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TABLE OF CONTENTS
Item 8. Financial Statements and Supplementary Data

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

Form 10-K

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

 

 

For the fiscal year ended December 31, 2013

Or

o

 

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

 

 

For the transition period from            to            


Commission File Number 001-33160

Spirit AeroSystems Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware   20-2436320
(State 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

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

Title of Each Class

 

Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value   New York Stock Exchange

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

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

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

          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 on 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 þ    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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
(Do not check if a smaller
reporting company)
  Smaller reporting company o

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

          The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of the class A common stock on June 27, 2013, as reported on the New York Stock Exchange was approximately $2,643,834,149.

          As of February 12, 2014, the registrant had outstanding 120,991,868 shares of class A common stock, $0.01 par value per share, and 23,817,017 shares of class B common stock, $0.01 par value per share.


DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the registrant's Proxy Statement for the 2014 Annual Meeting of Stockholders to be filed not later than 120 day after the end of the fiscal year covered by this Report are incorporated herein by reference in Part III of this Annual Report on Form 10-K.


Table of Contents


TABLE OF CONTENTS

 
   
  Page  
PART I  
Item 1.   Business     3  
Item 1A.   Risk Factors     23  
Item 1B.   Unresolved Staff Comments     42  
Item 2.   Properties     43  
Item 3.   Legal Proceedings     44  
Item 4.   Mine Safety Disclosures     44  
    Executive Officers of the Registrant     44  

PART II

 
Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     47  
Item 6.   Selected Financial Data     50  
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations     52  
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk     79  
Item 8.   Financial Statements and Supplementary Data     82  
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     158  
Item 9A.   Controls and Procedures     158  
Item 9B.   Other Information     160  

PART III

 
Item 10.   Directors, Executive Officers and Corporate Governance     161  
Item 11.   Executive Compensation     161  
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     161  
Item 13.   Certain Relationships and Related Transactions and Director Independence     161  
Item 14.   Principal Accountant Fees and Services     161  

PART IV

 
Item 15.   Exhibits, Financial Statement Schedules     162  
Signatures     168  
Schedule II — Valuation and Qualifying Accounts     169  

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This Annual Report contains certain "forward-looking statements" that may involve many risks and uncertainties. Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "intend," "estimate," "believe," "project," "continue," "plan," "forecast," or other similar words, or the negative thereof, unless the context requires otherwise. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.

        Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following:

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        These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should review carefully the sections captioned "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report for a more complete discussion of these and other factors that may affect our business.

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PART I

Item 1.    Business

Our Company

        Unless the context otherwise indicates or requires, as used in this Annual Report, references to "we," "us," "our," or the "Company" refer to Spirit AeroSystems Holdings, Inc., its subsidiaries and predecessors. References to "Spirit" refer only to our subsidiary, Spirit AeroSystems, Inc., and references to "Spirit Holdings" or "Holdings" refer only to Spirit AeroSystems Holdings, Inc. References to "Boeing" refer to The Boeing Company and references to "Airbus" refer to Airbus S.A.S., a division of Airbus Group NV. References to "OEM" refer to commercial aerospace original equipment manufacturer.

        We are one of the largest independent non-OEM aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the twelve months ended December 31, 2013, we generated net revenues of $5,961.0 million, and had net loss of $621.4 million.

        Spirit Holdings was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of Boeing's operations in Wichita, Kansas; Tulsa, Oklahoma and McAlester, Oklahoma (the "Boeing Acquisition") by an investor group led by Onex Partners LP and Onex Corporation (together with its affiliates, "Onex"). Boeing's commercial aerostructures manufacturing operations in Wichita, Kansas and Tulsa and McAlester, Oklahoma, are referred to in this Report as "Boeing Wichita." Although Spirit began operations as a stand-alone company in 2005, its predecessor, Boeing Wichita (the "Predecessor"), had 75 years of operating history and expertise in the commercial and military aerostructures industry. Spirit Holdings, Spirit's parent company, has had publicly traded shares on the New York Stock Exchange under the ticker "SPR" since November 2006. Onex continues to hold approximately 94% of Spirit Holdings' class B common shares, which represents approximately 62% of total Spirit Holdings stockholder voting power.

        On April 1, 2006, we became a supplier to Airbus through our acquisition of the aerostructures division of BAE Systems (Operations) Limited, referred to in this Report as "BAE Systems." The acquired division of BAE Systems is referred to in this Report as "BAE Aerostructures," and the acquisition of BAE Aerostructures is referred to as the "BAE Acquisition."

        We manufacture aerostructures for every Boeing commercial aircraft currently in production, including the majority of the airframe content for the Boeing B737, the most popular major commercial aircraft in history. As a result of our unique capabilities both in process design and composite materials, we were awarded a contract that makes us the largest aerostructures content supplier on the Boeing B787, Boeing's next generation twin aisle aircraft. In addition, we are one of the largest content suppliers of wing systems for the Airbus A320 family, we are a significant supplier for the Airbus A380, and we will be a significant supplier for the new Airbus A350 XWB (Xtra Wide-Body) after the development stage of the program. Sales related to the large commercial aircraft market, some of which may be used in military applications, represented approximately 99% of our net revenues for the twelve-month period ended December 31, 2013.

        We derive our revenues primarily through long-term supply agreements with Boeing and Airbus. For the twelve months ended December 31, 2013, approximately 84% and 10% of our net revenues were generated from sales to Boeing and Airbus, respectively. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by the dollar value of products sold. We are a critical partner to our customers due to the broad range of products we currently supply to them and our leading design and manufacturing capabilities using both metallic and composite materials. Under our supply agreements with Boeing and Airbus, we supply products for the life of the aircraft program (other

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than the A350 XWB and A380), including commercial derivative models. For the A350 XWB and A380, we have long-term requirements contracts with Airbus.

        Since Spirit's incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Israel Aerospace Industries, Bombardier, Mitsubishi Aircraft Corporation, Bell Helicopter, Southwest Airlines, United Airlines and American Airlines. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita and Chanute, Kansas; Kinston, North Carolina; Saint-Nazaire, France; and Subang, Malaysia.


Our History

        In December 2004 and February 2005, an investor group led by Onex formed Spirit and Spirit Holdings, respectively, for the purpose of acquiring Boeing Wichita. The Boeing Acquisition was completed on June 16, 2005. Prior to the acquisition, Boeing Wichita functioned as an internal supplier of parts and assemblies for Boeing's airplane programs and had very few sales to third parties.

        In connection with the Boeing Acquisition, we entered into a long-term supply agreement under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita to Boeing prior to the Boeing Acquisition. The Supply Agreement is a requirements contract covering certain products such as fuselages, struts/pylons and wing components for Boeing B737, B747, B767 and B777 commercial aircraft programs for the life of these programs, including any commercial derivative models. Pricing for existing products on in-production models expired in May 2013 and interim pricing provisions under the supply agreement are currently in effect. We are currently negotiating future pricing terms with Boeing. The future pricing will be effective for a period to be agreed upon by the parties. The interim pricing terms are determined according to the existing prices as of May 2013 using a quantity-based price adjustment formula and specified annual escalation until such time as future pricing is agreed. Interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms.

        We also entered into a long-term supply agreement with Boeing for the B787 aircraft, covering the life of this aircraft program, including commercial derivatives. Under this contract we are Boeing's exclusive supplier for the forward fuselage, fixed and moveable leading wing edges and engine pylons for the B787. Pricing for the initial configuration of the B787-8 model is generally set through 2021, with prices decreasing as cumulative production volume levels are achieved. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing and have not yet reached agreement. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific changes, including design changes from the contract configuration baseline for each B787 model.

        On April 1, 2006, we acquired BAE Aerostructures, which was subsequently renamed Spirit AeroSystems (Europe) Limited ("Spirit Europe"). Spirit Europe manufactures leading and trailing wing edges and other wing components for commercial aircraft programs for Airbus and Boeing. The BAE Acquisition provided us with a foundation to increase future sales to Airbus, as Spirit Europe is a key supplier of wing and flight control surfaces for the A320 platform, Airbus' core single-aisle program, and of wing components for the A380 platform, one of Airbus' most important new programs and the world's largest commercial passenger aircraft. In July 2008, Spirit Europe was awarded a contract with Airbus to design and assemble a major wing structure for the A350 XWB program. Under our supply agreements with Airbus, we supply most of our products for the life of the aircraft program (other than the A350 XWB and A380), including commercial derivative models, with pricing determined through 2015. For the A380 and A350 XWB, we have long-term requirements contracts with Airbus that cover a fixed number of units.

        In November 2006, we issued and sold 10,416,667 shares of our class A common stock and certain selling stockholders sold 52,929,167 shares of our class A common stock at a price to the public of $26.00

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per share in our initial public offering. In May 2007, certain selling stockholders sold 34,340,484 shares of our class A common stock at a price to the public of $33.50 per share in a secondary offering of our class A common stock. In April 2011, certain selling stockholders sold 10,307,375 shares of our class A common stock at a price to the underwriters of $24.49 per share in a secondary offering of our class A common stock.


Our Relationship with Boeing

        Overview.    In connection with the Boeing Acquisition, Spirit entered into long-term supply agreements under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita to Boeing prior to the closing of the Boeing Acquisition. The main supply contract is primarily comprised of two separate agreements: (1) the Special Business Provisions, or Sustaining SBP, which sets forth the specific terms of the supply arrangement with regard to Boeing's B737, B747, B767 and B777 aircraft and (2) the General Terms Agreement, or GTA, which sets forth other general contractual provisions relating to our various supply arrangements with Boeing, including provisions relating to termination, events of default, assignment, ordering procedures, inspections and quality controls. The summary below describes provisions contained in both the Sustaining SBP and the GTA as both agreements govern the main supply arrangement. We refer to the Sustaining SBP, the GTA and any related purchase order or contract collectively as the "Supply Agreement." The Supply Agreement is a requirements contract which covers certain products, including fuselages, struts/pylons and nacelles (including thrust reversers), wings and wing components, as well as tooling, for Boeing B737, B747, B767 and B777 commercial aircraft programs for the life of these programs, including any commercial derivative models. During the term of the Supply Agreement and absent default by Spirit, Boeing is obligated to purchase from Spirit all of its requirements for products covered by the Supply Agreement. Although Boeing is not required to maintain a minimum production rate, Boeing is subject to a maximum production rate above which it must negotiate with us regarding responsibility for non-recurring expenditures related to a capacity increase.

        Pricing.    The pricing terms for recurring products under the Supply Agreement expired in May 2013. Under these terms, prices were adjusted each year based on a quantity-based price adjustment formula described in the Supply Agreement whereby average per-unit prices are higher at lower volumes and lower at higher volumes. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other changes. See "Changes" below.

        As the expiration of the established pricing terms has passed, Boeing and Spirit are currently negotiating future pricing, to be applicable for a period to be agreed upon by the parties. Boeing and Spirit are required to negotiate the pricing for such additional period in good faith based on prevailing U.S. market conditions for forward fuselages, B737 fuselages and B737/B777 struts and nacelles and based on prevailing global market conditions for all other products. Until the parties are able to agree upon future pricing, pricing will be determined according to the price as of the expiration of the initial eight-year period, adjusted using the existing quantity-based price adjustment formula and annual escalation and such interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms.

        Prices for commercial derivative models are to be negotiated in good faith by the parties based on then-prevailing market conditions. If the parties cannot agree on price, then they must engage in dispute resolution pursuant to agreed-upon procedures.

        Tooling.    Under the Supply Agreement, Boeing owns all tooling used in production or inspection of products covered by the Supply Agreement. Spirit is responsible for providing all new tooling required for manufacturing and delivering products under the Supply Agreement, and Boeing acquires title to such tooling upon completion of the manufacturing of the tools and payment by Boeing. Because Boeing owns this tooling, Spirit may not sell, lease, dispose of or encumber any of it. Spirit does, however, have the

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option to procure certain limited tooling needed to manufacture and deliver both Boeing and non-Boeing parts.

        Although Boeing owns the tooling, Spirit has the limited right to use this tooling without any additional charge to perform its obligations to Boeing under the Supply Agreement and also to provide aftermarket services in accordance with the rights granted to Spirit under other related agreements, including royalty-bearing license agreements. Boeing is entitled to use the tooling only under limited circumstances. Spirit is responsible for maintaining and insuring the tooling. Spirit's rights to use the tooling are subject to the termination provisions of the Supply Agreement.

        Changes.    Upon written notification to Spirit, Boeing has the right to make changes within the general scope of work performed by Spirit under the Supply Agreement. If any such change increases or decreases the cost or time required to perform, Boeing and Spirit must negotiate an equitable adjustment (based on rates, factors and methodology set forth in the Supply Agreement) to the price or schedule to reflect the change, except that Spirit will be responsible for absorbing the cost of certain changes. The Supply Agreement also provides for equitable adjustments to product prices if there are order accelerations or decelerations, depending on lead times identified in the Supply Agreement. In addition, the Supply Agreement provides for equitable adjustments to recurring part prices as well as the price of non-recurring work upon the satisfaction of certain conditions and upon certain minimum dollar thresholds being met.

        Additional Spirit Costs.    In the event that Boeing rejects a product manufactured by Spirit, Boeing is entitled to repair or rework such product, and Spirit is required to pay all reasonable costs and expenses incurred by Boeing related thereto. In addition, Spirit is required to reimburse Boeing for costs expended in providing Spirit and/or Spirit's contractors the technical or manufacturing assistance with respect to Spirit nonperformance issues.

        Termination for Convenience.    Subject to the restrictions prohibiting Boeing from manufacturing certain products supplied by Spirit or purchasing such products from any other supplier, Boeing may, at any time, terminate all or part of any order under the Supply Agreement by written notice to Spirit. If Boeing terminates all or part of an order, Spirit is entitled to compensation for certain costs.

        Termination of Airplane Program.    If Boeing decides not to initiate or continue production of a Boeing commercial aircraft model B737, B747, B767 or B777 or commercial derivative because it determines there is insufficient business basis for proceeding, Boeing may terminate such model or derivative, including any order therefor, by written notice to Spirit. In the event of such a termination, Boeing will be liable to Spirit for any orders issued prior to the date of the termination notice and may also be liable for certain termination costs.

        Events of Default and Remedies.    It is an "event of default" under the Supply Agreement if Spirit:

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        If an event of default occurs, Boeing has the right to exercise various remedies set forth in the Supply Agreement, including the right to manufacture or to otherwise obtain substitute products, cancel any or all outstanding orders under the Supply Agreement, and/or terminate the Supply Agreement. Boeing is limited, however, in its ability to cancel orders or terminate the Supply Agreement for the defaults described in items (1), (2) and (6) above. In such cases, Boeing may not cancel orders unless the event of default is material and has an operational or financial impact on Boeing and may not terminate the Supply Agreement unless there are repeated, material events of default and certain other criteria are satisfied. Boeing may only terminate the Supply Agreement with respect to the aircraft program affected by the event of default. If two or more programs are affected by the event of default, Boeing may terminate the entire Supply Agreement. Boeing may also require Spirit to transfer tooling, raw material, work-in-process and other inventory and certain intellectual property to Boeing in return for reasonable compensation.

        Excusable Delay.    If delivery of any product is delayed by circumstances beyond Spirit's reasonable control, and without Spirit's or its suppliers' or subcontractors' error or negligence (including, without limitation, acts of God, war, terrorist acts, fires, floods, epidemics, strikes, unusually severe weather, riots and acts of government), or by any material act or failure to act by Boeing, each being an "excusable delay," then, subject to certain exceptions, Spirit's delivery obligations will be extended. If delivery of any product is delayed by an excusable delay for more than three months, Boeing may cancel all or part of any order for the delayed products.

        If delivery of any product constituting more than 25% of the ship set value for one or more models of program airplanes is delayed by an excusable delay for more than five months, Boeing may cancel the Sustaining SBP as it applies to such models of program airplanes, and neither party will have any liability to the other, other than as described in the above paragraph under the heading "Events of Default and Remedies."

        Assignment.    Spirit may not assign its rights under the Supply Agreement other than with Boeing's consent, which Boeing may not unreasonably withhold unless the assignment is to a disqualified person. A disqualified person is one: (1) whose principal business is as an OEM of commercial aircraft, space vehicles, satellites or defense systems; (2) that Boeing reasonably believes will not be able to perform its obligations under the Supply Agreement; (3) that, after giving effect to the transaction, would be a supplier of more than 40% by value of the major structural components of any Boeing program then in production; or (4) who is, or is an affiliate of, a commercial airplane operator or is one of five named corporate groups. Sale of majority voting power or of all or substantially all of Spirit's assets to a disqualified person is considered an assignment.

        Overview.    Spirit and Boeing also entered into a long-term supply agreement for Boeing's B787 program, or the B787 Supply Agreement, which covers the life of the program and commercial derivatives. The B787 Supply Agreement is a requirements contract pursuant to which Spirit is Boeing's exclusive supplier for the forward fuselage, fixed and moveable leading wing edges, engine pylons and related tooling for the B787. While the B787 Supply Agreement does not provide for a minimum or maximum production rate, the agreement acknowledges that Spirit is responsible for capitalization to support a rate of ten per month. If Boeing decides to increase production above ten ship sets per month, and if a certain percentage of the profit margin of the additional revenue due to the increase is not projected to recover expenditures required to increase the production rate beyond that level, Spirit will negotiate with Boeing regarding an equitable price adjustment. Pursuant to the B787 Amendment described below, Spirit has agreed to proceed with all necessary capital and equipment investments required to support a rate of ten ship sets per month. Under the B787 Supply Agreement, Spirit also provides certain support, development and redesign engineering services to Boeing at an agreed hourly rate.

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        Pricing.    Pricing for the initial configuration of the B787-8 model is generally established through 2021, with prices decreasing as cumulative volume levels are met over the life of the program. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine the initial B787-9 and B787-10 prices and have not yet reached agreement. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific changes, including design changes from the contract configuration baseline for each B787 model. As outlined in the amendment to the B787 Supply Agreement dated May 12, 2011 (the "B787 Amendment"), both parties will participate in an annual price adjustment process for each B787 model, which will involve an evaluation of the cost impact to Spirit as a result of Boeing directed changes. The price adjustments are calculated using a methodology set out in the B787 Supply Agreement. The evaluations take place and conclude in the first quarter of each calendar year and apply retroactively to certain of the prior year's prices to the extent set out in the B787 Supply Agreement. In June 2013, Spirit and Boeing completed the first annual price adjustment for the B787-8.

        Advance Payments/Deferred Revenue.    In December 2010, Spirit and Boeing entered into a memorandum of agreement ("MOA") and a settlement agreement regarding certain claims associated with the development and production of the B787 airplane. As part of these agreements, Spirit received a payment for $236.2 million which was recorded as deferred revenue (short-term) within the December 31, 2010 consolidated balance sheet pending finalization of a contract amendment, which would contain the final settlement terms. On May 12, 2011, Spirit and Boeing entered into the B787 Amendment, which finalized and implemented substantially all of the provisions of the December 2010 MOA. Among other things, the B787 Amendment spread out repayment of a $700.0 million cash advance made by Boeing to Spirit in 2007 to be offset against the purchase price of the first 1,000 B787 ship sets delivered to Boeing, instead of the first 500 ship sets. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million due on December 15th of each year until the advance payments have been fully recovered by Boeing. The B787 Amendment also changed the treatment of advances paid by Boeing for certain non-recurring work into a nonrefundable payment in full for such work.

        Accordingly, portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was $600.2 million.

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

        Events of Default and Remedies.    It is an "event of default" under the B787 Supply Agreement if Spirit:

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        If an event of default occurs, Boeing has the right to exercise various remedies set forth in the B787 Supply Agreement, including the right to manufacture or to otherwise obtain substitute products, cancel any or all outstanding orders under the B787 Supply Agreement and/or terminate the B787 Supply Agreement. Before terminating any order or the B787 Supply Agreement, Boeing is required to work with Spirit to attempt to agree on a satisfactory recovery plan. Boeing may also require Spirit to transfer tooling, raw material, work-in-process and other inventory and certain intellectual property to Boeing in return for reasonable compensation.

        Assignment.    Spirit may not assign its rights under the B787 Supply Agreement or any related order other than with Boeing's consent, which Boeing may not unreasonably withhold unless the assignment is to a disqualified person. A disqualified person is one: (1) whose principal business is as an OEM of commercial aircraft, space vehicles, satellites or defense systems; (2) that Boeing reasonably believes will not be able to perform its obligations under the B787 Supply Agreement; (3) that, after giving effect to the transaction, would be a supplier of more than 40% by value of the major structural components of any Boeing program then in production; or (4) who is, or is an affiliate of, a commercial airplane operator or is one of five named corporate groups. Sale of majority voting power or of all or substantially all of Spirit's assets to a disqualified person is considered an assignment.

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

        Except as Boeing otherwise agrees, Spirit may only use Boeing proprietary information and materials (such as tangible and intangible confidential, proprietary and/or trade secret information and tooling) in the performance of its obligations under the Supply Agreement. Spirit is prohibited from selling products manufactured using Boeing proprietary information and materials to any person other than Boeing without Boeing's authorization.

        Spirit has granted to Boeing a license to Spirit proprietary information and materials and software and related products for use in connection with the testing, certification, use, sale or support of a product covered by the Supply Agreement, or the manufacture, testing, certification, use, sale or support of any aircraft including and/or utilizing a product covered by the Supply Agreement. Spirit has also granted to Boeing a license to use Spirit intellectual property to the extent such intellectual property interferes with Boeing's use of products or intellectual property belonging to Boeing under the Supply Agreement.

        To protect Boeing against Spirit's default, Spirit has granted to Boeing a license, exercisable on such default to practice and/or use, and license for others to practice and/or use on Boeing's behalf, Spirit's

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intellectual property and tooling related to the development, production, maintenance or repair of products in connection with making, using and selling products. As a part of the foregoing license, Spirit must, at the written request of and at no additional cost to Boeing, promptly deliver to Boeing any such licensed property considered by Boeing to be necessary to exercise Boeing's rights under the license.

        B787 Supply Agreement.    The B787 Supply Agreement establishes three classifications for patented invention and proprietary information: (1) intellectual property developed by Spirit during activity under the B787 Supply Agreement, or Spirit IP; (2) intellectual property developed jointly by Boeing and Spirit during that activity, or Joint IP; and (3) all other intellectual property developed during activity under the B787 Supply Agreement, or Boeing IP.

        Boeing may use Spirit IP for work on the B787 program and Spirit may license it to third parties for work on such program. Spirit may also not unreasonably withhold consent to the license of such intellectual property to third parties for work on other Boeing programs, provided that it may require a reasonable royalty to be paid and, with respect to commercial airplane programs, that Spirit has been offered an opportunity, to the extent commercially feasible, to work on such programs.

        Each party is free to use Joint IP in connection with work on the B787 and other Boeing programs, but each must obtain the consent of the other to use it for other purposes. If either party wishes to license Joint IP to a third party for work on a Boeing program other than the B787, then the other party may require a reasonable royalty, but may not unreasonably withhold its consent, as long as (if the program in question is another Boeing commercial airplane program) Spirit has been offered an opportunity, to the extent commercially feasible, to perform work for the particular program.

        Spirit is entitled to use Boeing IP for the B787 program, and may require Boeing to license it to subcontractors for the same purpose.

        Additional License From Boeing.    Boeing has licensed certain intellectual property rights to Spirit under a Hardware Material Services General Terms Agreement, or HMSGTA, and four initial Supplemental License Agreements, or SLAs, under the HMSGTA. The HMSGTA and the initial SLAs grant Spirit licenses to use Boeing intellectual property to manufacture listed parts for the aftermarket and to perform maintenance, repair and overhaul, or MRO, of aircraft and aircraft components for customers other than Boeing. These agreements also permit Spirit to use knowledge obtained by Spirit personnel prior to the closing of the Boeing Acquisition. Spirit also may obtain additional SLAs from Boeing and those SLAs will also supersede the restrictions on Spirit's use of Boeing's proprietary information and materials described above. Spirit pays Boeing royalties for the use of these licenses.


Intellectual Property

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


Our Products

        We are organized into three principal reporting segments: (1) Fuselage Systems, which includes forward, mid and rear fuselage sections; (2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components; and (3) Wing Systems, which includes wing systems and components, flight control surfaces and other miscellaneous structural parts. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina, with an assembly plant for the A350 XWB in Saint-Nazaire, France. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas, and the Wing Systems segment manufactures products at our facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Subang, Malaysia and Kinston, North Carolina. Fuselage Systems, Propulsion Systems and Wing Systems represented approximately 48%, 27%,

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and 25%, of our net revenues for the twelve months ended December 31, 2013, respectively. All other activities fall within the All Other segment, representing less than 1% of our net revenues for the twelve months ended December 31, 2013, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita.

