures		(See below)		$236 million
Capital reimbursement				$116 million

     Our 2009 outlook is based on the following market assumptions:

•

Our revenue guidance for the full-year 2009 has been lowered slightly to reflect the termination of the Cessna Citation Columbus program. We expect our 2009 revenues to be approximately $4.2-$4.3 billion based on Boeing’s 2009 delivery guidance of 480-485 aircraft; anticipated ramp up of B787 deliveries consistent with our expectations before Boeing’s announcement on June 23, 2009; 2009 expected Airbus deliveries of approximately 483 aircraft; internal Spirit forecasts for non-OEM production activity and non-Boeing and Airbus customers; and foreign exchange rates consistent with year-end 2008 levels.

•

We expect our 2009 fully diluted earnings per share guidance to be between $1.45 and $1.55 per share, reflecting the impact of unusual items recorded in the second quarter of 2009.

•

We expect our 2009 cash flow from operations less capital expenditures, net of customer reimbursements, to be no more than a ($100) million use of cash in the aggregate with capital expenditures of approximately $250 million.

Results of Operations

		Three Months				Three Months								Six Months				Six Months
		Ended				Ended				Percentage				Ended				Ended				Percentage
		July 2,				June 26,				Change to Prior				July 2,				June 26,				Change to Prior
		2009				2008				Year				2009				2008				Year
		($ in millions)
Net revenues		$	1,059.6			$	1,062.1				—			$	1,947.0			$	2,098.5				(7	%)
Operating costs and expenses
Cost of sales			1,021.6				874.5				17	%			1,758.9				1,731.8				2	%
Selling, general and administrative			34.7				40.9				(15	%)			73.1				80.0				(9	%)
Research and development			13.7				10.6				29	%			27.6				20.4				35	%
Total costs and expenses			1,070.0				926.0				16	%			1,859.6				1,832.2				2	%
Operating income (loss)			(10.4	)			136.1				N.A.				87.4				266.3				(67	%)
Interest expense and financing fee amortization			(9.8	)			(10.5	)			(7	%)			(18.9	)			(19.6	)			(4	%)
Interest income			2.0				5.0				(60	%)			4.6				10.7				(57	%)
Other income, net			4.2				0.2				2000	%			5.7				1.6				256	%
Income (loss) before income taxes			(14.0	)			130.8				N.A.				78.8				259.0				(70	%)
Income tax benefit (provision)			5.8				(44.4	)			N.A.				(24.4	)			(87.4	)			(72	%)
Income (loss) before equity in net loss of affiliate			(8.2	)			86.4				N.A.				54.4				171.6				(68	%)
Equity in net loss of affiliate			(0.1	)			—				N.A.				—				—				—
Net income (loss)		$	(8.3	)		$	86.4				N.A.			$	54.4			$	171.6				(68	%)