        As the programs we are involved in move through their life cycles, we classify them based on where they fall in the life cycle. The following table summarizes the program phases and programs in each category:

Program Phases
 
Life Cycle
 
Aircraft Platform
New   Generally early in development phase with possible low rate production   A350 XWB, Sikorsky CH53-K,
Mitsubishi Regional Jet,
Bombardier CSeries
    Significant design evolution    
    Typically has not achieved certifications    

Maturing

 

Generally in early production phase

 

B787, Rolls-Royce BR725, G280,
    Typically certification is achieved in this phase   G650, KC-46
    Less design evolution than in new program phase    

Mature

 

Generally at full-rate production

 

B737, B747, B767, B777, A320
    Typically certification has been achieved   Family, A330, A380, P8-A
    Relatively stable design with less engineering change    

        We principally design, engineer and manufacture commercial aircraft structures such as fuselages, nacelles (including thrust reversers), struts/pylons, wings and wing assemblies and flight control surfaces. We are the largest independent supplier of aerostructures to Boeing and one of the largest independent suppliers of aerostructures to Airbus. Sales related to the commercial aircraft structures market, some of which may be used in military applications, represented approximately 99% of our net revenues for the year ended December 31, 2013.

        Our structural components, in particular the forward fuselage and nacelles, are among the most complex and highly engineered structural components and represent a significant percentage of the costs of each aircraft. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by dollar value of products sold. We typically sell a package of aerostructure components, referred to as a ship set, to our customers.

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        The following table summarizes the major commercial programs that we currently have under long-term contract by product and aircraft platform.

Product
 
Description
 
Aircraft Platform
Fuselage Systems        

Forward Fuselage

  Forward section of fuselage which houses flight deck, passenger cabin and cargo area   B737, B747, B767, B777, B787

Other Fuselage Sections

 

Mid-section and other sections of the fuselage and certain other structural components, including floor beams

 

B737, B747, B777, A350 XWB

Propulsion Systems        

Nacelles (including Thrust Reversers)

  Aerodynamic structure surrounding engines   B737, B747, B767, B777, Rolls-Royce BR725 Engine (for Gulfstream G650)

Struts/Pylons

 

Structure that connects engine to the wing

 

B737, B747, B767, B777, B787, Mitsubishi Regional Jet, Bombardier CSeries

Wing Systems        

Flight Control Surfaces

  Flaps and slats   B737, B777, A320 family

Wing Structures

 

Wing framework which consists mainly of spars, ribs, fixed leading edge, stringers, trailing edges and flap track beams

 

B737, B747, B767, B777, B787, A320 family, A330, A340, A350 XWB, A380, Gulfstream G650, Gulfstream G280

        In addition to providing aerostructures for commercial aircraft, we also design, engineer and manufacture structural components for military aircraft. We have been awarded a significant amount of work for the B737 P-8A, B737 C40 and B767 KC-46 Tanker. The B737 P-8A, B737 C40 and B767 KC-46 Tanker are commercial aircraft modified for military use. Other military programs for which we provide products include the development of the Sikorsky CH-53K and Bell Helicopter V-280 tilt-rotor, and various other programs.

        The following table summarizes the major military programs that we currently have under long-term contract by product and military platform. Rotorcraft is part of the Fuselage Systems segment and low observables, radome and other military are part of the Wing Systems segment.

Product
 
Description
 
Military Platform
Low Observables   Radar absorbent and translucent materials   Various
Rotorcraft   Forward cockpit and cabin   Sikorsky CH-53K Development Program

 

 

Fuselage

 

Bell Helicopter V-280 Development Program
Other Military   Fabrication, bonding, assembly, testing, tooling, processing, engineering analysis, and training   Various

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        We continue to broaden our base for aftermarket support of the products we design and build. We have developed our global sales and marketing channel for spare parts, with sales offices in Singapore, Ireland, China and the U.S. Our Spirit catalog has over 14,000 parts that we are selling directly to the marketplace by virtue of having obtained parts manufacturing approvals from the FAA. In the area of MRO we have repair stations in Wichita, Kansas, with FAA and European Aviation Safety Agency (EASA) certifications, and Prestwick, Scotland, which is EASA-certified with FAA certification pending. In addition, we operate an MRO repair station through a joint venture in Jinjiang, China, Taikoo Spirit AeroSystems Composite Company, Ltd., which holds Civil Aviation Administration of China certification and FAA and EASA approval.

        The following table summarizes our aftermarket products and services:

Product
 
Description
 
Aircraft Platform
Spares   Provides replacement parts and components support for:    
    In production aircraft   B737NG, B747, B767, B777, B787, Gulfstream G280 and G650, A320 family, A330, A340, A380

 

 

Out of production aircraft

 

B707, B727, B737 Classic, B757
Maintenance, Repair and Overhaul   Certified repair stations that provide complete on-site nacelle repair and overhaul; maintains global partnerships to support MRO services   B737, B747, B757, B767, B777 and G650 nacelles, and G650 and G280 wing components

Rotable Assets

 

Maintain a pool of rotable assets for exchange and/or lease

 

B737, B747, B757, B767, B777


Our Competitive Strengths

        We believe our key competitive strengths include:

        Leading Position in the Growing Commercial Aerostructures Market.    We are one of the largest independent non-OEM commercial aerostructures manufacturers with an estimated 17% market share of the global market. Based on their published aircraft backlog figures, Boeing and Airbus had a combined backlog of 10,639 commercial aircraft as of December 31, 2013, and 9,055 commercial aircraft as of December 31, 2012. We are under contract to provide aerostructure products for approximately 98% of the aircraft that comprise this commercial aircraft backlog. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by dollar value of the products sold. The significant Boeing and Airbus aircraft order backlog for scheduled deliveries in this decade, and our strong relationships with Boeing and Airbus, should enable us to continue to profitably grow our core commercial aerostructures business.

        Participation on High-Volume and Major Growth Platforms.    We derive a high proportion of our Boeing revenues from the high-volume B737 program and a high proportion of our Airbus revenues from the high-volume A320 program. Boeing's backlog consists of approximately 3,680 B737s (more than eight years of backlog at current build rates) and Airbus' backlog consists of approximately 4,298 aircraft in the A320 family (more than eight years of backlog at current build rates). The B737 and A320 families are Boeing's and Airbus' best-selling commercial airplanes, respectively. We have also been awarded a significant amount of work on major twin-aisle programs, the B777, B787 and A350 XWB.

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        Stable Base Business.    We have entered into long-term supply agreements with Boeing and Airbus, our two largest customers, making us the exclusive supplier for most of the products covered by these contracts. Our supply agreements with Boeing provide that we will continue to supply essentially all of the products we currently supply to Boeing for the life of the current aircraft programs, including commercial derivative models. The principal supply agreements we have entered into with Boeing make us Boeing's exclusive source for substantially all of the products covered by the agreements.

        Under our supply agreements with Airbus, we supply most of our products for the life of the aircraft program, including commercial derivative models. For the A380 and A350 XWB, we have long-term requirements contracts with Airbus that cover a fixed number of units. We are currently the sole-source supplier for approximately 50% of the products, as measured by dollar volume, that we sell directly to Airbus.

        Strong Incumbent and Competitive Position.    We have a strong incumbent position on the products we currently supply to Boeing and Airbus, forged by long-standing relationships and long-term supply agreements. Several members of our management team have a long history of working in the aerospace industry, at Boeing Wichita and BAE Aerostructures. We believe our management team possesses inherent knowledge of and relationships with Boeing and Airbus that may not be matched to a corresponding degree between other suppliers and these two OEMs.

        We believe that OEMs incur significant costs to change aerostructures suppliers once contracts are awarded. Such changes after contract award require additional testing and certification, which may create production delays and significant costs for both the OEM and the new supplier. We also believe it would be cost prohibitive for other suppliers to duplicate our facilities and the over 20,000 major pieces of equipment that we own or operate. The combined insurable replacement value of all the buildings and equipment we own or operate is approximately $6.6 billion, including approximately $2.6 billion for buildings, approximately $2.4 billion for equipment that we own and approximately $1.6 billion for other equipment used in the operation of our business. The insurable values represent the estimated replacement cost of buildings and equipment used in our operations and covered by property insurance, and exceed the fair value of assets acquired as determined for financial reporting purposes. As a result, we believe that as long as we continue to meet our customers' requirements, the probability that they change suppliers on our current statement of work is quite low. Our incumbent position also provides us with a competitive advantage with respect to new business from our customers.

        Industry-Leading Technology, Design Capabilities and Manufacturing Expertise.    Spirit AeroSystems, independently, and previously as Boeing Wichita, has over 80 years of experience designing and manufacturing large-scale, complex aerostructures. We possess industry-leading engineering capabilities that include significant expertise in structural design, technology development, test, and regulatory certification (FAA and international civil aviation authorities). We specialize in the use of metallic and composite materials, conducting stress analyses to ensure structural integrity, systems engineering to ensure customer and regulatory requirements are clearly identified and managed, and acoustics technology.

        With approximately 1,500 degreed engineering and technical employees (including over 40 degreed contract engineers) and access to approximately 800 engineers from other engineering firms, we possess knowledge and manufacturing know-how that customers depend on and that would be difficult for other suppliers to replicate. In addition to our engineering expertise, we have strong manufacturing and technological capabilities. Our manufacturing processes are highly automated, delivering efficiency and quality, and we have expertise in manufacturing aerostructures using both metallic and composite materials. We have strong technical expertise in bonding and metals fabrication, assembly, tooling and composite manufacturing, including the handling of all composite material grades and fabricating large-scale complex contour composites. We provide aftermarket support for the products we design and build.

        We believe our technological, engineering and manufacturing capabilities separate us from many of our competitors and give us a significant competitive advantage to grow our business and increase our

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market share. The fact that we are one of the major external suppliers of forward fuselages for large commercial aircraft demonstrates our industry leadership. The forward fuselage is one of the most complex and technologically advanced aerostructures on a commercial aircraft because it must satisfy the aircraft's contour requirements; balance strength, aerodynamics and weight; and house the cockpit and avionics.

        Competitive and Predictable Labor Cost Structure.    Following the Boeing Acquisition, we entered into new labor contracts with our unions that established wage levels that are aligned with the local market. We also changed work rules and significantly reduced the number of job categories, resulting in greater flexibility in work assignment programs and increased productivity. Over the past four years, we successfully negotiated long-term labor agreements with each of the five unions representing factory and office workers in our U.S. locations. As a result, we expect our labor costs to be stable and predictable through 2019.

        Experienced Management Team.    We have an experienced and proven management team with significant aerospace and defense industry experience. We continue to add new talent to our management team and realign our existing talent pool. Our management team has successfully expanded our business and established the stand-alone operations of our business, and is actively working to reduce costs. Many of our executives and senior managers have lengthy experience working with our primary customers, including Boeing and Airbus, which provides us with detailed insight into how we can better serve our customers.


Operating Segments

        We operate in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Substantially all revenues in the three principal segments are from Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. We serve customers in addition to Boeing and Airbus across our three principal segments; however, these customers currently do not represent a significant portion of our revenues, and are not expected to in the near future. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas.

        The Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs, as well as related spares and MRO. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas; Kinston, North Carolina; and Saint-Nazaire, France.

        The Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers) and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas.

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

        We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.

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Sales and Marketing

        Our established sales and marketing infrastructure supports our efforts to expand our business with new and existing customers in three sectors of the aerostructures industry: (1) large commercial airplanes, (2) business and regional jets and (3) military/helicopter. The sales directors establish and maintain relationships with individual customers and are supported in their campaigns by sales teams within specific product specialties and a market research team performing various analyses related to those products and customers. The comprehensive sales and marketing teams work closely to ensure a consistent, single message approach with customers.

        Although we have long-term contracts with Boeing and Airbus on programs such as the B737, B787, A320, A350 XWB and A380, and OEMs generally desire to minimize costs by retaining established aerostructure suppliers, our sales and marketing team continues to maintain strong relationships with the OEMs to position us for future business opportunities. Our marketing team continues to research and analyze trends in our industry and in new product development, and our sales team maintains regular contact with key Boeing and Airbus decision-makers to prepare for new business opportunities from both companies.

        We maintain a customer contact database to maximize our interactions with existing and potential customers. In the time that Spirit has existed as an independent company, we have been successful in building a positive identity and name recognition for the Company brand through advertising, trade shows, sponsorships and Spirit customer events. In order to diversify and win new customers, we market our expertise in the design and manufacture of major aerostructures and advanced manufacturing capabilities with both composites and traditional metals processes.


Customers

        Our primary customers are aircraft OEMs. Boeing and Airbus are our two largest customers. We are the largest independent aerostructures supplier to Boeing and one of the largest independent suppliers to Airbus. We entered into long-term supply agreements with our customers to provide aerostructure products to aircraft programs. As of December 31, 2013, virtually all of the products we sell are under long-term contracts and 97% of those products, as measured by dollar value of products sold, are supplied by us on a sole-sourced basis.

        We have good relationships with our customers due to our diverse product offerings, leading design and manufacturing capabilities using both metallic and composite materials, and competitive pricing.

        Boeing.    For the twelve months ended December 31, 2013, approximately 84% of our revenues were from sales to Boeing. We have a strong relationship with Boeing given our predecessor's 75+ year history as a Boeing division. As part of the Boeing Acquisition, we entered into a long-term supply agreement under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita prior to the Boeing Acquisition for the life of the programs. In addition, Boeing selected us to be the design leader for the Boeing B787 forward fuselage based in part on our expertise with composite technologies.

        We believe our relationship with Boeing is unmatched in the industry and will allow us to continue to be an integral partner with Boeing in the designing, engineering and manufacturing of complex aerostructures.

        Airbus.    For the twelve months ended December 31, 2013, approximately 10% of our revenues were from sales to Airbus. As a result of the BAE Acquisition, we became one of the largest independent aerostructures suppliers to Airbus, and we have expanded our relationship through new business wins. Under our supply agreement with Airbus, we supply products for the life of the aircraft program, including commercial derivative models, with pricing determined through 2015. For the A350 XWB and A380 programs, we have long-term requirements contracts with Airbus that cover a fixed number of units. We believe we can leverage our relationship with Airbus and our history of delivering high-quality products to further increase our sales to Airbus and continue to partner with Airbus on new programs going forward.

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        We are a significant supplier of the composite fuselage structure for the new Airbus A350 XWB. To accommodate this and other work, we expanded our operations in 2011 with the opening of a manufacturing facility in Kinston, North Carolina and an assembly plant in Saint-Nazaire, France, which will assemble the center fuselage sections it receives from the Kinston, North Carolina facility before transporting the completed assembled unit to Airbus. In addition, we have a contract with Airbus to design and manufacture a major wing structure for the A350 XWB program. Spirit Europe designs and assembles the wing leading edge structure primarily at its facility in Prestwick, Scotland. The composite front spar is built at the facility in Kinston, North Carolina with sub-assemblies being manufactured at the Spirit AeroSystems Malaysia facility in Subang, Malaysia.

        Although most of our revenues are obtained from sales inside the U.S., we generated $806.1 million, $785.7 million, and $653.1 million in sales to international customers for the twelve months ended December 31, 2013, December 31, 2012, and December 31, 2011, respectively, primarily to Airbus.

        The following chart illustrates the split between domestic and foreign revenues (dollars in millions):

 
  Year Ended
December 31, 2013
  Year Ended
December 31, 2012
  Year Ended
December 31, 2011
 
Revenue Source(1)
  Net Revenues   Percent of
Total
Net Revenues
  Net Revenues   Percent of
Total
Net Revenues
  Net Revenues   Percent of
Total
Net Revenues
 

United States

  $ 5,154.9     87 % $ 4,612.0     85 % $ 4,210.7     87 %

International

                                     

United Kingdom

    559.7     9 %   470.4     9 %   422.6     8 %

Other

    246.4     4 %   315.3     6 %   230.5     5 %
                           

Total International

    806.1     13 %   785.7     15 %   653.1     13 %
                           

Total Revenues

  $ 5,961.0     100 % $ 5,397.7     100 % $ 4,863.8     100 %
                           
                           

(1)
Revenues are attributable to countries based on the destination where goods are delivered.

        The international revenue is included primarily in the Wing Systems segment. All other segment revenues are primarily from U.S. sales. Approximately 6% of our long-lived assets based on book value are located in the United Kingdom as part of Spirit Europe with approximately another 5% of our long-lived assets located in countries outside the United States and the United Kingdom.


Expected Backlog

        As of December 31, 2013, our expected backlog associated with large commercial aircraft, business and regional jet, and military equipment deliveries through 2019, calculated based on contractual product prices and expected delivery volumes, was approximately $41.1 billion. This is an increase of $5.8 billion from our corresponding estimate as of the end of 2012 reflecting the fact that Airbus and Boeing new orders exceeded deliveries in 2013. Backlog is calculated based on the number of units Spirit is under contract to produce on our fixed quantity contracts, and Boeing and Airbus announced backlog on our supply agreements. The number of units may be subject to cancellation or delay by the customer prior to shipment, depending on contract terms. The level of unfilled orders at any given date during the year may be materially affected by the timing of our receipt of firm orders and additional airplane orders, and the speed with which those orders are filled. Accordingly, our expected backlog as of December 31, 2013 may not necessarily represent the actual amount of deliveries or sales for any future period.


Manufacturing and Engineering

        Our expertise is in designing, engineering and manufacturing large-scale, complex aerostructures. We maintain eight state-of-the-art manufacturing facilities in Wichita, Kansas; Chanute, Kansas; Tulsa,

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Oklahoma; McAlester, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; Saint-Nazaire, France; and Subang, Malaysia.

        Our core manufacturing competencies include:

        Our manufacturing expertise is supported by our state-of-the-art equipment. We have over 20,000 major pieces of equipment installed in our customized manufacturing facilities. For example, for the manufacture of the B787 composite forward fuselage, we installed a 30-foot diameter by 70-foot long autoclave, which is one of the largest autoclaves in the world. An autoclave is an enclosure device that generates controlled internal heat and pressure conditions used to cure and bond certain resins which is used in the manufacture of composite structures. We installed a comparable autoclave as well as other specialized machines in Kinston, North Carolina to support our work on the A350 XWB. We intend to continue to make the appropriate investments in our facilities to support and maintain our industry-leading manufacturing expertise.

        Spirit employs approximately 1,500 engineers and technical employees, including over 40 contract engineers. In addition, we currently contract the work of approximately 800 engineers from engineering services firms worldwide.

        Spirit employs 28 technical fellows who are experts in engineering and who keep the Company current with new technology by producing technical solutions for new and existing products and processes. We also employ 13 FAA designees and an additional 13 engineers who are in the process of becoming designees. The designees are experienced engineers appointed by the FAA to approve engineering data and witness compliance testing used for certification. In addition, we have an additional seven FAA designees available via contract to assist on an as-needed basis.

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

        Our engineering organization is composed of four primary groups, including: (1) Structures Design and Drafting, which focuses on production support, design-for-manufacturing and major product derivatives, and new customer introductions; (2) Structures Technology, which focuses on overall structural integrity over the lifecycle of the airframe through stress and durability analysis, damage tolerance analysis and vibration testing; (3) Manufacturing Engineering, which is responsible for applying lean manufacturing techniques, interpreting design drawings and providing manufacturing sequence work plans; and (4) Liaison, Lab and Materials, Processes and Standards, which conducts research into defects discovered by quality assurance through analytical chemistry, metallurgical, static and dynamic testing and full-scale testing.

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

        We believe that world-class research and development helps to maintain our position as an advanced partner to our OEM customers' new product development teams. As a result, we spend significant capital and financial resources on our research and development, including approximately $34.7 million during the year ended December 31, 2013, approximately $34.1 million during the year ended December 31, 2012, and approximately $35.7 million during the year ended December 31, 2011. Through our research, we strive to develop unique intellectual property and technologies that will improve our OEM customers' products and, at the same time, position us to win work on new products. Our development effort primarily focuses on preparing for the initial production of new products and improving manufacturing processes on our current work. It also serves as an ongoing process that helps develop ways to reduce production costs and streamline manufacturing processes.

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


Suppliers and Materials

        The principal raw materials used in our manufacturing operations are aluminum, titanium, steel and carbon fiber. We also purchase metallic parts, non-metallic parts, and machined components. In addition, we procure subassemblies from various manufacturers which are used in the final aerostructure assembly.

        Currently we have approximately 1,400 active manufacturing suppliers. No one supplier represents more than 3% of our total cost of sales. Our strategy is to enter into long-term contracts with suppliers to secure competitive pricing. Our exposure to rising costs of raw material is limited to some extent through leveraging relationships with our OEM's high-volume contracts.

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


Environmental Matters

        Our operations and facilities are subject to various environmental, health and safety laws and regulations, including federal, state, local and foreign government requirements, governing, among other matters, the emission, discharge, handling and disposal of regulated materials, the investigation and remediation of contaminated sites, and permits required in connection with our operations. Our operations are designed, maintained and operated to promote protection of human health and the environment. Although we believe that our operations and facilities are in material compliance with applicable environmental and worker protection laws and regulations, management cannot provide assurance that future changes in such laws or their enforcement, or the nature of our operations will not require us to make significant additional expenditures to ensure continued compliance. Further, we could incur substantial costs, including costs to reduce air emissions, clean-up costs, fines and sanctions, and third-party property damage or personal injury claims as a result of violations of or liabilities under environmental laws, relevant common law or the environmental permits required for our operations.

        New regulations or more stringent enforcement of existing requirements could also result in additional compliance costs. For example, various governments have enacted or are considering enactment

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of laws to reduce emissions of carbon dioxide and other so-called greenhouse gases ("GHG"). In particular, the U.S. Environmental Protection Agency (the "EPA") has promulgated new regulations that require certain of our facilities to report annual GHG emissions and may require new operating permits to be issued for those facilities. In the absence of a national price for carbon-based air pollutant emissions, new legislation from Congress, or information relative to additional regulation from the EPA, we are not in a position at this time to estimate the costs which may result from these or similar actions.

        Under some environmental laws in the United States, a current or previous owner or operator of a contaminated site may be held liable for the entire cost of investigation, removal or remediation of regulated materials at such property, whether or not the owner or operator knew of, or was responsible for, the presence of such regulated materials. Persons who arrange for disposal or treatment of hazardous materials also may be liable for the costs of investigation, removal or remediation of those substances at a disposal or treatment site, regardless of whether the affected site is owned or operated by them. Because we own and/or operate a number of facilities that have a history of industrial or commercial use and because we arrange for the disposal of regulated materials at many disposal sites, we may and do incur costs for investigation, removal and remediation.

        The Asset Purchase Agreement for the Boeing Acquisition, referred to herein as the "Asset Purchase Agreement", provides, with limited exceptions, that Boeing is responsible for environmental liabilities relating to conditions existing at the Wichita, Kansas and Tulsa and McAlester, Oklahoma facilities as of the Boeing Acquisition date. For example, Boeing is subject to an administrative consent order issued by the Kansas Department of Health and Environment, or KDHE, to contain and clean up contaminated groundwater, which underlies a majority of the Wichita site. Pursuant to the KDHE order, Boeing has a long-term remediation plan in place, and containment and remediation efforts are underway. We are responsible for any environmental conditions that we cause at these facilities following the Boeing Acquisition.

        In the United Kingdom, remediation of contaminated land may be compelled by the government in certain situations. If a property is to be redeveloped, the local authority, in its planning role, may require remediation as a condition to issuing a permit. In addition, in situations in which the contamination is causing harm to human health or polluting the environment, the local authority may use its environmental legislative powers to force remediation so that the impacted areas are "suitable for use." If contamination is polluting the property of a third party or causing loss, injury or damage, the third party may file an action against the owner or operator of the source in common law based on negligence or nuisance to recover the value of the loss, injury or damage sustained.

        Our interests in other international sites are subject to foreign government environmental laws and regulations. It is our policy and practice to comply with all requirements, both domestic and international. We believe that our procedures are properly designed to prevent unreasonable risk of environmental damage and resulting financial liability in connection with our business.


Competition

        Although we are one of the largest independent non-OEM aerostructures suppliers, based on annual revenues, with an estimated 17% share of the global non-OEM aerostructures market, this market remains highly competitive and fragmented. Our primary competition currently comes from either work performed by internal divisions of OEMs or other first-tier suppliers, but direct competition continues to grow.

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        Our principal competitors among OEMs include Airbus (including their wholly-owned subsidiaries Aerolia SAS, and Premium Aerotec GmbH), Boeing, Dassault Aviation, Embraer Brazilian Aviation Co., Alenia Aermacchi, Gulfstream Aerospace Co., United Technologies Corporation, and Textron Inc. These OEMs may choose not to outsource production of aerostructures due to their own direct labor and overhead considerations and capacity utilization at their own facilities. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce parts in-house or to outsource them. Offset requirements from customers of OEMs may also drive some decisions relative to their business model for production.

        Our principal competitors among non-OEM aerostructures suppliers are Aircelle S.A., Fuji Heavy Industries, Ltd., GKN Aerospace, Kawasaki Heavy Industries, Inc., Mitsubishi Heavy Industries, Sonaca, Triumph Group, Inc., Latecoere S.A., and Nexcelle. Our ability to compete for new aerostructures contracts depends upon (1) our design, engineering and manufacturing capabilities, (2) our underlying cost and pricing structure, (3) our business relationship with OEMs, and (4) our available manufacturing capacity. Some of our competitors have greater resources than we do and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Providers of aerostructures have traditionally competed on the basis of cost, technology, quality and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply-chain management and sales and marketing, and we may not have enough resources to make such investments.


Employees

        As of December 31, 2013, we had approximately 13,948 employees and approximately 229 contract labor personnel, located in our six U.S. facilities. Approximately 85% of our U.S. employees are represented by five unions. Our largest union is the International Association of Machinists and Aerospace Workers ("IAM"), which represents approximately 7,270 employees, or 52%, of the U.S. workforce. We successfully negotiated a new long-term ten-year contract with the IAM in 2010, which is in effect through June 25, 2020. For IAM-represented employees at our Kinston, North Carolina facility, we successfully negotiated a new long-term contract in December 2012, which is in effect through December 2024. The Society of Professional Engineering Employees in Aerospace — Wichita Technical and Professional Unit ("SPEEA — WTPU") represents approximately 1,696 employees, or 12%, of the U.S. workforce. In December of 2011, we successfully negotiated a new 91/2 year contract with SPEEA-WTPU, which is in effect through January 31, 2021. The International Union, Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") represents approximately 1,978 employees, or 14%, of the U.S. workforce. The UAW contract is in effect through November 30, 2020. The Society of Professional Engineering Employees in Aerospace — Wichita Engineering Unit ("SPEEA — WEU") represents approximately 704 employees, or 5%, of the U.S. workforce. We successfully negotiated a new contract with this union in 2012, which is in effect through December 1, 2018. The International Brotherhood of Electrical Workers ("IBEW") represents approximately 193 employees, or 1%, of the U.S. workforce. The IBEW contract is in effect through September 18, 2020.

        As of December 31, 2013, we had approximately 953 employees and approximately 75 contract labor personnel located in our two U.K. facilities. Approximately 679, or 71%, of our U.K. employees are represented by one union, Unite (Amicus Section). In 2013, the Company negotiated two separate ten-year pay agreements, with the Manual Staff bargaining and the Monthly Staff bargaining groups of the Unite union. These agreements fundamentally cover basic pay and variable at risk pay, while other employee terms and conditions generally remain the same from year to year until both parties agree to change them. The current pay agreements expire December 31, 2022.

        As of December 31, 2013, we had approximately 562 employees and approximately 14 contract labor personnel in our Malaysia facility. None of our Malaysia employees are currently represented by a union.

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        As of December 31, 2013, we had approximately 109 employees and approximately 41 contract labor personnel in our French facilities. None of our France employees are currently represented by a union.

        We consider our relationships with our employees to be satisfactory.


Government Contracts

        Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, either directly or by subcontract, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally: (1) suspend or debar us from receiving new prime contracts or subcontracts; (2) terminate existing contracts; (3) reduce the value of existing contracts; (4) audit our contract-related costs and fees, including allocated indirect costs; and (5) control and potentially prohibit the export of our products.

        Most U.S. Government contracts for which we subcontract can be terminated by the U.S. Government either for its convenience or if the prime contractor defaults by failing to perform under the contract. In addition, the prime contractor typically has the right to terminate our subcontract for its convenience or if we default by failing to perform under the subcontract. Termination for convenience provisions generally provide only for our recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination for default provisions generally provide for the subcontractor to be liable for excess costs incurred by the prime contractor in procuring undelivered items from another source.


Foreign Ownership, Control or Influence ("FOCI")

        Due to the fact that more than 50% of our voting power is effectively controlled by a non-U.S. entity (Onex) we are required to operate in accordance with the terms and requirements of a Special Security Agreement, or SSA, with the Department of Defense ("DOD"). Under the DOD National Industrial Security Program Operating Manual ("NISPOM"), the U.S. Government will not award contracts to companies determined to be under FOCI, where a DOD Facility Security Clearance, or FCL, is required, unless certain "mitigation" measures are put in place. The purpose of the FOCI mitigation measures is to protect cleared U.S. defense contractors against improper FOCI.

        We have been cleared to the "Secret" level under an SSA, which is one of the recognized FOCI mitigation measures under the NISPOM. As a cleared entity, we must comply with the requirements of our SSA, the NISPOM and any other applicable U.S. Government industrial security regulations. Failure to follow the requirements of the SSA, the NISPOM or any other applicable U.S. Government industrial security regulations could, among other things, result in termination of our FCL, which in turn would preclude us from being awarded classified contracts or, under certain circumstances, performing on our existing classified contracts.


Governmental Regulations

        The commercial aircraft component industry is highly regulated by the Federal Aviation Authority, or FAA, in the United States, the Joint Aviation Authority, or JAA, in Europe and other agencies throughout the world. The military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in some cases, by individual OEMs, to engineer and service parts and components used in specific aircraft models.

        We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA requires that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA-approved repair stations.

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

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


Available Information

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

        We make available through our Internet website, under the heading "Investor Relations", our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports after we electronically file such materials with the Securities and Exchange Commission ("SEC"). Copies of our key corporate governance documents, including our Corporate Governance Guidelines, Code of Ethics and Business Conduct, Finance Code of Conduct and charters for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are also available on our website.

        Our filed Annual and Quarterly Reports, Proxy Statement and other reports previously filed with the SEC are also available to the public through the SEC's website at http://www.sec.gov. Materials we file with the SEC may also be read and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Item 1A.    Risk Factors

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


Risk Factors Related to Our Business and Industry

     Our commercial business is cyclical and sensitive to commercial airlines' profitability. The business of commercial airlines is, in turn, affected by global economic conditions and geo-political considerations.

        We compete in the aerostructures segment of the aerospace industry. Our customers' business, and therefore our own, is directly affected by the financial condition of commercial airlines and other economic factors, including global economic conditions and geo-political considerations that affect the demand for air transportation. Specifically, our commercial business is dependent on the demand from passenger airlines and cargo carriers for the production of new aircraft. Accordingly, demand for our commercial products is tied to the worldwide airline industry's ability to finance the purchase of new aircraft and the industry's forecasted demand for seats, flights, routes and cargo capacity. Similarly, the size and age of the worldwide commercial aircraft fleet affects the demand for new aircraft and, consequently, for our products. Such factors, in conjunction with evolving economic conditions, cause the market in which we operate to be cyclical to varying degrees, thereby affecting our business and operating results.

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

     Our business jet programs are sensitive to consumer preferences in the business jet market.

        Our business jet program success is tied to demand for products from the manufacturers with whom we contract. The business jet market is impacted by consumer preference for different business jet models. If demand for new aircraft from our customers decreases, there would likely be a corresponding decrease in demand for our business jet products, and our business, financial condition and results of operations could be materially adversely affected.

     Our business could be materially adversely affected if one of our components causes an aircraft accident.

        Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured or serviced by us or our suppliers. While we believe that our liability insurance coverage is sufficient to protect us in the event of future product liability claims, it may not be adequate. Also, we may not be able to maintain insurance coverage in the future at an acceptable cost. Any such liability not covered by insurance or for which third-party indemnification is not available could require us to dedicate a substantial portion of our cash flows to make payments on such liability, which could have a material adverse effect on our business, financial condition and results of operations.

        An accident caused by one of our components could also damage our reputation for quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aerostructures. If an accident were to be caused by one of our components, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers could be materially adversely affected.

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

        Our operations expose us to potential liability for warranty claims made by customers or third parties with respect to aircraft components that have been designed, manufactured, or serviced by us or our suppliers. Material product warranty obligations could have a material adverse effect on our business, financial condition and results of operations.

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

        Currently, Boeing is our largest customer and Airbus is our second-largest customer. For the twelve months ended December 31, 2013, approximately 84% and 10% of our net revenues were generated from sales to Boeing and Airbus, respectively. Although our strategy, in part, is to diversify our customer base by entering into supply arrangements with additional customers, we cannot give any assurance that we will be successful in doing so. Even if we are successful in obtaining and retaining new customers, we expect that Boeing and, to a lesser extent, Airbus, will continue to account for a substantial portion of our sales for the foreseeable future. Although we are a party to various supply contracts with Boeing and Airbus which obligate Boeing and Airbus to purchase all of their requirements for certain products from us, those

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agreements generally do not require specific minimum purchase volumes. In addition, if we breach certain obligations under these supply agreements and Boeing or Airbus exercises its right to terminate such agreements, our business will be materially adversely affected. Boeing and Airbus have the contractual right to cancel their supply agreements with us for convenience, which could include the termination of one or more aircraft models or programs for which we supply products. Although Boeing and Airbus would be required to reimburse us for certain expenses, there can be no assurance these payments would adequately cover our expenses or lost profits resulting from the termination. In addition, we have agreed to a limitation on recoverable damages if Boeing wrongfully terminates our main supply agreement with respect to any model or program. If this occurs, we may not be able to recover the full amount of our actual damages. Furthermore, if Boeing or Airbus (1) experiences a decrease in requirements for the products which we supply to it; (2) experiences a major disruption in its business, such as a strike, work stoppage or slowdown, a supply-chain problem or a decrease in orders from its customers; or (3) files for bankruptcy protection; our business, financial condition and results of operations could be materially adversely affected.

     Our largest customer, Boeing, operates in a very competitive business environment.

        Boeing operates in a highly competitive industry. Competition from Airbus, Boeing's main competitor, as well as from regional jet makers and other foreign manufacturers of commercial single-aisle aircraft, has intensified as these competitors expand aircraft model offerings and competitively price their products. As a result of this competitive environment, Boeing continues to face pressure on product offerings and sale prices. While we do have supply agreements with Airbus, we currently have substantially more business with Boeing and thus any adverse effect on Boeing's production of aircraft resulting from this competitive environment may have a material adverse effect on our business, financial condition and results of operations.

     Our business depends, in large part, on sales of components for a single aircraft program, the B737.

        For the twelve months ended December 31, 2013, approximately 46% of our net revenues were generated from sales of components to Boeing for the B737 aircraft. While we have entered into long-term supply agreements with Boeing to continue to provide components for the B737 for the life of the aircraft program, including commercial and the military P-8A Poseidon derivatives, Boeing does not have any obligation to purchase components from us for any replacement for the B737 that is not a commercial derivative model. If we were unable to obtain significant aerostructures supply business for any B737 replacement program, our business, financial condition and results of operations could be materially adversely affected.

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

        While we have entered into long-term supply agreements with Boeing to provide components for the B737, B747, B767 and B777 and their commercial derivatives for the life of these aircraft programs, Boeing does not have any obligation to purchase components from us for any subsequent variant of these aircraft that is not a commercial derivative as defined by the Supply Agreement. Boeing has publicly announced its intention to update the B777 with a next-generation twin-engine aircraft program currently named the Boeing 777X. If the changes to the aircraft are later deemed significant enough to disqualify it as a commercial derivative for the B777 under the Supply Agreement, or Boeing successfully establishes it is not capable of being FAA certificated by an amendment to an existing Type Certificate through addition of a minor model or by a Supplemental Type Certificate, there is a risk that we may not be engaged by Boeing on the B777X to generally the same extent of Spirit's involvement in the B777, or at all. If we are unable to obtain significant aerostructures supply business for any update or replacement program for the B777 or any other aircraft program for which we provide significant content, our business, financial condition and results of operations could be materially adversely affected.

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     We may be required to repay Boeing up to approximately $600.2 million of advance payments related to the B787 Supply Agreement. The advances must be repaid in the event that Boeing does not take delivery of a sufficient number of ship sets prior to the termination of the aircraft program.

        In December 2010, Spirit and Boeing entered into a memorandum of agreement and a settlement agreement regarding certain claims associated with the development and production of the B787 airplane. As part of these agreements, Spirit received a payment in December 2010, which was recorded as deferred revenue (short-term) within the consolidated balance sheet pending finalization of a contract amendment which would contain the final settlement terms.

        On May 12, 2011, Boeing and Spirit entered into the B787 Amendment, which finalized the provisions of the memorandum of agreement. Based on the terms of the B787 Amendment, the payment received by Spirit in December 2010 was reclassified from deferred revenue to revenue, and certain advance payments received by Spirit were also reclassified to revenue. The B787 Amendment also spread out repayment of a $700.0 million cash advance made by Boeing to Spirit in 2007 to be offset against the purchase price of the first 1,000 B787 ship sets delivered to Boeing, instead of the first 500 ship sets. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million on December 15th of each year until the advance payments have been fully recovered by Boeing.

        Accordingly, portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was approximately $600.2 million.

     We may be required to repay Airbus up to approximately $243.9 million of advance payments. The advances must be repaid in the event that Airbus does not take delivery of a sufficient number of ship sets prior to the date set out in the advance agreement.

        In February 2012, Spirit and Airbus entered into an agreement whereby Spirit received a series of payments totaling $250.0 million, which were recorded as advance payments within our consolidated balance sheet.

        The agreement provides for repayment of the $250.0 million in cash advances made by Airbus to be offset against the purchase price of the first 200 Section 15 A350 XWB ship sets delivered to Airbus prior to December 31, 2017. If in the course of 2015, Airbus, in its reasonable opinion, anticipates 200 units will not be ordered and paid for by the end of 2017, both Airbus and Spirit will agree in the first quarter of 2016 on a revised repayment amount to ensure the entire advance is repaid prior to December 31, 2017. In no circumstance would the repayment amount exceed the recurring price of each ship set.

        Portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments received by us from Airbus under the advance agreement and not yet repaid or recognized as revenue was approximately $243.9 million.

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

        For certain of our new and maturing programs, we regularly commence work or incorporate customer requested changes prior to negotiating pricing terms for engineering work or the product which has been modified. We typically have the legal right to negotiate pricing for customer directed changes. In those cases, we assert to our customers our contractual rights to obtain the additional revenue or cost reimbursement we expect to receive upon finalizing pricing terms. An expected recovery value of these assertions is incorporated into our contract profitability estimates when applying contract accounting. Our

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inability to recover these expected values, among other factors, could result in the recognition of a forward loss on these programs and could have a material adverse effect on our results of operations.

        For the G650 program, we currently have $135.1 million of accounts receivable that are related to Gulfstream short-paid invoices for deliveries from 2010 through the end of the third quarter of 2013, the period through which these incomplete payments continued. In August, 2013, we instituted a demand for arbitration against Gulfstream, seeking damages from Gulfstream for the incomplete payments, as well as other damages and relief. Gulfstream counterclaimed against Spirit in the arbitration, seeking liquidated damages for delayed deliveries of wings, as well as other damages and relief. While we believe that the short-paid amount is collectible, if we are unable to collect this amount or if it becomes part of an overall settlement or arbitration award, recognition of additional forward losses on the G650 program could be required and the future cash flows of the Company could be significantly impacted.

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

        New or maturing programs with new technologies typically carry risks associated with design responsibility, development of new production tools, hiring and training of qualified personnel, increased capital and funding commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements, supplier performance, ability of the customer to meet its contractual obligations to us, and our ability to accurately estimate costs associated with such programs. In addition, any new or maturing aircraft program may not generate sufficient demand or may experience technological problems or significant delays in the regulatory certification or manufacturing and delivery schedule. If we were unable to perform our obligations under new or maturing programs to the customer's satisfaction or manufacture products at our estimated costs, if we were to experience unexpected fluctuations in raw material prices or supplier problems leading to cost overruns, if we were unable to successfully perform under revised design and manufacturing plans or successfully resolve claims and assertions, or if a new or maturing program in which we had made a significant investment was terminated or experienced weak demand, delays or technological problems, our business, financial condition and results of operations could be materially adversely affected. Some of these risks have affected our maturing programs to the extent that we have recorded significant forward losses and maintain certain of our maturing programs at zero or low margins due to our inability to overcome the effects of these risks. We continue to face similar risks as well as the potential for default, quality problems, or inability to meet weight requirements and these could result in continued zero or low margins or additional forward losses, and the risk of having to write-off additional inventory if it were deemed to be unrecoverable over the life of the program. In addition, beginning new work on existing programs also carries risks associated with the transfer of technology, knowledge and tooling.

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

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

        The Company recognizes revenue under the contract method of accounting and estimates revenue and cost for contract blocks that span a period of multiple years. The contract method of accounting requires judgment on a number of underlying assumptions to develop our estimates. Due to the significant length of time over which revenue streams are generated, the variability of future period estimated revenue and cost may be adversely affected if circumstances or underlying assumptions change. For additional information on our accounting policies for recognizing revenue and profit, please see our

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discussion under "Management's Discussion and Analysis — Critical Accounting Policies" in this Form 10-K.

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

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

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

     We have announced the initiation of a process to divest our Oklahoma sites, which could disrupt our business, involve increased expenses and present risks not contemplated at the time of the divestiture.

        There can be no assurance that any sale of all or any portion of our Oklahoma sites will be completed in a timely manner, on a cost-effective basis, on terms favorable to us, or at all. A significant divestiture such as this typically entails numerous potential risks, including:

        Furthermore, the pursuit of any such transaction may require the expenditure of substantial legal and other fees, which may be incurred whether or not a transaction is consummated. As a result of the aforementioned risks, among others, the pursuit of the divestiture may not lead to increased stockholder value.

        We actively consider other divestitures from time to time. If we decide to pursue any other divestiture, it may involve numerous potential risks, including those described above.

     Future commitments to our customers to increase production rates depend on our ability to expand production at our manufacturing facilities.

        Boeing and Airbus, our two largest customers, have both announced planned production rate increases for several of their major programs. In some cases, in order to meet these increases in production rates, we will need to make significant capital expenditures to expand our capacity and improve our performance. While some of these expenditures will be reimbursed by our customers, we could be required to bear a significant portion of the costs. In addition, the increases in production rates could cause

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disruptions in our manufacturing lines, which could materially adversely impact our ability to meet our commitments to our customers, and have a resulting adverse effect on our financial condition and results of operations.

     We operate in a very competitive business environment.

        Competition in the aerostructures segment of the aerospace industry is intense. Although we have entered into supply agreements with Boeing and Airbus under which we are their exclusive supplier for certain aircraft parts, we will face substantial competition from both OEMs and non-OEM aerostructures suppliers in trying to expand our customer base and the types of parts we make.

        OEMs may choose not to outsource production of aerostructures due to, among other things, their own direct labor and other overhead considerations and capacity utilization at their own facilities. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce a part in-house or to outsource.

        Our principal competitors among non-OEM aerostructures suppliers are Aircelle S.A., Fuji Heavy Industries, Ltd., GKN Aerospace, Kawasaki Heavy Industries, Inc., Mitsubishi Heavy Industries, Sonaca, Triumph Group, Inc., Latecoere S.A., and Nexcelle. Some of our competitors have greater resources than we do and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Providers of aerostructures have traditionally competed on the basis of cost, technology, quality and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply-chain management and sales and marketing, and we may not have enough resources to make such investments. For these reasons, we may not be able to compete successfully in this market or against our competitors, which could have a material adverse effect on our business, financial condition and results of operations.

     High switching costs may substantially limit our ability to obtain business that is currently under contract with other suppliers.

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

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

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

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        We have agreed with Boeing to continue to operate substantial manufacturing operations in Wichita, Kansas until at least June 16, 2015 and we have other commitments to keep major programs in Wichita until 2020 in certain circumstances. This may prevent us from being able to offer our products at prices that are competitive in the marketplace and could have a material adverse effect on our ability to generate new business.

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

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

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

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

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

     Our business is subject to regulation in the United States and internationally.

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

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

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

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

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

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

        Boeing, our predecessor at the Wichita facility, is under an administrative consent order issued by the Kansas Department of Health and Environment to contain and remediate contaminated groundwater, which underlies a majority of our Wichita facility. Pursuant to this order and its agreements with us, Boeing has a long-term remediation plan in place, and treatment, containment and remediation efforts are underway. If Boeing does not comply with its obligations under the order and these agreements, we may be required to undertake such efforts and make material expenditures.

        In connection with the BAE Acquisition, we acquired a manufacturing facility in Prestwick, Scotland that is adjacent to contaminated property retained by BAE Systems. The contaminated property may be subject to a regulatory action requiring remediation of the land. It is also possible that the contamination may spread into the property we acquired. BAE Systems has agreed to indemnify us, subject to certain contractual limitations and conditions, for certain clean up costs and other losses, liabilities, expenses and claims related to existing pollution on the acquired property, existing pollution that migrates from the acquired property to a third party's property and any pollution that migrates to our property from property retained by BAE Systems. If BAE Systems does not comply with its obligations under the BAE Acquisition agreement, we may be required to undertake such efforts and make material expenditures.

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

     New regulations related to conflict minerals have and will continue to force us to incur additional expenses, may make our supply chain more complex, and could adversely impact our business.

        The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 contains provisions to improve transparency and accountability concerning the supply of certain minerals and metals, known as conflict minerals, originating from the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012, the SEC adopted annual investigation, disclosure and reporting requirements for

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those companies that manufacture or contract to manufacture products that contain conflict minerals that originated from the DRC and adjoining countries. As initial disclosure requirements commence in May 2014 (with respect to 2013), we have and will continue to incur compliance costs, including costs related to determining the sources of conflict minerals used in our products and other potential changes to processes or sources of supply as a consequence of such verification activities. The implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in certain of our products. As there may be only a limited number of suppliers offering "conflict free" minerals, we cannot be sure that we will be able to obtain necessary conflict-free minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free.

     Significant consolidation in the aerospace industry could make it difficult for us to obtain new business.

        Suppliers in the aerospace industry have consolidated and formed alliances to broaden their product and integrated system offerings and achieve critical mass. This supplier consolidation is in part attributable to aircraft manufacturers more frequently awarding long-term sole-source or preferred supplier contracts to the most capable suppliers, thus reducing the total number of suppliers. If this consolidation were to continue, it may become more difficult for us to be successful in obtaining new customers.

     We may be materially adversely affected by high fuel prices.

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

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

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

        Moreover, we are dependent upon the ability of our suppliers to provide materials and components that meet specifications, quality standards and delivery schedules. Our suppliers' failure to provide expected raw materials or component parts that meet our technical specifications could adversely affect production schedules and contract profitability. We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs for us and possible forward losses on certain contracts. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business and might lead to termination of our supply agreements with our customers.

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

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

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

        In order to be successful, we must attract, retain, train, motivate, develop and transition qualified executives and other key employees, including those in managerial, manufacturing and engineering positions. Identifying, developing internally or hiring externally, training and retaining qualified executives and engineers are critical to our future, and competition for experienced employees in the aerospace industry and in particular, Wichita, Kansas where the majority of our manufacturing and executive offices are located, can be intense. In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash- and share-based compensation. Our share-based incentive awards consist primarily of restricted stock grants, some of which are conditioned on our achievement of certain designated financial performance targets, which makes the size of a particular year's award uncertain. If employees do not receive share-based incentive awards with a value they anticipate, if our share-based compensation otherwise ceases to be viewed as a valuable benefit, if our total compensation package is not viewed as being competitive, or if we do not obtain the shareholder approval needed to continue granting share-based incentive awards in the amounts we believe are necessary, our ability to attract, retain, and motivate executives and key employees could be weakened. The failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. Further, changes in our management team may be disruptive to our business and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations.

     We are subject to the requirements of the National Industrial Security Program Operating Manual ("NISPOM") for our Facility Security Clearance ("FCL"), which is a prerequisite for our ability to perform on classified contracts for the U.S. Government.

        A Department of Defense ("DOD") FCL is required for a company to be awarded and perform on classified contracts for the DOD and certain other agencies of the U.S. Government. From time to time we have performed and may perform on classified contracts, although we did not generate any revenues from classified contracts for the twelve months ended December 31, 2013. We have obtained an FCL at the

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"Secret" level. Due to the fact that more than 50% of our voting power is effectively controlled by a non-U.S. entity (Onex), we are required to operate in accordance with the terms and requirements of our Special Security Agreement ("SSA") with the DOD. If we were to violate the terms and requirements of our SSA, the NISPOM, or any other applicable U.S. Government industrial security regulations, we could lose our FCL. We cannot give any assurance that we will be able to maintain our FCL. If for some reason our FCL is invalidated or terminated, we may not be able to continue to perform under our classified contracts in effect at that time, and we would not be able to enter into new classified contracts, which could adversely affect our revenues.

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

        We derive a significant portion of our revenues from sales by Boeing and Airbus to customers outside the United States. In addition, for the twelve months ended December 31, 2013, direct sales to our non-U.S. customers accounted for approximately 13% of our net revenues. We expect that our and our customers' international sales will continue to account for a significant portion of our net revenues for the foreseeable future. As a result, we are subject to risks of doing business internationally, including:

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

     Our fixed-price contracts and requirements to re-negotiate pricing at specified times may commit us to unfavorable terms.

        We provide most of our products and services through long-term contracts in which the pricing terms are fixed based on certain production volumes. Accordingly, there is the risk that we will not be able to sustain a cost structure that is consistent with assumptions used in bidding on contracts. Increased or unexpected costs may reduce our profit margins or cause us to sustain losses on these contracts. Other than certain increases in raw material costs which can be passed on to our customers in most instances, we must fully absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these contracts and in projecting the ultimate level of sales that we may achieve. Our failure to anticipate technical problems, estimate delivery reductions, estimate costs accurately or control costs during performance of a fixed-price contract may reduce the profitability of a contract or cause a loss.

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        This risk particularly applies to products such as the Boeing B787, for which we had delivered one hundred sixty-four production articles as of December 31, 2013 since the inception of the program, and in respect of which our performance at the contracted price depends on our being able to achieve production cost reductions as we gain production experience although Spirit can recoup from Boeing half of any overruns within a certain percentage of shipset prices. When we negotiated the B787-8 pricing under the B787 Amendment, we assumed that a contractually mandated joint-effort by Boeing and Spirit to reduce costs and increase production efficiency, as well as favorable trends in volume, learning curve efficiencies and future pricing from suppliers would reduce our production costs over the life of the B787 program, thus maintaining or improving our margin on each B787 we produced. Pricing for the initial configuration of the B787-8 is generally established through 2021, with prices decreasing as cumulative volume levels are achieved. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific charges. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing, and have not yet reached agreement. Our ability to obtain fair and equitable prices for subsequent models could impact the profitability of the overall program. Additionally, we cannot give any assurance that our development of new technologies or capabilities will be successful or that we will be able to reduce our B787 production costs over the life of the program. Our failure to reduce production costs or to obtain pricing as we have anticipated could result in the need to record additional forward losses for this program.

        Many of our other production cost estimates also contain pricing terms which anticipate cost reductions over time. In addition, although we have entered into these fixed price contracts with our customers, they may nonetheless seek to re-negotiate pricing with us in the future. Any such higher costs or re-negotiations could materially adversely affect our profitability, margins and revenues.

        Certain of our long-term supply agreements provide for re-negotiation of established pricing terms at specified times. In particular, pricing terms under our supply agreement with Boeing for the B737, B747, B767 and B777 platforms, which accounted for 70% of our net revenues in 2013, expired in May 2013, thus activating interim pricing provisions under the Supply Agreement. We are currently negotiating future pricing with Boeing for a period to be agreed upon by the parties. We are required to negotiate the pricing for such additional period in good faith based on prevailing U.S. market conditions for forward fuselages, B737 fuselages and B737/B777 struts and nacelles and based on prevailing global market conditions for all other products. Until we are able to agree upon pricing, pricing will be determined according to the existing prices, adjusted using a quantity-based price adjustment formula and specified annual escalation and such interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms. If we agree on future pricing that provides us with operating margins that are lower than those which we currently experience, or if we are unable to agree on new pricing terms and the default pricing terms remain in effect for a period of time, our business, financial condition and results of operations could be materially adversely affected.

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

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

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     If we are unable to protect our information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.

        We rely on information technology networks and systems to manage and support a variety of business activities, including procurement and supply chain, engineering support, and manufacturing. Our information technology systems, some of which are managed by third-parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events. In addition, security breaches could result in unauthorized disclosure of confidential information. If our information technology systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our manufacturing process could be disrupted resulting in late deliveries or even no deliveries if there is a total shutdown.

     We are implementing new company-wide software systems, which could cause unexpected production or other delays.

        We have recently implemented an Enterprise Resource Planning ("ERP") software system in several of our facilities, and have begun implementation of other system upgrades and infrastructure changes. We plan to complete implementation of ERP software in all of our primary facilities over the next two years. Unexpected problems with these implementations could result in production or other delays.

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

        Our business depends on using certain intellectual property and tooling that we have rights to use under license grants from Boeing. These licenses contain restrictions on our use of Boeing intellectual property and tooling and may be terminated if we default under certain of these restrictions. Our loss of license rights to use Boeing intellectual property or tooling would materially adversely affect our business. See "Business — Our Relationship with Boeing — License of Intellectual Property." In addition to the licenses with Boeing, we license some of the intellectual property needed for performance under some of our supply contracts from our customers under those supply agreements. We must honor our contractual commitments to our customers related to intellectual property and comply with infringement laws governing our use of intellectual property. In the event we obtain new business from new or existing customers, we will need to pay particular attention to these contractual commitments and any other restrictions on our use of intellectual property to make sure that we will not be using intellectual property improperly in the performance of such new business. In the event we use any such intellectual property improperly, we could be subject to an infringement claim by the owner or licensee of such intellectual property.

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

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

        We spent approximately $34.7 million on research and development during the twelve months ended December 31, 2013. Our expenditures on our research and development efforts may not create any new sales opportunities or increases in productivity that are commensurate with the level of resources invested.

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

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     Any future business combinations, acquisitions, mergers, or joint ventures will expose us to risks, including the risk that we may not be able to successfully integrate these businesses or achieve expected operating synergies.

        We actively consider strategic transactions from time to time. We evaluate acquisitions, joint ventures, alliances and co-production programs as opportunities arise, and we may be engaged in varying levels of negotiations with potential competitors at any time. We may not be able to effect transactions with strategic alliance, acquisition or co-production program candidates on commercially reasonable terms or at all. If we enter into these transactions, we also may not realize the benefits we anticipate. In addition, we may not be able to obtain additional financing for these transactions. The integration of companies that have previously been operated separately involves a number of risks, including, but not limited to:

        Consummating any acquisitions, joint ventures, alliances or co-production programs could result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities.

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

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

     We identified material weaknesses in our internal control over financial reporting.

        A material weakness is a deficiency, or combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be

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prevented or detected on a timely basis. As of December 31, 2013, we concluded that we had material weaknesses in our internal control over financial reporting as described below:

        Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013, based on criteria in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

        Our efforts to remediate the aforementioned deficiencies in internal control over financial reporting are described further in Item 9A. Controls and Procedures.

        While we believe that we have a plan to remediate these deficiencies, we cannot be certain that additional material weaknesses or significant deficiencies will not develop or be identified. We are in the process of remediating our internal control deficiencies over the cost estimation process for the G280 and G650 programs in Tulsa, Oklahoma and completeness, accuracy and valuation of inventory and cost of sales related to the A350 XWB Section 15 program in Kinston, North Carolina. Any failure to maintain adequate internal control over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation could cause us to report additional material weaknesses or other deficiencies in our internal control over financial reporting and could result in a reasonable possibility of errors or misstatements in the consolidated financial statements that would be material.


Risk Factors Related to Our Capital Structure

     The interests of our controlling stockholder may conflict with your interests.

        Onex Partners LP, Onex Corporation and their respective partners and affiliates that beneficially own our class B common stock, herein referred to collectively as the "Onex entities," own 22,411,638 shares of our class B common stock. Our class A common stock has one vote per share, while our class B common stock has ten votes per share on all matters to be voted on by our stockholders. Consequently, the Onex entities control approximately 62% of the combined voting power of our outstanding common stock. Accordingly, and for so long as the Onex entities continue to hold class B common stock that represents at least 10% of the total number of shares of common stock outstanding, Onex will exercise a controlling influence over our business and affairs and will have the power to determine all matters submitted to a

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vote of our stockholders, including the election of directors and approval of significant corporate transactions such as amendments to our certificate of incorporation, mergers and the sale of all or substantially all of our assets. Onex could cause corporate actions to be taken even if the interests of Onex conflict with the interests of our other stockholders. This concentration of voting power could have the effect of deterring or preventing a change in control of Spirit that might otherwise be beneficial to our stockholders. Gerald W. Schwartz, the Chairman, President and Chief Executive Officer of Onex Corporation, owns shares representing a majority of the voting rights of the shares of Onex Corporation.

     Our substantial debt could adversely affect our financial condition and our ability to operate our business. The terms of the indenture governing our long-term bonds and our senior secured credit facility impose significant operating and financial restrictions on our company and our subsidiaries, which could also adversely affect our operating flexibility and put us at a competitive disadvantage by preventing us from capitalizing on business opportunities.

        As of December 31, 2013, we had total debt of approximately $1,167.3 million, including approximately $538.2 million of borrowings under our senior secured credit facility, $596.4 million of long-term bonds, a $10.0 million Malaysian loan, approximately $15.3 million of capital lease obligations, and $7.4 million in other debt obligations. In addition to our debt, as of December 31, 2013, we had $44.7 million of letters of credit and letters of guarantee outstanding.

        The terms of the indentures governing our long-term bonds and our senior secured credit facility impose significant operating and financial restrictions on us, which limit our ability, among other things, to:

        These restrictions could have consequences, including the following:

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        Our existing senior secured revolving credit facility, which matures on April 18, 2017, is a significant source of liquidity for our business. The failure to extend or renew this agreement could have a significant effect on our ability to invest sufficiently in our programs, fund day to day operations, or pursue strategic opportunities.

        We cannot assure you that we will be able to maintain compliance with the covenants in the agreements governing our indebtedness in the future or, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

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

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

        Global credit markets are still recovering from the 2008 financial crisis, and are subject to numerous risk factors, including but not limited to concerns over sovereign debt in Europe and elsewhere; the impact and effectiveness of new financial legislation and regulation in the United States and Europe; the impact of those reforms on borrowers, financial institutions and credit rating agencies; potential systemic risk resulting from the interrelationship of credit market products and participants; global governmental and central banking policies; and conflict and political instability in the Middle East and Asia. There can be no assurance that access to credit markets will continue to be available to us.

     Any reduction in our credit ratings could materially and adversely affect our business or financial condition.

        As of December 31, 2013, our corporate credit rating was affirmed at BB and placed on negative outlook by Standard & Poor's and was affirmed at Ba2 and placed on negative outlook by Moody's Investor Services.

        On February 6, 2014, Moody's Investors Service placed the credit ratings of Spirit AeroSystems, Inc. under review for possible downgrade.

        The ratings reflect the agencies' assessment of our ability to pay interest and principal on our debt securities and credit agreements. A rating is not a recommendation to purchase, sell or hold securities. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be considered independently of all other ratings. Lower ratings would typically result in higher interest costs of debt securities when they are sold, and could make it more difficult to issue future debt securities. In addition, a downgrade in our fixed or revolving long-term debt rating could result in an increase in borrowing costs under our senior secured credit facility and could trigger a prepayment based on the excess cash flow prepayment provision under our term loan depending on our total leverage ratio. Any downgrade in our credit ratings could thus have a material adverse effect on our business or financial condition.

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

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

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

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

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

     Spirit Holdings is a "controlled company" within the meaning of the New York Stock Exchange rules and, as a result, qualifies for, and relies on, exemptions from certain corporate governance requirements.

        Because the Onex entities own more than 50% of the combined voting power of the common stock of Spirit Holdings, Spirit Holdings is deemed a "controlled company" under the rules of the New York Stock Exchange, or NYSE. As a result, Spirit Holdings qualifies for, and relies upon, the "controlled company" exception to the board of directors and committee composition requirements under the rules of the NYSE. Pursuant to this exception, Spirit Holdings is exempt from rules that would otherwise require that Spirit Holdings' board of directors be comprised of a majority of "independent directors" (as defined under the rules of the NYSE), and that Spirit Holdings' compensation committee and corporate governance and nominating committee be comprised solely of "independent directors," so long as the Onex entities continue to own more than 50% of the combined voting power of the common stock of Spirit Holdings. Spirit Holdings' board of directors consists of eleven directors, eight of whom qualify as "independent." Spirit Holdings' compensation and corporate governance and nominating committees are not comprised

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solely of "independent directors." Spirit Holdings does not currently rely on the exemption related to board composition, although it may do so in the future. See "Management — Executive Officers and Directors" and "Committees of the Board of Directors."

     Our stock price may be volatile.

        Price fluctuations in our class A common stock could result from general market and economic conditions and a variety of other factors, including:

Item 1B.    Unresolved Staff Comments

        The Company received a comment letter from the Securities and Exchange Commission (the "SEC") Division of Corporation Finance dated December 10, 2012 regarding its Form 10-K for Fiscal Year Ended December 31, 2011 and Form 10-Q for the Fiscal Quarter Ended September 27, 2012. We have filed responses with the SEC that addressed several of the SEC staff's comments. However, as of February 19, 2014, we have not yet responded to comments regarding updates to our contract estimates which resulted in forward losses recognized in the third quarter of 2012 as we work with the SEC Division of Enforcement on some similar issues. We intend to continue to work with the Division of Corporation Finance to respond to the outstanding comments.

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Item 2.    Significant Properties

        The location, primary use, approximate square footage and ownership status of our principal properties as of December 31, 2013 are set forth below:

Location
  Primary Use   Approximate
Square Footage
  Owned/Leased

United States

           

Wichita, Kansas(1)

  Primary Manufacturing   11.3 million   Owned/Leased

  Facility/Offices/Warehouse        

Chanute, Kansas(2)

  Manufacturing Facility   59,362   Leased

Tulsa, Oklahoma

  Manufacturing Facility   1.9 million   Leased

McAlester, Oklahoma

  Manufacturing Facility   135,000   Owned

Kinston, North Carolina

  Primary Manufacturing/Office/Warehouse   761,600   Leased

Nashville, Tennessee(3)

  Office   15,000   Leased

United Kingdom

           

Prestwick, Scotland

  Manufacturing Facility   901,000   Owned

Preston, England

  Administrative Offices   28,000   Leased

Malaysia

           

Subang, Malaysia

  Manufacturing   337,000   Owned/Leased

France

           

Saint-Nazaire, France

  Primary Manufacturing/Office   58,800   Leased

Toulouse, France

  Office   3,400   Leased

(1)
95% of the Wichita facility is owned.

(2)
Operations began in Q1 2012.

(3)
Operation began in Q2 2012.

        Our physical assets consist of 15.5 million square feet of building space located on 1,335 acres in eleven facilities. We produce our fuselage systems and propulsion systems from our primary manufacturing facility located in Wichita, Kansas with some fuselage work done in our Kinston, North Carolina facility. We produce wing systems in our manufacturing facilities in Tulsa, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; Saint-Nazaire, France; and Subang, Malaysia. In addition to these sites, we have a facility located in McAlester, Oklahoma dedicated to supplying machined parts and sub-assemblies to the Wichita and Tulsa facilities. We also have a light sub-assembly manufacturing facility located in Chanute, Kansas which manufactures small parts in support of Wichita propulsion.

        The Wichita facility, including Spirit's corporate offices, is comprised of 625 acres, 6.3 million square feet of manufacturing space, 1.3 million square feet of offices and laboratories for the engineering and design group and 3.7 million square feet for support functions and warehouses. A total of 617,429 square feet is currently vacant, with much of it planned for backfill by new programs. The Wichita site has access to transportation by rail, road and air. For air cargo, the Wichita site has access to the runways of McConnell Air Force Base.

        The Chanute facility, consists of 59,362 square feet of building space. The Chanute facility manufactures sub-assemblies for the propulsion segment, and is leased from the city of Chanute.

        The Tulsa facility consists of 1.9 million square feet of building space set on 153 acres. The Tulsa plant is located five miles from an international shipping port (Port of Catoosa) and is located next to the Tulsa International Airport. The Tulsa facility includes off site leased space, 1.5 miles east in the Green Valley Center. The McAlester site, which manufactures parts and sub-assemblies primarily for the Tulsa facility, consists of 135,000 square feet of building space on 92 acres.

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        The Prestwick facility consists of 0.9 million square feet of building space, comprised of 0.7 million square feet of manufacturing space and 0.2 million square feet of office space. This facility is set on 95 acres. The Prestwick plant is located on the west coast of Scotland, approximately 33 miles south of Glasgow, within close proximity to the motorway network that provides access between England and continental Europe. It is also easily accessible by air (at Prestwick International Airport) or by sea. We lease a portion of our Prestwick facility to the Regional Aircraft division of BAE Systems and certain other tenants.

        The Malaysian manufacturing plant is located at the Malaysia International Aerospace Center (MIAC) in Subang. The 269,000 square foot leased facility is set on 45 acres and is centrally located with easy access to Kuala Lumpur, Malaysia's capital city, as well as nearby ports and airports. The facility assembles composite panels for wing components. An additional 68,000 square foot warehouse owned by Spirit was constructed in 2012 for shipping/receiving and parts storage to make room for additional manufacturing space in the existing building.

        The Wichita and Tulsa manufacturing facilities have significant scale to accommodate the very large structures that are manufactured there, including, in Wichita, entire fuselages. Three of the U.S. facilities are in close proximity, with approximately 175 miles between Wichita and Tulsa and 90 miles between Tulsa and McAlester. Currently, these U.S. facilities utilize approximately 95% of the available building space. The Prestwick manufacturing facility currently utilizes only 72% of the space; of the remaining space, 15% is leased and 13% is vacant. The Preston office space is located in North Lancashire, England, approximately 200 miles south of Prestwick.

        The Kinston, North Carolina facility, supports the manufacturing of composite panels and wing components. The primary manufacturing site and off-site leased spaces total 318 acres and 761,600 square feet. In addition to the primary manufacturing facility, this includes three additional buildings leased from the NC Global Transpark Authority: 27,500 square foot warehouse/office supporting receiving needs, a 26,400 square foot warehouse providing tooling storage, and a 120,000 square foot manufacturing facility supporting light manufacturing.

        The Saint-Nazaire, France site was built on 6.25 acres and totals 58,800 square feet. This facility receives center fuselage frame sections for the Airbus A350 XWB from the facility in Kinston, North Carolina. Sections designed and manufactured in North Carolina are shipped across the Atlantic, received in Saint-Nazaire, and assembled before being transported to Airbus. Additionally, a 3,400 square foot office area in Toulouse, France is leased for engineering support.

Item 3.    Legal Proceedings

        Information concerning the litigation and other legal proceedings in which the Company is involved, may be found in Note 22 under the sub-heading "Litigation" in this Annual Report and that information is hereby incorporated by reference.

Item 4.    Mine Safety Disclosures

        Not applicable.


Executive Officers of the Registrant

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

        Larry Lawson, 55.    Mr. Lawson joined Spirit Holdings as President and Chief Executive Officer on April 6, 2013. Prior to joining Spirit Holdings, Mr. Lawson was Executive Vice President of Lockheed Martin's Aeronautics business segment. Mr. Lawson began his career as a flight control engineer working on the F-15 Eagle at McDonnell Douglas. He has since held a broad range of leadership positions in engineering, advanced development, business development, and program management in a career spanning more than 30 years. In his

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work at Lockheed Martin, Mr. Lawson has overseen key aircraft production programs such as the F-35, F-22, F-16, C-130J, and C-5, including highly classified programs in the world-renowned Skunk Works® organization. Mr. Lawson holds a bachelor's degree in Electrical Engineering from Lawrence Technological University, where he also serves on the board of trustees, has a master's degree in Electrical Engineering from the University of Missouri, and is a graduate of the Harvard Business School Advanced Management Program and an MIT Seminar XXI Fellow.

        Philip Anderson, 49.    Mr. Anderson became the Senior Vice President of Defense and Contracts of Spirit Holdings effective September 23, 2013. Mr. Anderson previously served as Senior Vice President and Chief Financial Officer of Spirit Holdings from February 12, 2010 to September 2013. From October 2009 to February 2010, Mr. Anderson served as Vice President and Interim Chief Financial Officer of Spirit Holdings. Mr. Anderson also served as Treasurer of Spirit Holdings from November 2006 to July 2010. From March 2003 to November 2006, Mr. Anderson was the Director of Corporate Finance and Banking for Boeing. Mr. Anderson began his career at Boeing in 1989 as a defense program analyst and served in a variety of finance and manufacturing operations leadership positions at Boeing Defense Systems and Boeing Commercial Airplanes. Mr. Anderson received his Bachelor of Arts and Masters of Business from Wichita State University and holds a Six Sigma Black Belt certification from the University of Michigan.

        David M. Coleal, 46.    Mr. Coleal assumed the role of Executive Vice President /General Manager — Boeing, Military, Business & Regional Jet Programs & Aftermarket in May 2013 after previously serving as Senior Vice President /General Manager of the Fuselage Segment since July 2011. Prior to joining Spirit AeroSystems, Mr. Coleal was Vice President and General Manager of Bombardier-Learjet. He joined Bombardier Aerospace in March 2008 and was responsible for all engineering and manufacturing operations, program change management, quality and material logistics for the Learjet family of aircraft, including development of the pioneering all-composite Learjet 85 mid-size business jet. From 2001 to 2008, Mr. Coleal worked at Cirrus Design Corporation, where he was initially responsible for operations, and he assumed positions of increasing responsibility until being named President and Chief Operating Officer in 2005. Mr. Coleal earned his Masters of Business Administration in Management Science from California State University — Hayward in 1997. He graduated from California State University in Sacramento in 1990 with a Bachelor of Science degree in Mechanical Engineering Technology.

        Sanjay Kapoor, 53.    Mr. Kapoor joined Spirit Holdings as Senior Vice President and Chief Financial Officer on September 23, 2013. Mr. Kapoor joined Spirit from Raytheon where he most recently served as Vice President of Integrated Air & Missile Defense for Raytheon Integrated Defense Systems (IDS). Prior to this role, Mr. Kapoor was IDS Vice President of Finance and Chief Financial Officer from 2004 to 2008. Mr. Kapoor also served as CFO at United Technologies' Pratt and Whitney Power Systems Division. His tenure at Pratt and Whitney also included roles as Director of Aftermarket Services for the Power Systems Business, controller for the Turbine Module Center and business manager for new commercial programs. Mr. Kapoor received his bachelor's degree in technology from the Indian Institute of Technology and a dual Masters of Business Administration in finance and entrepreneurial management from The Wharton School at the University of Pennsylvania.

        Jon D. Lammers, 49.    Mr. Lammers was named Senior Vice President — Secretary of Spirit Holdings in July 2012, and General Counsel of Spirit Holdings in October 2012. Mr. Lammers brings more than 20 years of legal experience, including 15 years at Cargill, Incorporated, where he served from July 1997 to July 2012. He served as Cargill's Asia Pacific general counsel in Singapore from June 2006 to June 2010 as well as Cargill's deputy North American general counsel in Wayzata, Minnesota from July 2010 to July 2012. Mr. Lammers earned his Bachelor of Science in Business Administration from the University of Southern California and his Juris Doctor degree from the University of Virginia.

        Samantha J. Marnick, 43.    Ms. Marnick became Senior Vice President — Chief Administration Officer in October 2012. From January 2011 to September 2012, Ms. Marnick served as Senior Vice President of Corporate Administration and Human Resources. From March 2008 to December 2010, Ms. Marnick served as Vice President Labor Relations & Workforce Strategy responsible for labor relations, global human resource

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project management office, compensation and benefits, and workforce planning. Ms. Marnick previously served as Director of Communications and Employee Engagement from March 2006 to March 2008. Prior to joining the Company, Ms. Marnick was a senior consultant and Principal for Mercer Human Resource Consulting holding management positions in both the United Kingdom and in the United States. Prior to that Ms. Marnick worked for Watson Wyatt, the UK's Department of Health and Social Security and The British Wool Marketing Board. Ms. Marnick holds a Master's degree from the University of Salford in Corporate Communication Strategy and Management.

        John Pilla, 54.    Mr. Pilla became the Senior Vice President/General Manager — Airbus and A350 XWB Program Management in May 2013. Prior to that, Mr. Pilla served as the Senior Vice President/General Manager, Propulsion Systems Segment of Spirit since July 2009 and added the role of Senior Vice President/General Manager of the Wing segment in September 2012. From July 2011 to May 2013, he was also responsible for the Aftermarket Customer Support Organization. From April 2008 to July 2009, Mr. Pilla was Chief Technology Officer of Spirit Holdings and he served as Vice President/General Manager — 787 of Spirit Holdings and/or Spirit, a position he assumed at the date of the Boeing Acquisition in June 2005 and held until March 2008. Mr. Pilla began his career at Boeing Commercial Airplanes in 1981 as a stress engineer and was promoted to Chief Engineer of Structures and Liaison in 1995. In 1997, Mr. Pilla led the Next-Generation 737 engineering programs and ultimately led the Define Team on the 737-900 fuselage and empennage in late 1997 as well as the 777LR airplane in May 2000. In July 2001, Mr. Pilla became the Director of Business Operations, a position he held until July 2003 when he accepted an assignment as 787 Director of Product Definition and Manufacturing. He received his Master's degree in Aerospace Structures Engineering in 1986 and a Masters in Business Administration in 2002 from Wichita State University.

        Heidi Wood, 48.    Ms. Wood joined Spirit Holdings as Senior Vice President — Strategy, Mergers and Acquisitions and Investor Relations in July 2013. Prior to joining the Company, Ms. Wood was Senior Vice President and Co-head of Global Sales at Avjet Corporation. From 1999 to 2013, Ms. Wood served as Managing Director and global head of aerospace/defense analysis at Morgan Stanley. She was responsible for leading North American, Europe, Latin American and Singapore-based teams. Prior to assuming her employment at Morgan Stanley, Ms. Wood was an analyst at Cowen & Company from 1992 to 1999. Ms. Wood holds a Bachelor of Arts degree with honors from Brown University.

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Part II

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

        Our class A common stock has been quoted on the NYSE under the symbol "SPR" since November 21, 2006. Prior to that time, there was no public market for our stock. As of February 12, 2014, there were approximately 1,282 holders of record of class A common stock. However, we believe that many additional holders of our class A common stock are unidentified because a substantial number of shares are held of record by brokers or dealers for their customers in street names. The closing price on February 12, 2014 was $28.86 per share as reported by the NYSE.

        As of February 12, 2014, there were approximately 123 holders of record of class B common stock. Our class B common stock is neither listed nor publicly traded.

        The following table sets forth for the indicated periods the high and low closing sales price for our class A common stock on the NYSE.

 
  2013   2012  
Fiscal Quarter
  High   Low   High   Low  

1st

  $ 19.00   $ 15.94   $ 25.66   $ 21.11  

2nd

  $ 21.93   $ 18.45   $ 25.72   $ 22.12  

3rd

  $ 25.99   $ 21.48   $ 25.85   $ 21.65  

4th

  $ 34.18   $ 23.54   $ 22.87   $ 14.04  


Dividend Policy

        We did not pay any cash dividends in 2012 or 2013 and we currently do not intend to pay cash dividends. Our future dividend policy will depend on the requirements of financing agreements to which we may be a party. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions.


Securities Authorized for Issuance under Equity Compensation Plans

        The following table represents restricted shares outstanding under the Executive Incentive Plan, the Director Stock Plan, and the Short-Term and Long-Term Incentive Plans as of December 31, 2013.

Equity Compensation Plan Information

Plan Category
  Number of Securities
to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights
  Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
  Number of Securities
Remaining Available
for Future Issuances
Under the Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
 
 
  (a)
  (b)
  (c)
 

Restricted Stock Awards

                   

Equity compensation plans approved by security holders(1)(2)

    N/A (3) $     8,939,862 (4)

Equity compensation plans not approved by security holders(2)

      $      

Total

    N/A (3) $     8,939,862 (4)

(1)
Approved by previous security holders in place before our initial public offering. Amendments were approved by shareholders in 2008 and 2011.

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(2)
Our equity compensation plans provide for the issuance of incentive awards to officers, directors, employees and consultants in the form of stock appreciation rights, restricted stock, restricted stock units and deferred stock, in lieu of cash compensation.

(3)
There are 1,732,535 class A shares and 869,219 class B shares outstanding under the Executive Incentive Plan, the Director Stock Plan, and the Short-Term and Long-Term Incentive Plans as of December 31, 2013.

(4)
As of December 31, 2013, there are 3,380,285; 2,404,323; 1,455,716 and 1,699,538 securities available for future issuance under the Executive Incentive Plan, the Director Stock Plan, and the Short-Term and Long-Term Incentive Plans, respectively.

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Stock Performance

        The following graph shows a comparison from December 31, 2008 through December 31, 2013 of cumulative total return of our class A common stock, Standard & Poor's 500 Stock Index, and the Standard & Poor's 500 Aerospace & Defense Index. Such returns are based on historical results and are not intended to suggest future performance. We have never paid dividends on our class A common stock and have no present plans to do so.

GRAPHIC

 
  INDEXED RETURNS
Years Ending

 
Company/Index
  Base
Period
12/31/08
    
12/31/2009
  12/31/2010   12/31/2011   12/31/2012   12/31/2013  

Spirit AeroSystems Holdings, Inc

    100     195.28     204.62     204.33     166.86     335.10  

S&P 500 Index

    100     126.46     145.51     148.59     172.37     228.19  

S&P 500 Aerospace & Defense Index

    100     124.64     143.47     151.04     173.04     268.07  

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Item 6.    Selected Financial Data


SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

        The following table sets forth our selected consolidated financial data for each of the periods indicated. Financial data is derived from the audited consolidated financial statements of Spirit Holdings. The audited consolidated financial statements for the years ended December 31, 2011, December 31, 2012 and December 31, 2013 are included in this Annual Report. You should read the information presented below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined and consolidated financial statements and related notes contained elsewhere in the Annual Report.

 
  Spirit Holdings  
 
  Twelve Months Ended  
 
  December 31,
2013
  December 31,
2012
  December 31,
2011
  December 31,
2010
  December 31,
2009
 
 
  (Dollars in millions, except per share data)
 

Statement of Income Data:

                               

Net revenues

  $ 5,961.0   $ 5,397.7   $ 4,863.8   $ 4,172.4   $ 4,078.5  

Cost of sales(1)

    6,059.5     5,245.3     4,312.1     3,607.9     3,581.4  

Selling, general and administrative expenses(2)

    200.8     172.2     159.9     156.0     137.1  

Impact from severe weather event

    30.3     (146.2 )            

Research and development

    34.7     34.1     35.7     51.5     56.7  
                       

Operating (loss) income

    (364.3 )   92.3     356.1     357.0     303.3  

Interest expense and financing fee amortization

    (70.1 )   (82.9 )   (77.5 )   (59.1 )   (43.6 )

Interest income

    0.3     0.2     0.3     0.3     7.0  

Other income (loss), net

    3.3     1.8     1.4     (0.4 )   6.1  
                       

(Loss) income before income taxes and equity in net income (loss) of affiliates

    (430.8 )   11.4     280.3     297.8     272.8  

Income tax (provision) benefit

    (191.1 )   24.1     (86.9 )   (78.2 )   (80.9 )

Equity in net income (loss) of affiliates

    0.5     (0.7 )   (1.0 )   (0.7 )   (0.2 )
                       

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4   $ 218.9   $ 191.7  
                       
                       

Net (loss) income per share, basic

  $ (4.40 ) $ 0.24   $ 1.36   $ 1.56   $ 1.39  

Shares used in per share calculation, basic(3)

    141.3     140.7     139.2     137.9     137.2  

Net (loss) income per share, diluted

  $ (4.40 ) $ 0.24   $ 1.35   $ 1.55   $ 1.37  

Shares used in per share calculation, diluted

    141.3     142.7     142.3     141.0     139.8  

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  Spirit Holdings  
 
  Twelve Months Ended  
 
  December 31,
2013
  December 31,
2012
  December 31,
2011
  December 31,
2010
  December 31,
2009
 
 
  (Dollars in millions)
 

Other Financial Data:

                               

Cash flow provided by (used in) operating activities

  $ 260.6   $ 544.4   $ (47.3 ) $ 125.1   $ (13.9 )

Cash flow (used in) investing activities

  $ (268.2 ) $ (248.8 ) $ (249.2 ) $ (288.4 ) $ (112.4 )

Cash flow (used in) provided by financing activities

  $ (13.9 ) $ (34.6 ) $ (6.7 ) $ 277.4   $ 276.1  

Capital expenditures

  $ (234.2 ) $ (236.1 ) $ (249.7 ) $ (288.1 ) $ (228.2 )

Consolidated Balance Sheet Data:

                               

Cash and cash equivalents

  $ 420.7   $ 440.7   $ 177.8   $ 481.6   $ 369.0  

Accounts receivable, net

  $ 550.8   $ 420.7   $ 267.2   $ 200.2   $ 160.4  

Inventories, net

  $ 1,842.6   $ 2,410.8   $ 2,630.9   $ 2,507.9   $ 2,206.9  

Property, plant & equipment, net

  $ 1,803.3   $ 1,698.5   $ 1,615.7   $ 1,470.0   $ 1,279.3  

Total assets

  $ 5,107.2   $ 5,415.3   $ 5,042.4   $ 5,102.0   $ 4,473.8  

Total debt

  $ 1,167.3   $ 1,176.2   $ 1,200.9   $ 1,196.8   $ 893.8  

Long-term debt

  $ 1,150.5   $ 1,165.9   $ 1,152.0   $ 1,187.3   $ 884.7  

Total equity

  $ 1,481.0   $ 1,996.9   $ 1,964.7   $ 1,810.9   $ 1,573.8  

(1)
Included in 2013 cost of sales are forward loss charges of $1,133.3 million, which includes $41.1 million on the B747-8 program, $16.4 million on the B767 program, $422.0 million on the B787 program, $111.3 million on the A350 XWB program, $240.9 million on the G280 wing program, $288.3 million on the G650 wing program and $13.3 million on our Rolls-Royce BR725 program. Included in 2012 cost of sales are forward loss charges of $636.7 million, which includes $11.5 million on the B747-8 program, $184.0 million on the B787 wing program, $8.9 million on the A350 XWB non-recurring wing contract, $118.8 million on the G280 wing program, $162.5 million on the G650 wing program and $151.0 million on our Rolls-Royce program. Included in 2011 cost of sales are forward loss charges of $132.1 million, which includes $81.8 million on the G280 wing program, $29.0 million on the Sikorsky CH-53K program, $18.3 million on the B747-8 program and $3.0 million on the A350 XWB non-recurring wing program. Included in 2010 cost of sales are charges of $18.9 million related to the grant of shares to employees represented by the IAM in connection with the ratification of a new ten-year labor contract on June 25, 2010, $6.5 million in early retirement incentives for members represented by the IAM who made elections to retire in 2010, and $3.3 million in grants of shares to employees represented by the UAW in connection with the ratification of a new ten-year labor contract on December 18, 2010. Also included in 2010 cost of sales is a $2.8 million forward loss on the G280 wing program. Included in the 2009 cost of sales are forward loss charges of $103.9 million, which includes $93.0 million on the G280 wing program and $10.9 million on the Cessna Citation Columbus program. Includes cumulative catch-up adjustments of $95.5 million, $14.7 million, $13.8 million, ($23.2) million and ($58.5) million for periods prior to the twelve months ended December 31, 2013, December 31, 2012, December 31. 2011, December 31, 2010 and December 31, 2009, respectively.

(2)
Includes non-cash stock compensation expenses of $19.6 million, $15.3 million, $11.1 million, $7.9 million and $9.7 million for the respective periods starting with the twelve months ended December 31, 2013.

(3)
Under the Financial Accounting Standards Board ("FASB") guidance, unvested share-based payment awards that contain non-forfeitable 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. See Note 20, "Equity," for more details.

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

        You should read the following discussion of our financial condition and results of operations in conjunction with the audited consolidated financial statements, the notes to the audited consolidated financial statements and the "Selected Consolidated Financial Information and Other Data" appearing elsewhere in this Annual Report. This section includes "forward-looking statements." Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "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, including, but not limited to, those described in the "Risk Factors" section of this Annual Report. See also "Cautionary Statement Regarding Forward-Looking Statements." 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 February 6, 2014, Moody's Investors Service placed the rating of Spirit AeroSystems, Inc. under review for possible downgrade.

        On January 16, 2014, Bombardier announced a delay in entry-into-service for the new C Series aircraft, for which Spirit provides content. This delay is not expected to have a material impact on Spirit's results of operations.

        On December 19, 2013, Spirit completed the sale of its interest in the Spirit-Progresstech joint venture, our former joint venture with ProgressTech, LTD.


Overview

        We are one of the largest independent non-OEM (original equipment manufacturer) aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the twelve months ended December 31, 2013, we generated net revenues of $5,961.0 million and net loss of $621.4 million.

        We are organized into three principal reporting segments: (1) Fuselage Systems, which includes forward, mid and rear fuselage sections, (2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which includes 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 companies that have operations in Wichita, Kansas. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina, with an assembly plant in Saint-Nazaire, France for the A350 XWB program. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas. The Wing Systems segment manufactures products at our facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Subang, Malaysia; and Kinston, North Carolina. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 48%, 27%, 25% and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2013.

        We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.

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Market Trends

        The financial health of the commercial airline industry has a direct and significant effect on our commercial aircraft programs. The global industry's year-over-year revenue grew from 2010 through 2013, and is forecast to continue growing in 2014 and 2015, after significant contraction in 2008 and 2009. One key driver of the commercial aircraft market is airline passenger and cargo traffic trends. Principal factors influencing traffic are economic growth and political stability. A significant downturn in global or regional economic stability, or exogenous shocks such as terrorism or a pandemic, could suppress traffic and negatively affect demand for our key customers' products.

        Demand for commercial aerostructures is highly correlated to demand for new aircraft. Boeing and Airbus have more than doubled their combined backlog since December 2006. The year-end 2013 combined backlog was 10,639 aircraft. High backlog levels are expected to continue to drive increasing production and delivery forecasts in the near to mid-term from both Boeing and Airbus.

        The following table sets forth the historical deliveries of Boeing and Airbus for 2008 through 2013 and delivery expectations for 2014.

 
  2008   2009   2010   2011   2012   2013   2014(1)  

Boeing

    375     481     462     477     601     648     715-725  

Airbus

    483     498     510     534     588     626     626  
                               

Total

    858     979     972     1,011     1,189     1,274     1,341-1,351  

(1)
Boeing has announced that it expects its 2014 deliveries to be approximately 715-725 aircraft. Airbus announced that it expects 2014 deliveries to reach similar levels as 2013.

        Product inventory continues to grow in terms of absolute dollars and remains stable as a percentage of total assets. Inventory as a percentage of total assets was 36%, 45% and 52% at December 31, 2013, 2012 and 2011, respectively. This overall trend in inventory is driven primarily by our contractually required investments in certain programs, which include the Boeing B747-8, B787, Gulfstream G280 and G650, Airbus A350 XWB, Sikorsky CH-53K and Rolls-Royce BR725 programs. The contracts for these programs accounted for a decrease in inventory from 2012 to 2013 of $682.7 million, which is net of forward loss charges for each year. Excluding the forward loss charges, these programs would have increased inventory by $329.4 million from 2012 to 2013. The increases in inventory for new and maturing programs in the last few years are a result of the application of the percentage-of-completion method of contract accounting with regard to inventory and revenue recognition. Under this method, investments in new and maturing contracts, including contractual pre-production costs and recurring production costs in excess of the projected average cost to manufacture all units in the contract block, initially accumulate in inventory for the related contract. Once production has reached a point where the cost to produce a ship set falls below such projected average cost, the inventory balance for such program will begin to decrease. Deferred inventory costs are evaluated for recoverability through their inclusion in the total costs used in the calculation of each contract block's estimated profit margin. When the estimated total contract block costs exceed total estimated contract block revenues, a forward loss is recorded and an inventory reserve is established.


Management's Focus

        The Company's focus is on ensuring that our strategy and our operational and cost performance are world class. Overall, we are committed to the concept of change and we have undertaken specific actions recently that highlight that commitment. On May 2, 2013, we announced the undertaking of comprehensive strategic and financial reviews of our development programs at our Tulsa, Wichita, Kinston and St. Nazaire sites. These reviews were concluded in the fourth quarter of 2013. Decisions made as a result of these reviews include some of the actions we announced in 2013, the most significant of which was

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our commencement of a process to sell our Oklahoma facilities, which we announced on August 6, 2013. Certain of our maturing programs, including the Gulfstream G280 and G650 wing and the B787 wing programs, are produced at these facilities. This decision aligns with our strategy to focus on the commercial aerospace and defense segments of the marketplace. We may ultimately decide to sell only a portion of, or certain programs produced at, our Oklahoma facilities, to sell separate portions and/or programs to different buyers, or to retain the facilities in their entirety. We are also committed to reducing internal cost and improving operational efficiency through centralization of functions as demonstrated by the reduction in workforce activities completed in the third quarter of 2013. Additionally, we continue to align the business around our customers and programs with strong emphasis on markets, business management, program management, production and supply chain. We also added new executive talent and reassigned existing executive talent in an effort to strengthen performance in certain areas of our business. We anticipate taking additional actions in the near-term as we continue to focus on positioning the Company for future success.


New and Maturing Programs

        We are currently performing work on several new and maturing programs, which are in various stages of development. The Boeing B787-8 has received FAA and JAA certifications, as well as EASA certification for entry into service. The Gulfstream G280 and G650 have each received FAA and EASA certifications.

        During 2013, several events occurred that led to significant changes in cost estimates for several programs resulting in forward losses being recorded on some of these programs. Due to these changes, for the twelve months ended December 31, 2013, we recorded forward loss charges of $1,133.3 million, including $240.9 million on the Gulfstream G280, $288.3 million on the Gulfstream G650, $78.6 million on the Airbus A350 XWB fuselage recurring, $32.7 million on the Airbus A350 XWB fuselage non-recurring, $41.1 million on the Boeing B747-8 fuselage, $16.4 million on the Boeing B767 propulsion, $422.0 million on the Boeing B787 and a net $13.3 million on the Rolls-Royce BR725. These amounts are recorded within the Company's results of operations as part of cost of goods sold as well as on the consolidated balance sheet as forward loss provisions within inventory.

A350 XWB

        We continue to support the development of the A350 XWB program through a wing contract and a fuselage contract, both of which are segmented into a non-recurring design engineering phase and recurring production phase. In the first quarter of 2013, we reduced the margins for the A350 XWB fuselage recurring and A350 XWB wing recurring programs to break-even to reflect an increase in identified risk profile of these programs. In September and October of 2013, we agreed with Airbus on the work scope for the design and tooling related to the -1000 derivative of the A350 XWB fuselage and wing contracts, respectively.

        Based on current estimates, the agreement for the non-recurring design engineering phase of the -1000 derivative fuselage resulted in a $32.7 million forward loss which was recorded in the third quarter of 2013. There is a risk of additional forward loss if we do not successfully execute the design and engineering change process as projected.

        Our A350 XWB fuselage recurring program has experienced various production inefficiencies mostly driven by early development discovery and engineering change to the aircraft design, as well as higher test and transportation costs. Airbus is assisting us as we work through these issues and has provided additional resources to work alongside our personnel. In the third quarter of 2013, we recorded a forward loss of $78.6 million for the A350 XWB fuselage recurring contract due to these production inefficiencies. There continues to be risk of additional forward loss associated with the fuselage recurring contract as we work through production issues.

        Although we continue to project the wing recurring production contract to be break-even, there is still a substantial amount of risk similar to what we have experienced on other development programs.

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Particularly, our ability to successfully negotiate favorable terms with our suppliers, manage supplier performance, execute cost reduction strategies, hire and retain skilled production and management personnel, execute quality and manufacturing processes, and manage program schedule delays or adjust to higher rate schedules, among other risks, will determine the ultimate performance of these programs.

B787 Program

        As we move into a higher production rate on this program, our performance at the current contracted price depends on our continued ability to achieve cost reductions in manufacturing and support labor as well as supply chain. During the first and second quarters of 2013, we experienced production inefficiencies at our Tulsa facility as we transitioned the B787-9 derivative into production, which drove forward losses of $37.3 million on the B787 wing program. Additionally in the fourth quarter of 2013, we revised our estimates of the amount of near-term achievable cost reductions for the B787 program based on cost savings ideas generated, the maturity of those ideas, and the expected realization for the program. This change in cost savings estimates drove a forward loss in the fourth quarter of $384.7 million. Total forward losses for the program were $422.0 million for the twelve months ended December 31, 2013.

        Continuous improvement in our cost structure has been on-going since the beginning of the program as design engineering for both the B787-8 and B787-9 derivatives finalized and manufacturing plans solidified. Near term cost improvement efforts will focus on efficiency gains within our manufacturing process and execution of sourcing strategies.

        We have not yet established pricing for the B787-9, B787-10 or any future derivatives. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing, and have not yet reached agreement. Our ability to successfully negotiate fair and equitable prices for these models as well as overall B787 delivery volumes and our ability to achieve forecasted cost improvements on all B787 models are key factors in achieving the projected financial performance for this program.

G280 and G650 Programs

        The Gulfstream G650 and G280 programs face near term risks that includes our ability to execute our contractual work statement, achieve supply chain cost reductions, and successfully perform to manufacturing plans and delivery schedules. Business jet market fluctuations caused by changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market, also present risk to these programs. The G650 program has significant near term risk as we work with our customer to resolve certain commercial issues related to Gulfstream's contention that delivered units failed to meet schedule and weight requirements.

Supply Chain Cost Reductions — G280 and G650

        Our 2012 cost estimates at completion for the Gulfstream G280 and G650 programs included significant cost reductions primarily related to sourcing opportunities projected to be realized between 2015 and 2018. These sourcing opportunities and related savings amounts were based on the experience of the supply chain team and operational management. During the second quarter of 2013, the supply chain team and operational management determined that a substantial portion of the total cost savings included in the contract estimates for each program would not be realized. This determination was based on a number of changing conditions and new developments including, an assessment of our actual experience with our customers regarding their receptiveness to proposed changes, completion of a detailed part analyses as part of our effort to project future sourcing costs, and our inability to achieve estimated supplier price reductions via negotiations with suppliers.

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Labor Estimates — Tulsa Facility

        The labor cost forecasts within the contract estimates for the G280, G650 and B787 are based on certain assumptions, including the level of disruption expected in the future. In our contract estimates through the first quarter of 2013, we assumed that certain disruptions to the manufacturing line caused by (i) supplier quality issues and late deliveries, (ii) customer inspections occurring in our facilities and (iii) our own manufacturing quality issues would be resolved by the middle of 2013. During the second and fourth quarters of 2013, key performance dates were missed and we extended the expected period of time during which these issues would be resolved in our assumptions for our contract estimates. As a result, we experienced higher actual costs as well as significant increases to forecasted costs, resulting in additional forward losses recognized on all of these programs in the second and fourth quarters of 2013.

Contractual Items — G650

        As we worked with Gulfstream to meet its production demand, we negotiated a temporary transfer of a portion of our work scope to Gulfstream for completion. In the second quarter of 2013, due to the effect of continued production challenges on our forecasted ability to achieve scheduled deliveries, we changed our assumptions to extend the duration of the work transfer and updated our estimates regarding this temporarily transferred work scope which is accounted for as a reduction in forecasted revenue. As described in more detail in Note 22, "Commitments, Contingencies and Guarantees," we instituted a demand for arbitration against Gulfstream to resolve certain contractual disputes primarily related to engineering changes made by Gulfstream and the impact of those changes to weight and delivery schedules as well as for incomplete payments to Spirit. We continually assess these contractual items and adjust our estimates as appropriate each quarter. Changes in these particular estimates resulted in additional forward losses recognized on the G650 in the second quarter of 2013.

General Statement Regarding New and Maturing Programs

        In order to continue to reduce risk on our new and maturing programs, it will be critical that we successfully perform under revised design and manufacturing plans, achieve forecasted cost reductions as we enter increasing levels of production, meet customer delivery schedules and successfully resolve claims, assertions and pricing negotiations with our customers and suppliers.

        Additionally, we face risks related to the announcement on August 6, 2013 of our initiation of a process to divest our Oklahoma facilities, which we may ultimately decide to sell separate portions and/or programs to different buyers, or retain the facilities in their entirety. We have a concentration of maturing programs, including the G650, G280 and B787 wing programs, at these facilities and a divestiture of these facilities may have a material financial impact in the period in which the divestiture becomes probable.


Basis of Presentation

        The financial statements include Spirit'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. Investments in business entities in which we do not have control, but have the ability to exercise influence over operating and financial policies, are accounted for by the equity method. Kansas Industrial Energy Supply Company ("KIESC"), a tenancy-in-common with other Wichita companies established to purchase natural gas, is fully consolidated as Spirit owns 77.8% of the entity's equity. All intercompany balances and transactions have been eliminated in consolidation. The Company's U.K. subsidiary uses local currency, the British pound, as its functional currency; the Malaysian subsidiary uses the British pound and our Singapore subsidiary uses the Singapore dollar. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency.

        As part of the monthly consolidation process, the functional currency is translated to U.S. dollars using the end-of-month currency translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts as defined by FASB authoritative guidance on foreign currency translation.

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Critical Accounting Policies

        The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to inventory, income taxes, financing obligations, warranties, pensions and other post-retirement benefits and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.

        The following are our most critical accounting policies, which are those that require management's most subjective and complex judgments, requiring the use of estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

        A significant portion of the Company's revenues are recognized under long-term, volume-based pricing contracts, requiring delivery of products over several years. The Company recognizes revenue under the contract method of accounting and records sales and profits on each contract in accordance with the percentage-of-completion method of accounting, primarily using the units-of-delivery method. The units-of-delivery method recognizes as revenue the contract price of units of a basic production product delivered during a period and as the cost of earned revenue the costs allocable to the delivered units; costs allocable to undelivered units are reported in the balance sheet as inventory. The method is used in circumstances in which an entity produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers' specifications. Recurring long-term production contracts are usually divided into contract blocks for this purpose, with each block treated as a separate contract for "units-of-delivery" production-type contract accounting purposes.

        The total quantity of production units to be delivered under a contract may be set as a single contract accounting block, or it can be split into multiple blocks. Unless the life of the contract is so long that it prevents reliable estimates, the entire contract quantity will typically be set as the contract accounting block quantity. "Life of program" or "requirements based" contracts often lead to continuing sales of more than twenty years. Since this is much longer than can be reliably estimated, we use parameters based on the contract facts and circumstances to determine the length of the contract block. This analysis includes: considering the customer's firm orders, internal assessment of the market, reliabilities of cost estimates, potential segmentation of non-recurring elements of the contract, and other factors. Contract block sizes may also be determined based on certain contractual terms such as pricing renegotiation dates such that certain contract blocks may use an approximate date instead of a defined unit quantity in order to increase the ability to estimate accurately given that the renegotiated pricing is unknown for the planning block. Shorter contract blocks for mature, ongoing programs are common due to the presence of recent cost history and probable forecast accuracy. Mature program contract blocks tend to be approximately two years in length. Initial contract blocks often require a longer time period and greater number of units in order to take into account the higher cost of early units due to a steeper experience curve and pre-production design costs. Initial contract blocks on new programs can extend up to ten years or longer. As these programs mature and efficiencies are realized, subsequent contract block length shortens to take into account the steady state of the continuing production.

        Revenues from non-recurring design work are recognized based on substantive milestones or use of the cost to cost method, that are indicative of our progress toward completion depending on facts and

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circumstances. We follow the requirements of FASB authoritative guidance on accounting for the performance of construction-type and certain production-type contracts (the contract method of accounting), using the cumulative catch-up method in accounting for revisions in estimates. Under the cumulative catch-up method, the impacts of revisions in estimates are recognized immediately when changes in estimated contract profitability become known.

        A profit rate is estimated based on the difference between total revenues and total costs over a contract block. Total revenues at any given time include actual historical revenues up to that time plus future estimated revenues. Total costs at any given time include actual historical costs up to that time plus future estimated costs. Estimated revenues include negotiated or expected values for units delivered, estimates of probable recoveries asserted against the customer for changes in specifications, price adjustments for contract and volume changes, escalation and assumed but currently unnegotiated price increases for derivative models. Costs include the estimated cost of certain pre-production effort (including non-recurring engineering and planning subsequent to completion of final design) plus the estimated cost of manufacturing a specified number of production units. Estimates take into account assumptions relative to future labor performance and rates, and projections relative to material and overhead costs including expected "learning curve" cost reductions over the term of the contract. Estimated revenues and costs also take into account the expected impact of specific contingencies that we believe are probable.

        Estimates of revenues and costs for our contract blocks span a period of multiple years and are based on a substantial number of underlying assumptions. We believe that the underlying assumptions are sufficiently reliable to provide a reasonable estimate of the profit to be generated. However, due to the significant length of time over which revenue streams will be generated, the variability of the revenue and cost streams can be significant if the assumptions change. Estimates of profit margins for contract accounting blocks are typically reviewed on a quarterly basis. Assuming the initial estimates of sales and costs under the contract block are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract block. Changes in these underlying estimates due to revisions in sales and cost estimates may result in profit margins being recognized unevenly over a contract block as such changes are accounted for on a cumulative basis in the period estimates are revised, which we refer to as cumulative catch-up adjustments. When the current estimates of total contract revenue and total contract cost indicate a loss, a provision for the entire loss on the contract, known as a forward loss charge, is recorded to cost of sales in the period in which it becomes evident.

        For revenues not recognized under the contract method of accounting, the Company recognizes revenues from the sale of products at the point of passage of title, which is generally at the time of shipment. Shipping and handling costs are included in cost of sales. Revenues earned from providing maintenance services including any contracted research and development are recognized when the service is complete or other contractual milestones are attained.

        Under an agreement with Airbus, beginning in 2012 certain payments that are also accounted for as consideration given by a vendor to a customer have been amortized as a reduction to net revenues.

        A significant portion of the Company's future revenues is expected to be derived from new or maturing programs. There are several risks inherent to such programs. In the design and engineering phase, we may incur costs in excess of our forecasts due to several factors, including cost overruns, customer directed change orders and delays in the overall program. We may also incur higher than expected recurring production costs, which may be caused by a variety of factors, including the future impact of engineering changes (or other change orders) or our inability to secure contracts with our suppliers at projected cost levels. Our ability to recover these excess costs from the customer will depend on several factors, including our rights under our contracts for such programs. In determining our profits and losses in accordance with the percentage-of-completion method of contract accounting, we are required to make significant assumptions regarding our future costs and revenues, as well as the estimated number of units to be manufactured under the contract and other variables. We continually review and update our assumptions based on market trends and our most recent experience. If we make material

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changes to our assumptions, such as a reduction in the estimated number of units to be produced under the contract (which could be caused by emerging market trends or other factors), an increase in future production costs or a change in the recoverability of increased design or production costs, we may experience negative cumulative catch-up adjustments related to revenues previously recognized. In some cases, we may recognize forward loss amounts. For a broader description of the various types of risks we face related to new and maturing programs, see "Risk Factors — Risk Factors Related to Our Business and Industry."

        Raw materials are stated at lower of cost (principally on an actual or average cost basis) or market. Inventoried costs attributed to units delivered under long-term contracts are based on the estimated average cost of all units expected to be produced and are determined under the learning curve concept which anticipates a predictable decrease in unit costs as tasks and production techniques become more efficient through repetition. This usually results in an increase in inventory (referred to as "excess-over-average" or "deferred production costs") during the early years of a contract. These costs are deferred only to the extent the amount of actual or expected excess-over-average is reasonably expected to be fully offset by lower-than-average costs in future periods of a contract. If in-process inventory plus estimated costs to complete a specific contract exceed the actual plus anticipated remaining sales value of such contract, such excess is charged to cost of sales in the period the loss becomes known, thus reducing total inventory to estimated realizable value. Costs in inventory include amounts relating to contracts with long production cycles, some of which are not expected to be realized within one year.

        The Company reviews its general stock materials and spare parts inventory each quarter to identify impaired inventory, including excess or obsolete inventory, based on historical sales trends and expected production usage. Impaired inventories are written off to work in process in the period identified.

        Total inventory includes deferred production costs for the excess of production costs over the estimated average cost per ship set, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. 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. Work-in-process inventory also includes non-recurring production costs. Non-recurring production costs include design and engineering costs and test articles.

        Finished goods inventory is stated at its estimated average per unit cost based on all units expected to be produced.

        Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant customer-directed work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a certain number of ship set deliveries.

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

        A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a

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deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

        Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's prior earnings history including the forward losses previously recognized in the U.S., Management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position in recent years once results from the year ended December 31, 2013 were included, the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As of December 31, 2013, the total net U.S. deferred tax asset was $399.6 million. The net U.S. deferred tax asset after recording valuation allowances is $3.7 million. Valuation allowances recorded against the consolidated net U.S. deferred tax asset in the current year were $381.0 million. Additionally, the Company maintains a $14.9 million valuation allowance against separate company state income tax credits and previously recorded other U.S. issues and $0.6 million for other foreign issues which is an increase of $5.1 million from the prior year. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.

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

        We account for pensions and other post-retirement benefits in accordance with FASB authoritative guidance on employers' accounting for pensions, post-retirement benefits other than pensions, defined benefit pension and other post-retirement plans (See Note 16, "Pension and Other Post-Retirement Benefits," for additional detail on these plans).

        Assumptions used in determining the benefit obligations and the annual expense for our pension and post-retirement benefits other than pensions are evaluated and established in conjunction with an independent actuary.

        We set the discount rate assumption annually for each of our retirement-related benefit plans as of the measurement date, based on a review of projected cash flows and long-term high-quality corporate bond yield curves. The discount rate determined on each measurement date is used to calculate the benefit obligation as of that date, and is also used to calculate the net periodic benefit expense/(income) for the upcoming plan year.

        We derive assumed expected rate of return on pension assets from the long-term expected returns based on the investment allocation by class specified in our investment policy. The expected return on plan assets determined on each measurement date is used to calculate the net periodic benefit expense/(income) for the upcoming plan year.

        Assumed health care cost trend rates have a significant effect on the amounts reported for the post-retirement health care plans. To determine the health care cost trend rates, we consider national health trends and adjust for our specific plan designs and locations.

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        At inception, we adopted FASB authoritative guidance which generally requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value and to recognize this cost over the requisite service period or immediately if there is no service period or other performance requirements. Stock-based compensation represents a significant accounting policy of ours, which is further described in Note 15, "Debt," within the notes to our consolidated financial statements included in this Annual Report.

        We have established various stock compensation plans that include restricted share grants and restricted stock units.


New Accounting Standards

        For a listing of new accounting standards see Note 2, "Summary of Significant Accounting Policies — New Accounting Standards."


Results of Operations

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

 
  Twelve
Months
Ended
December 31,
2013
  Twelve
Months
Ended
December 31,
2012
  Twelve
Months
Ended
December 31,
2011
 
 
  ($ in millions)
 

Net revenues

  $ 5,961.0   $ 5,397.7   $ 4,863.8  

Cost of sales(1)(2)(3)

    6,059.5     5,245.3     4,312.1  

Selling, general and administrative expenses(4)

    200.8     172.2     159.9  

Impact from severe weather event(5)

    30.3     (146.2 )    

Research and development

    34.7     34.1     35.7  
               

Operating (loss) income

    (364.3 )   92.3     356.1  

Interest expense and financing fee amortization

    (70.1 )   (82.9 )   (77.5 )

Interest income

    0.3     0.2     0.3  

Other income, net

    3.3     1.8     1.4  
               

(Loss) income before income taxes and equity in net loss of affiliate

    (430.8 )   11.4     280.3  

Income tax (provision) benefit

    (191.1 )   24.1     (86.9 )
               

(Loss) income before equity in net loss of affiliate

    (621.9 )   35.5     193.4  

Equity in net income (loss) of affiliate

    0.5     (0.7 )   (1.0 )
               

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4  
               
               

(1)
The twelve months ended December 31, 2013 are inclusive of forward loss charges of $422.0 million, $288.3 million, $240.9 million, $111.3 million, $16.4 million, $41.1 million and $13.3 million on the Boeing B787, Gulfstream G650, Gulfstream G280, Airbus A350 XWB, Boeing B767, Boeing B747-8 and Rolls-Royce BR725, respectively. The twelve months ended December 31, 2013 includes charges of $17.8 million related to reduction in workforce activities, $38.1 million related to warranty reserve adjustments and $95.5 million in favorable cumulative catch-up adjustments for periods prior to December 31, 2013.

(2)
The twelve months ended December 31, 2012 are inclusive of forward loss charges of $184.0 million, $162.5 million, $151.0 million, $118.8 million, $8.9 million, $8.0 million and $11.5 million on the Boeing B787, Gulfstream G650, Rolls-Royce BR725, Gulfstream G280, Airbus A350 XWB wing

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(3)
Included in 2011 is recognition of previously deferred revenue associated with the B787 Amendment in the second quarter of 2011, a net $81.8 million forward loss charge recorded for the G280 program, a net $29.0 million forward loss charge recorded for the Sikorsky CH-53K helicopter program, an $18.3 million forward loss charge recorded on the B747-8 program and a $3.0 million forward loss charge recorded on the A350 XWB non-recurring wing program. In addition, 2011 cost of sales includes a $9.0 million charge to replenish warranty and extraordinary rework reserves, $1.9 million in early retirement incentives for eligible UAW-represented employees and $13.8 million in favorable cumulative catch-up adjustments for periods prior to December 31, 2011. For the twelve months ended December 31, 2011, $6.9 million was reclassified from segment operating income to unallocated cost of sales to conform to current year presentation.

(4)
Includes non-cash stock compensation expenses of $19.6 million, $15.3 million and $11.1 million for the respective periods starting with the twelve months ended December 31, 2013.

(5)
For 2012, gain includes a $234.9 million insurance settlement amount, offset by $88.7 million of costs incurred related to the April 14, 2012 severe weather event. Costs include assets impaired by the storm, clean-up costs, repair costs and incremental labor, freight and warehousing costs associated with the impacts of the storm.

        Comparative ship set deliveries by model are as follows:

Model
  Twelve Months
Ended
December 31,
2013
  Twelve Months
Ended
December 31,
2012
  Twelve Months
Ended
December 31,
2011
 

B737

    442     417     377  

B747

    19     24     17  

B767

    15     25     23  

B777

    99     86     78  

B787

    65     43     25  
               

Total Boeing

    640     595     520  

A320 Family

    486     437     403  

A330/340

    113     97     93  

A350

    8     3      

A380

    34     24     24  
               

Total Airbus

    641     561     520  

Business/Regional Jets

    97     84     49  
               

Total

    1,378     1,240     1,089  
               
               

        For purposes of measuring production or ship set deliveries for Boeing aircraft in a given period, the term "ship set" refers to sets of structural fuselage components produced or delivered for one aircraft in such period. For purposes of measuring production or ship set deliveries for Airbus and Business/Regional Jet aircraft in a given period, the term "ship set" refers to all structural aircraft components produced or delivered for one aircraft in such period. Other components which are part of the same aircraft ship sets could be produced or shipped in earlier or later accounting periods than the components used to measure

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production or ship set deliveries, which may result in slight variations in production or delivery quantities of the various ship set components in any given period.

        Net revenues by prime customer are as follows:

Prime Customer
  Twelve Months
Ended
December 31,
2013
  Twelve Months
Ended
December 31,
2012
  Twelve Months
Ended
December 31,
2011
 

Boeing

  $ 5,022.6   $ 4,533.2   $ 4,156.7  

Airbus

    595.1     466.1     497.0  

Gulfstream

    138.6     165.1     56.5  

Sikorsky

    14.7     26.2     24.9  

Other(1)

    190.0     207.1     128.7  
               

Total net revenues

  $ 5,961.0   $ 5,397.7   $ 4,863.8  
               
               

(1)
Includes aftermarket sales

        Net Revenues.    Net revenues for the twelve months ended December 31, 2013 were $5,961.0 million, an increase of $563.3 million, or 10%, compared with net revenues of $5,397.7 million for the prior year. The increase in net revenues in 2013 as compared to 2012 was primarily due to production volume increases on Boeing, Airbus and business jet programs. We recorded approximately $525.3 million of additional production volume driven by customer delivery schedules and higher production rates, approximately $22.9 million of additional non-recurring revenue and approximately $10.1 million of additional aftermarket volume. Non-recurring revenue, which includes design and development efforts, increased during 2013 primarily due to increased efforts on the B737 MAX and A350 XWB non-recurring fuselage, partially offset by lower design and development activities on the B747-8, B787 and Sikorsky non-recurring contracts. Deliveries to Boeing increased by 8% to 640 ship sets during 2013 primarily driven by higher production rates on certain Boeing models, as compared to 595 ship sets delivered in the prior year. Deliveries to Airbus increased by 14% to 641 ship sets during 2013 primarily driven by customer delivery schedules, as compared to 561 ship sets delivered in the prior year. In total, ship set deliveries increased 11% to 1,378 ship sets in 2013 compared to 1,240 ship sets for the same period in the prior year. Approximately 94% of Spirit's net revenues for 2013 came from our two largest customers, Boeing and Airbus.

        Pricing terms under our Supply Agreement with Boeing for the B737, B747, B767 and B777 platforms, which accounted for 70% of our net revenue, expired in May 2013, thus activating interim pricing provisions outlined within the terms of the Supply Agreement. We are currently negotiating pricing with Boeing for a period to be agreed upon by both parties. Until we are able to agree upon pricing, revenue is recorded using the pricing terms as of May 2013 and will be retroactively adjusted in the period in which we agree on future pricing terms.

        We have not yet established pricing for the B787-9, B787-10 or any future derivatives. In accordance with the B787 Supply Agreement revenue recognized for 2013 B787-9 deliveries was based on interim pricing negotiated with Boeing pending final price negotiations. For B787-9 deliveries in contract block 1, we have applied the appropriate accounting guidance for unpriced change orders in estimating revenues which will also be updated once final pricing is negotiated.

        Cost of Sales.    Cost of sales as a percentage of net revenues was 102% for the twelve months ended December 31, 2013, as compared to 97% in the prior year. The increase in cost of sales of $814.2 million in 2013 is primarily due to higher production volume and forward loss charges of $1,133.3 million recognized on several programs including the B787, A350 XWB and Gulfstream programs (see — "New and Maturing

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Programs"). Cost of sales for the twelve months ended December 31, 2013 includes charges of $17.8 million related to reduction in workforce activities and $38.1 million related to warranty reserve adjustments. These charges were partially offset by a favorable $95.5 million cumulative catch-up adjustment related to periods prior to 2013 driven by productivity and efficiency improvements on core programs as well as a pension related gain of $17.2 million.

        In comparison, for the twelve months ended December 31, 2012 we recorded forward loss charges of $644.7 million. Also included in 2012 was a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions, a charge of $3.6 million as a result of impairment of assets, and a charge of $2.2 million related to the disposal of certain assets.

        SG&A, Research and Development.    Combined SG&A and Research and Development costs as a percentage of net revenues was 4% for each of the twelve month periods ended December 31, 2013 and December 31, 2012. SG&A expense increased $28.6 million for the twelve months ended December 31, 2013, or 17%, primarily due to an increase in executive stock compensation expense and severance amounts of $11.3 million, an increase in executive benefits of $7.7 million and an increase in professional service fees of $5.4 million. Research and development expenses for the twelve months ended December 31, 2013 were up $0.6 million, or 2% compared to the same period in the prior year.

        Impact of Severe Weather Event.    Expenses related to the April 2012 severe weather event were $30.3 million for the twelve months ended December 31, 2013, as compared to a gain of $146.2 million in 2012. The expenses for 2013 were related to property damage, clean up and continuing recovery costs. In comparison, during the third quarter of 2012, the Company settled the insurance claims resulting from the second quarter 2012 severe weather event and recorded a net $146.2 million gain to operating income for the twelve months ended December 31, 2012. This settlement resolved all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions.

        Operating Income (Loss).    Operating loss for the twelve months ended December 31, 2013 was ($364.3) million, which was $456.6 million lower than operating income of $92.3 million for the prior year. Operating income in 2013 was unfavorably impacted by forward loss charges of $1,133.3 million, $17.8 million related to reduction in workforce activities and $38.1 million related to warranty reserve adjustments, as compared to charges in prior year of $644.7 million of forward loss, $2.2 million for UAW share grant awards in accordance with our labor agreement, $2.1 million for early retirement incentives to eligible employees and other one-time expense reductions, $3.6 million as a result of impairment of assets, and $2.2 million related to the disposal of certain assets. This was partially offset by higher overall production volumes and aftermarket volumes and a favorable cumulative catch-up adjustment of $95.5 million in 2013.

        Interest Expense and Financing Fee Amortization.    Interest expense and financing fee amortization for the twelve months ended December 31, 2013 includes $63.4 million of interest and fees paid or accrued in connection with long-term debt and $6.7 million in amortization of deferred financing costs, as compared to $68.3 million of interest and fees paid or accrued in connection with long-term debt and $14.6 million in amortization of deferred financing costs in the prior year. The change in amortization of deferred financing costs was primarily driven by the write down in 2012 of $9.5 million in deferred financing fees as a result of debt extinguishment from the April 18, 2012 term loan refinancing.

        Interest Income.    Interest income for the twelve months ended December 31, 2013 was $0.3 million compared to $0.2 million for the same period in the prior year.

        Other Income, net.    Other income, net for the twelve months ended December 31, 2013 was a net gain of $3.3 million, primarily due to gains on foreign exchange rates on intercompany activity and borrowings, offset by a $0.7 million book loss on the sale of Spirit's shares in the Spirit-Progresstech joint venture, compared to income of $1.8 million for the same period in the prior year.

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        Provision for Income Taxes.    The income tax provision for the twelve months ended December 31, 2013, was $191.1 million compared to $(24.1) million for the prior year. The 2013 effective tax rate was (44.4)% as compared to (211.4)% for 2012. The difference in the effective tax rate recorded for 2013 as compared to 2012 is primarily related to establishing a valuation allowance on the U.S. deferred tax assets, increased losses in the U.S. and the extension of the U.S. Research Tax Credit on January 2, 2013. The decrease from the U.S. statutory tax rate is primarily attributable to the same factors.

        Segments.    The following table shows segment revenues and operating income for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:

 
  Twelve Months
Ended
December 31,
2013
  Twelve Months
Ended
December 31,
2012
  Twelve Months
Ended
December 31,
2011
 
 
  ($ in millions)
 

Segment Revenues

                   

Fuselage Systems(1)

  $ 2,861.1   $ 2,590.6   $ 2,425.0  

Propulsion Systems

    1,581.3     1,420.9     1,221.5  

Wing Systems(1)

    1,502.5     1,375.1     1,207.8  

All Other

    16.1     11.1     9.5  
               

  $ 5,961.0   $ 5,397.7   $ 4,863.8  
               
               

Segment Operating Income

                   

Fuselage Systems(1)(2)

  $ 70.1   $ 387.2   $ 318.5  

Propulsion Systems(3)

    235.8     64.7     194.1  

Wing Systems(1)(4)

    (414.0 )   (339.1 )   0.5  

All Other

    4.4     1.0     1.3  
               

    (103.7 )   113.8     514.4  

Unallocated corporate SG&A

    (181.5 )   (155.3 )   (145.5 )

Unallocated impact from severe weather event(5)

    (30.3 )   146.2      

Unallocated research and development

    (8.9 )   (4.4 )   (1.9 )

Unallocated cost of sales(6)

    (39.9 )   (8.0 )   (10.9 )
               

Total operating income

  $ (364.3 ) $ 92.3   $ 356.1  
               
               

(1)
For 2011, includes recognition of deferred revenue, non-recurring revenue on B787-9 derivative and mission improvement, and pricing adjustments on prior and current-year deliveries all associated with the B787 Amendment, which was finalized in May 2011.

(2)
For 2013, includes forward loss charges of $489.6 million, which includes $41.1 million for the B747-8 program, $4.1 million for the B767 program, $333.1 million for the B787 program and $111.3 million for the A350 program. Also includes favorable cumulative catch-up adjustments of $60.1 million for periods prior to 2013. For 2012, includes a forward loss charge of $6.4 million for the B747-8 program and unfavorable cumulative catch-up adjustments for periods prior to 2012 of ($2.4) million. For 2011, includes a $29.0 million forward loss charge recorded for the Sikorsky CH-53K helicopter program and a $12.6 million forward loss charge for the B747-8 program.

(3)
For 2013, includes forward loss charges of $56.2 million, which includes $12.3 million for the B767 program, $30.6 million for the B787 program and $13.3 million for the Rolls-Royce BR725 program. For 2013, also includes favorable cumulative catch-up adjustments of $30.0 million for periods prior to 2013. For 2012, includes forward loss charges of $151.0 million recorded for the Rolls-Royce BR725 program and $8.0 million on our B767 program. For 2012, also includes favorable cumulative catch-up adjustments of $7.3 million for periods prior to 2012.

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(4)
For 2013, includes forward loss charges of $ 587.5 million, which includes $58.3 million for the B787 program, $240.9 million for the G280 program and $288.3 million for the G650 program. For 2013, also includes favorable cumulative catch-up adjustments of $5.4 million for periods prior to 2013. For 2012, includes forward loss charges of $184.0 million for the B787 wing program, $162.5 million for the G650 wing program, $118.8 million for the G280 wing program, $8.9 million for the A350 XWB non-recurring wing contract, and $5.1 million for the B747-8 wing program. For 2012, also includes favorable cumulative catch-up adjustments of $9.8 million for periods prior to 2012. For 2011, includes an $81.8 million forward loss charge recorded for the G280 wing program, a $5.7 million forward loss charge for the B747-8 program and a $3.0 million forward loss on the A350 XWB non-recurring wing contract.

(5)
For 2012, gain includes a $234.9 million insurance settlement amount, offset by $88.7 million of costs incurred related to the April 14, 2012 severe weather event. Costs include assets impaired by the severe weather event, clean-up costs, repair costs and incremental labor, freight and warehousing costs associated with the impacts of the severe weather event.

(6)
For 2013, includes charges of $38.1 million related to warranty reserve adjustments, $17.8 million related to reduction in workforce activities, $1.6 million in early retirement incentives, $15.4 million in gains related to pension activity and $2.2 million in gains primarily related to adjustments to intangible assets. For 2012, includes charges of $3.6 million related to asset impairments, $2.2 million related to stock incentives for certain UAW-represented employees and $2.1 million in early retirement incentives to eligible employees. For 2011, includes charges of $9.0 million due to a change in estimate to increase warranty and extraordinary rework reserves and $1.9 million in early retirement incentives elected by eligible UAW-represented employees.

        Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 48%, 27%, 25% and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2013.

        Fuselage Systems.    Fuselage Systems segment net revenues for the twelve months ended December 31, 2013 were $2,861.1 million, an increase of $270.5 million, or 10.4%, compared to the same period in the prior year. The increase in net revenues was primarily due to increased production rates on several Boeing models as well as higher deliveries for the A350 XWB program driven by customer delivery schedule. In addition, non-recurring net revenue, which includes design and development efforts, increased during 2013 on the B737 MAX and A350 XWB non-recurring fuselage, partially offset by reduced design and developmental activities on the B747-8, B787 and our Sikorsky non-recurring contracts. Fuselage Systems posted segment operating margins of 2.5% for the twelve months ended December 31, 2013, down from 15% for the same period in the prior year. Reduced segment operating margins were primarily driven by forward loss charges of $41.1 million recorded on the B747-8 program, $4.1 million on the B767 program, $333.1 million on the B787 program and $111.3 million on the A350 XWB program. This was partially offset by favorable cumulative catch-up adjustments of $60.1 million related to periods prior to 2013 driven by productivity and efficiency improvements on core programs. In comparison, in the same period of 2012, we recorded a forward loss of $6.4 million for the B747-8 program, a charge of $2.2 million related to the disposal of certain assets and an unfavorable cumulative catch-up adjustment of $2.4 million related to periods prior to 2012.

        Propulsion Systems.    Propulsion Systems segment net revenues for the twelve months ended December 31, 2013 were $1,581.3 million, an increase of $160.4 million, or 11.3%, compared to the same period in the prior year. The increase in net revenues was primarily due to higher production rates on several Boeing models, and increased non-recurring revenue on the B737 MAX. Propulsion Systems posted segment operating margins of 14.9% for the twelve months ended December 31, 2013, up from 5% segment operating margins for the same period in the prior year. Improved segment operating margins were primarily due to lower forward loss charges recorded in 2013 compared to the same period in 2012. In 2013, the segment recorded an aggregate forward loss charge of $13.3 million on the Rolls-Royce BR725

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program, $12.3 million on the B767 program and $30.6 million recognized on the B787 program. These charges were partially offset by favorable cumulative catch-up adjustments related to periods prior to 2013 of $30.0 million driven by productivity and efficiency improvements on core programs. In comparison, in the same period of 2012, the segment recognized forward loss charges of $151.0 million recognized on the Rolls-Royce BR725 program and $8.0 million recognized on the B767 program, partially offset by favorable cumulative catch-up adjustments of $7.3 million related to periods prior to 2012.

        Wing Systems.    Wing Systems segment net revenues for the twelve months ended December 31, 2013 were $1,502.5 million, an increase of $127.4 million, or 9.3%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production rates on several Boeing models and higher deliveries on our Airbus programs, partially offset by lower revenue on our Gulfstream G280 program as well as lower levels of non-recurring revenue on the Gulfstream G650 program compared to the prior year. Wing Systems posted segment operating margins of (28)% for the twelve months ended December 31, 2013, down from segment operating margins of (25)% for the same period in the previous year. Lower segment operating margins were due to forward loss charges of $58.3 million on the B787, $288.3 million on the G650 and $240.9 million on the G280 program. In addition, the segment recorded favorable cumulative catch-up adjustments of $5.4 million for periods prior to 2013 driven by productivity and efficiency improvements on core programs. In comparison, for 2012, the segment recorded forward loss charges of $184.0 million on the B787 program, $162.5 million on the G650 program, $118.8 million on the G280 program, $8.9 million on the A350 XWB non-recurring program and $5.1 million on the B747-8 program, partially offset by favorable cumulative catch-up adjustments of $9.8 million related to periods prior to 2012.

        All Other.    All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts and revenues from KIESC. In the twelve months ended December 31, 2013, All Other segment net revenues were $16.1 million, an increase of $5.0 million, as compared to the same period in the prior year. The All Other segment recorded 27% operating margins for the twelve months ended December 31, 2013, up from segment operating margins of 9% for the same period in the prior year driven by increased tooling sales.

        We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.

        Net Revenues.    Net revenues for the twelve months ended December 31, 2012 were $5,397.7 million, an increase of $533.9 million, or 11%, compared with net revenues of $4,863.8 million for the prior year. The increase in net revenues in 2012 as compared to 2011 was primarily due to production volume increases on Boeing and business jet programs. The 2011 amount included the recognition of previously deferred revenue resulting from the B787 Amendment, which was finalized in May 2011. In addition, we recorded approximately $473.6 million of higher production volume driven by customer delivery schedules, approximately $38.2 million of additional aftermarket volume, and increases of approximately $10.8 million in non-recurring revenue. Non-recurring revenues, which includes design and development efforts, increased during 2012 primarily due to increased efforts on the B737, B767, and B787, partially offset by a reduction in A350 XWB non-recurring fuselage efforts. Deliveries to Boeing increased by 14% to 595 ship sets during 2012 compared to 520 ship sets delivered in the prior year, as ship set deliveries increased across all Boeing programs driven by customer delivery schedules. Deliveries to Airbus increased by 8% to 561 ship sets during 2012 compared to 520 ship sets delivered in the prior year due to increased deliveries across all Airbus programs driven by customer delivery schedules. In total, ship set deliveries increased 14% to 1,240 ship sets in 2012 compared to 1,089 ship sets for the same period in the prior year. Approximately 93% of Spirit's net revenues for 2012 came from our two largest customers, Boeing and Airbus.

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        Cost of Sales.    Cost of sales as a percentage of net revenues was 97% for the twelve months ended December 31, 2012, as compared to 89% in the prior year. The increase in cost of sales of $933.2 million in 2012 was primarily due to an increase in production rates, a net $184.0 million forward loss charge on our B787 wing program, a $162.5 million forward loss charge on our G650 wing program, a $151.0 million forward loss charge on our BR725 program, a $118.8 million forward loss charge on our G280 wing program, an $8.9 million forward loss charge on our A350 wing program, a $6.4 million forward loss charge on our B747-8 fuselage program, a $5.1 million forward loss charge on our B747-8 wing program, an $8.0 million forward loss charge on our B767 propulsion program, a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions, a charge of $3.6 million as a result of impairment of assets, and a charge of $2.2 million related to the disposal of certain assets. In addition, we continued to record zero margins on the B787 program, for which deliveries have increased during the year. In 2012, we recorded a favorable $14.7 million cumulative catch-up adjustment related to periods prior to 2012 driven by productivity and efficiency on core programs.

        In comparison, in the same period of 2011, we recorded a net $81.8 million forward loss charge on our G280 wing program, a net $29.0 million forward loss charge on our Sikorsky CH-53K helicopter program, an $18.3 million forward loss charge on our B747-8 program, a $9.0 million charge to replenish warranty and extraordinary rework reserves, a $3.0 million forward loss charge on our A350 XWB non-recurring wing contract and a $1.9 million charge for early retirement incentives for eligible UAW-represented employees. In 2011, we recorded a favorable $13.8 million cumulative catch-up adjustment related to periods prior to 2011 driven by productivity improvements, recognition of favorable performance as we closed out B737 and B777 contract blocks in the fourth quarter, and a lower forecast for our short-term incentive accrual, partially offset by increasing material costs in our Wing Systems segment.

        SG&A, Research and Development.    Combined SG&A and Research and Development costs as a percentage of net revenues was 4% for the twelve months ended December 31, 2012, compared to 4% in the prior year. SG&A expense increased $12.3 million for the twelve months ended December 31, 2012, or 8%, primarily due to an increase in stock compensation expense of $4.2 million to $15.3 million related to grants awarded in 2012, as compared to $11.1 million during the prior year and an increase in professional services in the last half of 2012. Research and development expenses for the twelve months ended December 31, 2012 were down $1.6 million, or 4% compared to the same period in the prior year, as we had fewer research and development projects underway in 2012 versus 2011.

        Impact of Severe Weather Event.    During the third quarter of 2012, the Company settled the insurance claims resulting from the second quarter 2012 severe weather event and recorded a net $146.2 million gain to operating income for the twelve months ended December 31, 2012. This settlement resolved all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions.

        Operating Income.    Operating income for the twelve months ended December 31, 2012 was $92.3 million, which was $263.8 million lower than operating income of $356.1 million for the prior year. Operating income in 2012 was unfavorably impacted by forward loss charges of $644.7 million (see — "Cost of Sales"), a $3.6 million charge to impairment of assets, a $2.2 million related to the disposal of certain assets, a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, and a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions as compared to $132.1 million of forward loss charges, a $9.0 million charge to replenish warranty and extraordinary rework reserves, and a $1.9 million charge for early retirement incentives recorded in 2011. This was partially offset by higher overall production volumes and aftermarket volumes and a favorable cumulative catch-up of $14.7 million.

        Interest Expense and Financing Fee Amortization.    Interest expense and financing fee amortization for the twelve months ended December 31, 2012 includes $68.3 million of interest and fees paid or accrued in connection with long-term debt and $14.6 million in amortization of deferred financing costs, as compared

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to $71.9 million of interest and fees paid or accrued in connection with long-term debt and $5.6 million in amortization of deferred financing costs in the prior year. The change in interest expense associated with long-term debt was primarily driven by lower interest cost from new swaps entered into in the third quarter of 2011, partially offset by interest on the drawn portion of the revolver for a portion of 2012 and the effects of the new term loan entered into during the second quarter of 2012. Amortization of deferred financing costs increased by $9.0 million dollars in 2012 compared to the previous year primarily due to the write down of $9.5 million in deferred financing fees as a result of debt extinguishment from the April 18, 2012 term loan refinancing, partially offset by amortization of deferred financing cost over a longer term.

        Interest Income.    Interest income for the twelve months ended December 31, 2012 was $0.2 million compared to $0.3 million for the same period in the prior year.

        Other Income (Expense, net).    Other income (expense) for 2012 included a net gain of $1.8 million, primarily due to gains on foreign exchange rates on intercompany activity and borrowings, offset by a $3.0 million write-off of Hawker Beechcraft receivables and a $4.7 million charge for the impairment of assets, compared to income of $1.4 million for the same period in the prior year.

        Provision for Income Taxes.    The income tax provision for the twelve months ended December 31, 2012, was ($24.1) million compared to $86.9 million for the prior year. The 2012 effective tax rate was (211.4)% as compared to 31.0% for 2011. The difference in the effective tax rate recorded for 2012 as compared to 2011 is primarily related to reduced earnings and accounting for long term contracts, offset by the expiration of the U.S. Research Tax Credit on December 31, 2012. The decrease from the U.S. statutory tax rate is attributable primarily to reduced earnings, accounting for long term contracts and state income tax credits.

        On January 2, 2013, the President signed legislation retroactively extending the U.S. Research Tax Credit for two years, from January 1, 2012 through December 31, 2013. Our income tax expense for 2013 reflected the entire benefit of the Research Tax Credit attributable to 2012, which is estimated at $5.4 million. We also recorded the benefit of the 2013 Research Tax Credit in our 2013 tax expense.

        Fuselage Systems.    Fuselage Systems segment net revenues for the twelve months ended December 31, 2012 were $2,590.6 million, an increase of $165.6 million, or 7%, compared to the same period in the prior year. The increase in net revenues was primarily due to production volume increases in 2012 on Boeing programs. The 2011 amount included the recognition of revenue previously deferred in the second quarter of 2011 associated with the B787 Amendment settlement. In addition, non-recurring net revenue, which includes design and development efforts, increased in 2012 on the B737, B787 and Sikorsky CH-53K, partially offset by reduced design and developmental effort on the A350 XWB non-recurring fuselage program and the settlement of certain claims and assertions in the third quarter of 2012. Fuselage Systems posted segment operating margins of 15% for the twelve months ended December 31, 2012, up from 13% for the same period in the prior year. Improved segment operating margins were primarily driven by higher production volume due to rate increases on several Boeing programs with favorable margins and improved productivity and efficiency performance on our core programs, partially offset by increased zero margin revenue, a forward loss charge of $6.4 million for the B747-8 program, a charge of $2.2 million related to the disposal of certain assets and an unfavorable cumulative catch-up adjustment of $2.4 million related to periods prior to 2012. In comparison, in the same period of 2011, we recorded a forward loss of $29.0 million on the Sikorsky CH-53K program and a favorable cumulative catch-up adjustment of $13.6 million related to periods prior to 2011.

        Propulsion Systems.    Propulsion Systems segment net revenues for the twelve months ended December 31, 2012 were $1,420.9 million, an increase of $199.4 million, or 16%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production volume on Boeing models, increased aftermarket volume and increased non-recurring efforts on the B737 and B787. Propulsion Systems posted segment operating margins of 5% for the twelve months ended December 31, 2012, down from 16% segment operating margins for the same period in the prior year. Reduced segment

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operating margins were due to forward loss charges of $151.0 million recognized on the Rolls-Royce BR725 program and $8.0 million recognized on the B767 program, partially offset by a favorable cumulative catch-up adjustment related to periods prior to 2012 of $7.3 million associated with productivity and efficiency on core programs. In comparison, in the same period of 2011, the segment recognized a $12.8 million favorable cumulative catch-up adjustment related to periods prior to 2011.

        Wing Systems.    Wing Systems segment net revenues for the twelve months ended December 31, 2012 were $1,375.1 million, an increase of $167.3 million, or 14%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production volume on Boeing models and increased deliveries on our Gulfstream programs, partially offset by reduced non-recurring revenue on the A350 XWB non-recurring wing program and the settlement of certain claims and assertions in the third quarter of 2012. Wing Systems posted segment operating margins of (25)% for the twelve months ended December 31, 2012, down from segment operating margins of less than 1% for the same period in the previous year. In the twelve months of 2012, the segment recorded forward loss charges of $184.0 million on the B787 program, $162.5 million on the G650 program, $118.8 million on the G280 program, $8.9 million on the A350 XWB non-recurring program and $5.1 million on the B747-8 program, partially offset by a favorable cumulative catch-up adjustment related to periods prior to 2012 of $9.8 million driven in part by productivity and efficiency on core programs. In comparison, during 2011, we recorded an $81.8 million forward loss charge on our G280 wing contract, a $5.7 million forward loss charge on our B747-8 program, a $3.0 million forward loss on our A350 XWB non-recurring wing contract, and an unfavorable cumulative catch-up adjustment of $12.6 million related to periods prior to 2011.

        All Other.    All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts and revenues from KIESC. In the twelve months ended December 31, 2012, All Other segment net revenues were $11.1 million, a slight increase of $1.6 million, as compared to the same period in the prior year. The All Other segment posted operating income before unallocated corporate expenses of less than 1% for the twelve months ended December 31, 2012. The All Other segment recorded 9% operating margins for the twelve months ended December 31, 2012, down from segment operating margins of 14% for the same period in the prior year driven by additional sundry sales with lower margins.


Liquidity and Capital Resources

        The primary sources of our liquidity include cash on hand, cash flow from operations, which includes receivables from customers and borrowings available under our revolving credit facility. Additionally, we may receive advance payments from customers and proceeds from asset sales. Our liquidity requirements are driven by our long-cycle business model. Our business model is comprised of four to six year non-recurring investment periods, which include design and development efforts, followed by ten to twenty years of recurring production. The non-recurring investment periods require significant outflows of cash as we design the product, build tooling, purchase equipment and build initial production inventories. These activities are typically funded partially through customer advances and milestone payments, which are offset against revenue as production units are delivered in the case of customer advances, or recognized as revenue as milestones are achieved in the case of milestone payments. The remaining funds needed to support non-recurring programs come from predictable cash inflows from our mature programs that are in the recurring phase of the production cycle. Occasionally, we have utilized borrowings and other sources of cash to fund non-recurring investments during periods where cash received from our customers is not adequate to fund our purchase commitments. The non-recurring investment period typically ends concurrently with initial deliveries of completed aircraft by our customers, which indicates that a program has entered into the recurring production phase. When a program reaches steady recurring production, it typically results in long-term generation of cash from operations. As part of our business model, we have continuously added new non-recurring programs, which are supported by mature programs that are in the steady recurring phase of the production cycle to promote growth.

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        As of December 31, 2013, we had $420.7 million of cash and cash equivalents on the balance sheet and $650.0 million of available borrowing capacity under our revolving credit facility. We had no outstanding balances under our revolving credit facility at the end of 2013. Based on our planned levels of operations and our strong liquidity position, we currently expect that our cash on hand, cash flow from operations and borrowings available under our revolving credit facility will be sufficient to fund our operations, inventory growth, planned capital investments, research and development expenditures and scheduled debt service payments for at least the next twelve months.

        The following table provides a summary of our cash flows for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:

 
  For the Twelve Months Ended  
 
  December 31, 2013   December 31, 2012   December 31, 2011  
 
  ($ in millions)
 

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4  

Adjustments to reconcile net income        

    343.0     66.8     154.5  

Changes in working capital

    539.0     442.8     (394.2 )
               

Net cash provided by (used in) operating activities

    260.6     544.4     (47.3 )

Net cash (used in) investing activities

    (268.2 )   (248.8 )   (249.2 )

Net cash (used in) financing activities

    (13.9 )   (34.6 )   (6.7 )
               

Effect of exchange rate change on cash and cash equivalents

    1.5     1.9     (0.6 )
               

Net (decrease) increase in cash and cash equivalents for the period

    (20.0 )   262.9     (303.8 )

Cash and cash equivalents, beginning of period

    440.7     177.8     481.6  
               

Cash and cash equivalents, end of period

  $ 420.7   $ 440.7   $ 177.8  
               
               

        Operating Activities.    For the twelve months ended December 31, 2013, we had a net cash inflow of $260.6 million from operating activities, an inflow decrease of $283.8 million; compared to a net cash inflow of $544.4 million for the prior year. The decrease in net cash inflow during 2013 as compared to 2012 was primarily driven by lower cash advances, a 2012 insurance settlement, and lower tax payments (see "Tax" below), partially offset by timing of vendor payments and receivables from customers. In 2012, net cash provided by operating activities was primarily due to the receipt of a $250.0 million advance from Airbus associated with an agreement on the A350 XWB fuselage program, $234.9 million of insurance proceeds from our global settlement, offset by $88.7 million for all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions, and by timing of vendor payments and receivables from customers. Also during 2013, we made tax payments of $69.4 million.

        Investing Activities.    For the twelve months ended December 31, 2013, we had a net cash outflow of $268.2 million from investing activities, an increase in outflow of $19.4 million, compared to a net cash outflow of $248.8 million for the prior year. In 2013, capital expenditures were $272.6 million, and consisted of purchases of tooling and machinery and equipment to support increasing production rates on several Boeing and maturing programs, as well as for replacement of assets destroyed in the April 2012 severe weather event. In comparison, in 2012, capital expenditures were $249.0 million.

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        Financing Activities.    For the twelve months ended December 31, 2013, we had a net cash outflow of $13.9 million from financing activities, a decrease in outflow of $20.7 million, compared to a net cash outflow of $34.6 million for the prior year. The decrease in outflow was primarily due to the 2012 refinancing of our $559.0 million senior secured credit facilities with new senior secured credit facilities of $550.0 million, resulting in a prepayment of principal of $9.0 million in 2012. During 2012, in addition to the prepayment of principal, we incurred financing fees of $12.4 million and original issue discount of $2.7 million. Payments on debt for the twelve months ended December 31, 2013 were $10.4 million, compared to $11.7 million, excluding refinancing activities, for the same period in the prior year.

        Operating Activities.    For the twelve months ended December 31, 2012, we had a net cash inflow of $544.4 million from operating activities, an inflow increase of $591.7 million, compared to a net cash outflow of $47.3 million for the same period in the prior year. During 2012, net cash provided by operating activities was primarily due to the receipt of a $250.0 million advance from Airbus associated with an agreement on the A350 XWB fuselage program, $234.9 million of insurance proceeds from our global settlement, offset by $88.7 million for all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions, and by timing of vendor payments and receivables from customers. For 2012, our cash flow was favorably impacted by cash receipts from B787 deliveries, which were higher in the current period than 2011 due to higher cash payments beginning in the third quarter of 2011 and continuing into 2012 resulting from contractual reductions in the portion of advances repaid by each ship set delivered. This temporary increase in cash received per unit ended with the delivery of the 100th unit in 2012. Also during 2012, we made federal tax payments of $97.4 million, which are net of an Internal Revenue Service ("IRS") refund for the 2011 tax year, and payments relating to settling the 2008 and 2009 IRS examinations.

        We continued to invest in inventory for new programs and additional production costs for ramp-up activities in support of increasing build rates on several Boeing programs. During 2012, inventory build for new programs, including the B787, A350 XWB and Gulfstream programs, was $1,571.0 million, an increase of $768.3 million, compared to the same period in the prior year. Additionally, inventory build for mature Boeing and Airbus programs, including costs associated with announced increasing build rates on several Boeing programs was approximately $3,754.3 million, an increase of $541.7 million, compared to the same period in the prior year. These activities were funded through cash flows from operations, including receivables from customers and customer advances. These increases are partially offset by the $644.7 million in forward loss charges recorded in 2012 which are reflected as sources of cash as they are recorded as provision within inventory.

        The $47.3 million net cash outflow for the twelve months ended December 31, 2011 was largely the result of approximately $4.52 billion in expenditures driven by continued growth in inventory to support engineering development and start-up production costs for new programs, including the B787, A350 XWB and Gulfstream programs and for ramp-up activities for increasing build rates on the B737 and B777 programs, partially offset by cash receipts of approximately $4.47 billion driven by revenue from unit deliveries, which increased across all Boeing and Airbus models and aftermarket volume.

        Investing Activities.    For the twelve months ended December 31, 2012, we had a net cash outflow of $248.8 million from investing activities, a decrease in outflow of $0.4 million compared to a net cash outflow of $249.2 million for the same period in the prior year. In 2012, capital expenditures were $249.0 million, and consisted of purchases of tooling and machinery and equipment to prepare for the manufacturing of our developmental programs, to support increasing production rates on several Boeing programs and for replacement of assets destroyed in the severe weather event. In comparison, in 2011, capital expenditures were $249.7 million.

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        Financing Activities.    For the twelve months ended December 31, 2012, we had a net cash outflow of $34.6 million from financing activities, an increase in outflow of $27.9 million, compared to a net cash outflow of $6.7 million for the same period in the prior year. The increase in outflow was primarily due to the refinancing of our $559.0 million senior secured credit facilities with new senior secured credit facilities of $550.0 million, resulting in a prepayment of principal of $9.0 million. In addition to the prepayment of principal, we incurred financing fees of $12.4 million and original issue discount of $2.7 million. Payments on debt other than the refinancing activity were $11.7 million, compared to $8.0 million for the same period in the prior year. During the first half of 2012, we drew down and repaid $170.0 million from our revolver.

        Our primary future cash needs will consist of working capital, debt service, research and development and capital expenditures. We expend significant capital as we undertake new programs, which begin in the non-recurring investment phase of our business model. In addition, we expend significant capital to meet increased production rates on certain mature programs, including the B737. We also require capital to develop new technologies for the next generation of aircraft and are evaluating various plans to relieve capacity constraints for the announced customer production rate increases. Capital expenditures totaled approximately $272.6 million and $249.0 million, partially offset by $12.9 million in insurance proceeds from the severe weather event for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Excluding the impact of the severe weather event, capital expenditures totaled approximately $234.2 million and $236.1 million for the twelve months ended December 31, 2013 and December 31, 2012, respectively. We plan to fund future capital expenditures and cash requirements from cash on hand, cash generated by operations, customer cash advances, insurance proceeds; borrowings available under our revolving credit facility and proceeds from assets sales, if any.

        EAC Changes in Estimates.    As described in more detail in the New and Maturing Programs discussion, the Company significantly increased its estimates regarding future production costs on several of its maturing programs in 2013. The majority of the $1,133.3 million of forward loss charges represent future cash expenditures which increase our projected future cash needs from previous estimates. These charges cover production blocks that are currently estimated to be completed at various dates between now and 2018.

        Our U.S. pension plan remained fully funded at December 31, 2013 and we anticipate non-cash pension income for 2014 to remain at or near the same level as 2013. Our plan investments are broadly diversified and we do not anticipate a near-term requirement to make cash contributions to our U.S. pension plan. Effective December 31, 2013, the BAE Aerostructures pension plan benefits were frozen due to an amendment which closed the plan. Our projected contributions to the U.K. pension plan for 2014 are $0.7 million. See Note 16, "Pension and Other Post-Retirement Benefits," for more information on the Company's pension plans.

        Senior Secured Credit Facilities.    On April 18, 2012, Spirit entered into a $1.2 billion senior secured Credit Agreement (the "Credit Agreement") consisting of a $650.0 million revolving credit facility and a $550.0 million term loan B facility. The Credit Agreement refinanced and replaced the Second Amended and Restated Credit Agreement dated as of November 27, 2006, as amended. Proceeds of the new term loan were used to pay off outstanding amounts under the prior credit agreement. The revolving credit facility matures April 18, 2017 and bears interest, at Spirit's option, at either LIBOR, or a defined "base rate" plus an applicable margin based on Spirit's debt-to-EBITDA ratio (see table below). The term loan matures April 18, 2019 and bears interest, at Spirit's option, at LIBOR plus 3.00% with a LIBOR floor of 0.75% or base rate plus 2.00%, subject to a step down to LIBOR plus 2.75% or base rate plus 1.75%, as

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applicable, in the event Spirit's secured debt-to-EBITDA ratio is below 1:1 at any time after 2012. Substantially all of Spirit's assets, including inventory and property, plant and equipment, were pledged as collateral for both the term loan and the revolving credit facility. As of December 31, 2013, the outstanding balance of the term loan was $540.4 million. As of December 31, 2012, the outstanding balance of the term loan was $545.9 million. As of December 31, 2013 the carrying amount of the term loan was $538.2 million. The amount outstanding under the revolving credit facility was zero at each of December 31, 2013 and December 31, 2012. In the second quarter of 2012, the Company recorded a charge of $9.5 million for unamortized deferred financing fees as a result of extinguishment of the debt under the prior credit agreement.

        In addition to paying interest on outstanding principal under the Credit Agreement, Spirit is required to pay an unused line fee on the unused portion of the commitments under the revolving credit facility based on Spirit's debt-to-EBITDA ratio (see table below). Spirit is required to pay letter of credit fees equal to the applicable margin for LIBOR rate revolving credit borrowings with respect to letters of credit issued under the revolving credit facility (see table below). Spirit is also required to pay to the issuing banks that issue any letters of credit, letter of credit fronting fees in respect of letters of credit at a rate equal to twenty basis points per year, and to the administrative agent thereunder customary administrative fees.

Pricing Tier
  Debt-to-EBITDA
Ratio
  Commitment
Fee
  Letter of
Credit Fee
  Eurodollar
Rate Loans
  Base Rate
Loans
 

1

  ³ 3.0:1.0     0.450 %   2.50 %   2.50 %   1.50 %

2

  <3.0:1 but ³2.25:1     0.375 %   2.25 %   2.25 %   1.25 %

3

  <2.25:1 but ³1.75:1     0.300 %   2.00 %   2.00 %   1.00 %

4

  <1.75:1     0.250 %   1.75 %   1.75 %   0.75 %

        The 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 Credit Agreement also contained the following financial covenants (as defined in the Credit Agreement):

 
   

Senior Secured Leverage Ratio

  Shall not exceed 2.75:1.0

Interest Coverage Ratio

  Shall not be less than 4.0:1.0

Total Leverage Ratio

  Shall not exceed 4.0:1.0

        To address the forward loss charges that the Company recognized in the third quarter of 2012, the Company amended the Credit Agreement effective October 26, 2012. The amendment resulted in a temporary revision of the quarterly financial covenant ratios and increased the amount of time the Company has to apply the proceeds from the insurance settlement in connection with the severe weather event against expenses resulting from the event from 12 months to 24 months before the proceeds may be considered eligible for prepayment against the senior secured credit facility.

        Additionally, to address the forward loss charges that the Company recognized in the second quarter of 2013, the Company amended the Credit Agreement effective August 2, 2013. The amendment suspended the existing financial covenant ratios until December 31, 2014. The amendment requires Spirit to meet certain minimum liquidity and borrowing base requirements while the existing financial covenant ratios are suspended. Among other things, the amendment provides for the following key changes during the suspension period:

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        In addition, pursuant to the amendment the mandatory application of proceeds from the potential sale of the Oklahoma sites to repay the borrowings under the senior secured Credit Agreement is reduced from 100% to 50%. The Company expects to be in compliance with all required covenants through December 31, 2014.

        On February 6, 2014, Moody's Investors Service placed the credit rating of Spirit AeroSystems, Inc. under review for possible downgrade. A downgrade of our credit rating could trigger a prepayment based on the excess cash flow prepayment provision under our term loan depending on our total leverage ratio.

        Senior Notes.    On November 18, 2010, we issued $300.0 million aggregate of 6.75% Senior Notes due 2020 (the "2020 Notes"), with interest payable on June 15 and December 15 of each year, beginning June 15, 2011. The 2020 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2020 Notes was $300.0 million as of December 31, 2013.

        On September 30, 2009, we issued $300.0 million of 7.50% Senior Notes due October 1, 2017 (the "2017 Notes"), with interest payable on April 1 and October 1 of each year, beginning April 1, 2010. The 2017 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2017 Notes was $296.4 million as of December 31, 2013.

        As of December 31, 2013, we were and expect to continue to be in full compliance with all covenants contained in the indentures governing the 2020 Notes and the 2017 Notes through December 31, 2014.

        Advances and Deferred Revenue on the B787 Program.    On May 12, 2011, Spirit and Boeing entered into the B787 Amendment which, among other things, established a new repayment schedule for advances made by Boeing to Spirit to be repaid against the purchase price of the first 1,000 B787 ship sets delivered to Boeing. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million due on December 15th of each year until the advance payments have been fully recovered by Boeing. The B787 Amendment also changed the treatment of advances paid by Boeing for certain non-recurring work into a nonrefundable payment in full for such work. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was approximately $600.2 million.

        Advances on the A350 Fuselage Program.    In March 2012, we signed a Memorandum of Agreement with Airbus providing for Airbus to make advance payments to us in 2012. The advance payments are offset against the recurring price of A350 XWB ship sets invoiced by Spirit, at a rate of $1.25 million per ship set. As of December 31, 2013, the amount of advance payments received under this Memorandum of Agreement and not yet repaid was approximately $243.9 million.

        Malaysian Facility Agreement.    On June 2, 2008, Spirit Malaysia entered into a Facility Agreement for a term loan facility for Ringgit Malaysia RM69.2 million (approximately USD $20.0 million equivalent) (the "Malaysia Facility"), with the Malaysian Export-Import Bank. The Malaysia Facility requires quarterly principal repayments of RM3.3 million (approximately USD $1.0 million equivalent) from September 2011

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through May 2017 and quarterly interest payments payable at a fixed interest rate of 3.50% per annum. The Malaysia Facility loan balance as of December 31, 2013 was $10.0 million.

        French Factory Capital Lease Agreement.    On July 17, 2009, the Company's indirect wholly-owned subsidiary, Spirit AeroSystems France SARL entered into a capital lease agreement for €9.0 million (approximately USD $13.1 million equivalent) with a subsidiary of BNP Paribas Bank to be used towards the construction of our aerospace component assembly plant in Saint-Nazaire, France. Lease payments are variable, subject to the three-month Euribor rate plus 2.2%. Lease payments under the agreement are due quarterly through April 2025. As of December 31, 2013 and December 31, 2012, the Company has $10.7 million and $11.0 million, respectively, of debt attributable to the capital lease transaction. We currently assemble center fuselage frame sections and wings for the new Airbus A350 XWB aircraft at the Saint-Nazaire facility.

        Nashville Design Center Capital Lease Agreement.    On September 21, 2012, the Company entered into a capital lease agreement for $2.6 million for a portion of an office building in Nashville, Tennessee to be used for design of aerospace components. Lease payments are due monthly, and are subject to yearly rate increases until the end of the lease term of 124 months. As of December 31, 2013 and December 31, 2012, the Nashville Design Center capital lease balance was $2.5 million and $2.6 million, respectively.

        As of December 31, 2013, our credit ratings were a BB rating and negative outlook by Standard and Poor's, and a Ba2 and negative outlook by Moody Investor Services.

        Our credit ratings are reviewed periodically by the rating agencies listed above. On February 6, 2014, Moody's Investors Service placed the credit ratings for Spirit AeroSystems, Inc. under review for possible downgrade.

        The credit rating agencies consider many factors when assigning their ratings, such as the global economic environment and its possible impact on our financial performance, including certain financial metrics used by the rating agencies in determining our credit ratings. Accordingly, it is possible the rating agencies could downgrade our credit ratings from their current levels. This could significantly influence the interest rate of any future debt financings.

        A debt security credit rating is not a recommendation to buy, sell or hold a security. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings. Accordingly, each rating should be considered independent of other ratings.

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        The following table summarizes our contractual cash obligations as of December 31, 2013:

Contractual Obligations(1)(2)
  2014   2015   2016   2017   2018   2019   2020 and
After
  Total  

Principal payment on term loan

  $ 5.5   $ 5.5   $ 5.5   $ 5.5   $ 5.5   $ 512.9   $   $ 540.4  

Interest on debt(3)

    20.4     20.2     20.1     19.8     19.6     6.7         106.8  

Long-term bonds

                300.0             300.0     600.0  

Interest on long-term bonds

    42.8     42.8     42.8     37.1     20.3     20.3     19.3     225.4  

Principal payment on Malaysian term loan

    2.8     2.8     2.8     1.4                 9.8  

Interest on Malaysian loan

    0.3     0.3     0.2                     0.8  

U.K. pension obligation

    0.7                             0.7  

Non-cancelable capital lease payments(4)

    0.9     0.9     1.0     1.0     1.1     1.1     9.0     15.0  

Non-cancelable operating lease payments

    20.8     17.3     10.6     5.2     4.9     4.0     10.7     73.5  

Other

    14.4     4.6     4.5     2.2     0.4     0.4     8.5     35.0  

Purchase obligations(5)

    150.5     43.5     16.1     9.5     6.4             226.0  
                                   

Total

  $ 259.1   $ 137.9   $ 103.6   $ 381.7   $ 58.2   $ 545.4   $ 347.5   $ 1,833.4  
                                   
                                   

(1)
Does not include repayment of $600.2 million of B787 advances or deferred revenue credits to Boeing, or $243.9 million of Airbus advances, which are reflected in our consolidated balance sheet as short-term and long-term liabilities. See Note 10, "Advance Payments and Deferred Revenue/Credits."

(2)
The $18.4 million of unrecognized tax benefit liability for uncertain tax positions has been excluded from this table due to uncertainty involving the ultimate settlement period. See Note 19, "Income Taxes."

(3)
Interest on our Term Loan B was calculated for all years using the three-month LIBOR yield curve as of December 31, 2013 plus applicable margin.

(4)
Treats the financing of software license purchases and direct financing of system implementation as capital leases.

(5)
Purchase obligations represent computing, tooling, and property, plant and equipment commitments as of December 31, 2013.


Off-Balance Sheet Arrangements

        Other than operating leases disclosed in the notes to our financial statements included in this Annual Report, we have not entered into any off-balance sheet arrangements as of December 31, 2013.


Tax

        We establish reserves in accordance with FASB authoritative guidance to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. We recognize the financial statement impact for tax positions only after determining that based on its technical merits the relevant tax authority would more likely than not sustain the position on audit. For tax positions meeting the "more likely than not threshold" the amount recognized in the financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The reserves are adjusted quarterly to reflect changes in facts and circumstances, such as the tax audit's progress, case law developments, and new or emerging legislation. We believe that with a $13.3 million long-term payable, the tax reserves are adequate and reflect the most probable

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outcome for all tax contingencies known at December 31, 2013. Accordingly, the tax contingency liability is included as a non-current liability in our consolidated balance sheet.

        A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

        The amount of current U.S. and state tax receivables outstanding at December 31, 2013 is $75.2 million. The Company is evaluating options regarding the monetization of this asset, which include a refund request with the Internal Revenue Service, applying the balance towards our expected U.S. and state tax liabilities in 2014, or a combination of both approaches.


Expected Backlog

        As of December 31, 2013, our expected backlog associated with large commercial aircraft, business and regional jet, and military equipment deliveries through 2019, calculated based on contractual product prices and expected delivery volumes, was approximately $41.1 billion. This is an increase of $5.8 billion from our corresponding estimate as of the end of 2012 reflecting the fact that Airbus and Boeing new orders exceeded deliveries in 2013. Backlog is calculated based on the number of units Spirit is under contract to produce on our fixed quantity contracts, and Boeing and Airbus announced backlog on our supply agreements. The number of units may be subject to cancellation or delay by the customer prior to shipment, depending on contract terms. The level of unfilled orders at any given date during the year may be materially affected by the timing of our receipt of firm orders and additional airplane orders, and the speed with which those orders are filled. Accordingly, our expected backlog as of December 31, 2013 may not necessarily represent the actual amount of deliveries or sales for any future period.


Foreign Operations

        We engage in business in various non-U.S. markets. As of December 31, 2013, we have a foreign subsidiary with one facility in the United Kingdom, which serves as a production facility, a production facility in Malaysia, a worldwide supplier base, and a repair center for the European and Middle-Eastern regions. We purchase certain components and materials that we use in our products from foreign suppliers and a portion of our products will be sold directly to foreign customers, including Airbus, or resold to foreign end-users (i.e., foreign airlines and militaries). In addition, we operate an assembly facility in Saint-Nazaire, France to receive and assemble center fuselage frame sections for the Airbus A350 XWB commercial aircraft from the facility in Kinston, North Carolina before they are shipped to Airbus.

        Spirit is party to a joint venture with Hong Kong Aircraft Engineering Company Limited (HAECO), and its subsidiary, Taikoo Aircraft Engineering Company Limited (TAECO), Cathay Pacific Airways Limited, and Cal-Asia to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. The service center is called Taikoo Spirit AeroSystems Composite Co. Ltd.

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

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

        For the twelve months ended December 31, 2013, our net revenues from direct sales to non-U.S. customers were approximately $806.1 million, or 13%, of total net revenues for the same period. For the twelve months ended December 31, 2012, our net revenues from direct sales to non-U.S. customers were approximately $785.7 million, or 15%, of total net revenues for the same period. For the twelve months ended December 31, 2011, our net revenues from direct sales to non-U.S. customers were approximately $653.1 million, or 13%, of total net revenues for the same period.


Inflation

        A majority of our sales are conducted pursuant to long-term contracts that set fixed unit prices, some of which provide for price adjustment for inflation. In addition, we typically consider expected inflation in determining proposed pricing when we bid on new work. Although we have attempted to minimize the effect of inflation on our business through these protections, sustained or higher than anticipated increases in costs of labor or materials could have a material adverse effect on our results of operations.

        Spirit's contracts with suppliers currently provide for fixed pricing in U.S. dollars. Spirit Europe's supply contracts are denominated in U.S. dollars, British pounds sterling or Euros. In some cases, our supplier arrangements contain inflationary adjustment provisions based on accepted industry indices, and we typically include an inflation component in estimating our supply costs. Although the raw material industry is experiencing a softening in demand, some specific materials have yet to reflect a corresponding reduction in price. We expect that raw material market pricing volatility will remain a factor that may impact our costs, despite protections in our existing supplier arrangements. We will continue to focus our strategic cost reduction plans on mitigating the effects of this potential cost increase on our operations.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

        As a result of our operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include fluctuations in interest rates, which impact the amount of interest we must pay on our variable rate debt.

        Other than the interest rate swaps described below, financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, the funds in which our pension assets are invested, and trade accounts receivable.

        Accounts receivable include amounts billed and currently due from customers, amounts earned but unbilled, particular estimated contract changes, claims in negotiation that are probable of recovery, and amounts retained by the customer pending arbitration. The amounts retained by the customer include $135.1 million at December 31, 2013, See Note 22, "Commitments, Contingencies and Guarantees." For the twelve months ended December 31, 2013, approximately 84% of our net revenues were from sales to Boeing. Additionally, at December 31, 2013 approximately 29% of our outstanding accounts receivable were due from Gulfstream. We continuously monitor collections and payments from customers and maintain a provision for estimated credit losses as deemed appropriate based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically not been material, we cannot guarantee that we will continue to experience the same credit loss rates in the future.

        We maintain cash and cash equivalents with various financial institutions and perform periodic evaluations of the relative credit standing of those financial institutions and from time to time we invest

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excess cash in liquid short-term money market funds. We have not experienced any losses in such accounts and believe that we are not exposed to any significant credit risk on cash and cash equivalents. Additionally, we monitor our defined benefit pension plan asset investments on a quarterly basis and we believe that we are not exposed to any significant credit risk in these investments.


Commodity Price Risks

        Some raw materials and operating supplies are subject to price and supply fluctuations caused by market dynamics. Our strategic sourcing initiatives are focused on mitigating the impact of commodity price risk. We are party to collective raw material sourcing contracts arranged through Boeing and Airbus. These collective sourcing contracts allow us to obtain raw materials at pre-negotiated rates and help insulate us from market volatility across the industry for certain specialized metallic and composite raw materials used in the aerospace industry. Although our supply agreements with Boeing and Airbus allow us to pass on certain unusual increases in component and raw material costs to Boeing and Airbus in limited situations, we may not be fully compensated for such increased costs. We also have long-term supply agreements with a number of our major parts suppliers. We, as well as our supply base, are experiencing pricing increases for metallic raw materials (primarily aluminum and titanium) despite softening market demand across the industry. Although the demand pressure has been somewhat eased for certain metallic and composite raw materials, the specialized nature of the materials used in the aerospace industry has prevented a corresponding decrease in prices. We generally do not employ forward contracts or other financial instruments to hedge commodity price risk, although we continue to review a full range of business options focused on strategic risk management for all raw material commodities.

        Any failure by our suppliers to provide acceptable raw materials, components, kits or subassemblies could adversely affect our production schedules and contract profitability. We assess qualification of suppliers and continually monitor them to control risk associated with such supply base reliance.

        To a lesser extent, we also are exposed to fluctuations in the prices of certain utilities and services, such as electricity, natural gas, chemicals and freight. We utilize a range of long-term agreements to minimize procurement expense and supply risk in these areas.


Interest Rate Risks

        After the effect of interest rate swaps, as of December 31, 2013, we had $225.0 million of total fixed rate debt and $315.4 million of variable rate debt outstanding as compared to $325.0 million of total fixed rate debt and $220.9 million of variable rate debt outstanding as of December 31, 2012. Borrowings under our Senior Secured Credit Facility bear interest that varies with LIBOR. Interest rate changes generally do not affect the market value of such debt, but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. Assuming other variables remain constant, including levels of indebtedness, a one percentage point increase in interest rates on our variable debt would have an estimated impact on pre-tax earnings and cash flows for the next twelve months of approximately $3.2 million.

        We enter into floating-to-fixed interest rate swap agreements periodically. As of December 31, 2013, the interest swap agreements had notional amounts totaling $225.0 million.

Notional Amount
  Expires   Variable
Rate
  Fixed
Rate(1)
  Effective
Fixed
Rate(2)
  Fair Value,
December 31,
2013
 

$

225   July 2014   1 Month LIBOR     1.37%   N/A   $ (1.4 )

(1)
The fixed rate represents the rate at which interest is paid by the Company pursuant to the terms of its interest rate swap agreements.

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(2)
As of December 31, 2013 the interest rate swaps are no longer effective and therefore the effective fixed rate is not applicable.

        The purpose of entering into these swaps was to reduce our exposure to variable interest rates. In accordance with FASB authoritative guidance the interest rate swaps are being accounted for as cash flow hedges and the fair value of the swap agreements is reported on the balance sheet as an asset, if positive, or a liability, if negative. The fair value of the interest rate swaps was a net liability of approximately ($1.4) million at December 31, 2013. 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 at year end 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. We do not use these contracts for speculative or trading purposes.


Foreign Exchange Risks

        As a result of the BAE Acquisition, we have sales, expenses, assets and liabilities that are denominated in British pounds sterling. Spirit Europe's functional currency is the British pound 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.

        In accordance with FASB authoritative guidance, the intercompany revolving credit facility with Spirit Europe is exposed to fluctuations in foreign exchange rates. The fluctuation in rates for 2013 resulted in a gain of $2.9 million reflected in other income/expense.

        Other than the interest rate swaps and foreign exchange contracts, we have no other derivative financial instruments.

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Item 8.    Financial Statements and Supplementary Data


SPIRIT AEROSYSTEMS HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
  Page

Consolidated Financial Statements of Spirit AeroSystems Holdings, Inc. for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011

   

Report of Independent Registered Public Accounting Firm

  83

Consolidated Statements of Operations

  85

Consolidated Statements of Comprehensive Income

  86

Consolidated Balance Sheets

  87

Consolidated Statements of Changes in Shareholders' Equity

  88

Consolidated Statements of Cash Flows

  89

Notes to Consolidated Financial Statements

  90

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Report of Independent Registered Public Accounting Firm

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

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Spirit AeroSystems Holdings, Inc. and its subsidiaries (the "Company") at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule appearing under Item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because material weaknesses in internal control over financial reporting related to the Company's contract accounting estimates for its Airbus A350, Gulfstream G280 and G650 programs existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2013 consolidated financial statements and our opinion regarding the effectiveness of the Company's internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention

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or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Kansas City, Missouri
February 19, 2014

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Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Operations

 
  For the Twelve Months Ended  
 
  December 31,
2013
  December 31,
2012
  December 31,
2011
 
 
  ($ in millions, except per share data)
 

Net Revenues

  $ 5,961.0   $ 5,397.7   $ 4,863.8  

Operating costs and expenses

                   

Cost of sales

    6,059.5     5,245.3     4,312.1  

Selling, general and administrative

    200.8     172.2     159.9  

Impact from severe weather event

    30.3     (146.2 )    

Research and development

    34.7     34.1     35.7  
               

Total operating costs and expenses

    6,325.3     5,305.4     4,507.7  

Operating (loss) income

    (364.3 )   92.3     356.1  

Interest expense and financing fee amortization

    (70.1 )   (82.9 )   (77.5 )

Interest income

    0.3     0.2     0.3  

Other income, net

    3.3     1.8     1.4  
               

(Loss) income before income taxes and equity in net income (loss) of affiliates

    (430.8 )   11.4     280.3  

Income tax (provision) benefit

    (191.1 )   24.1     (86.9 )
               

(Loss) income before equity in net income (loss) of affiliates

    (621.9 )   35.5     193.4  

Equity in net income (loss) of affiliates

    0.5     (0.7 )   (1.0 )
               

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4  
               
               

(Loss) earnings per share

                   

Basic

  $ (4.40 ) $ 0.24   $ 1.36  

Diluted

  $ (4.40 ) $ 0.24   $ 1.35  

   

See notes to consolidated financial statements

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Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Comprehensive Income

 
  For the Twelve Months Ended  
 
  December 31,
2013
  December 31,
2012
  December 31,
2011
 
 
  ($ in millions)
 

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4  

Other comprehensive income (loss), net of tax:

                   

Unrealized (loss) on interest rate swaps, net of tax effect of zero, zero, $2.4, respectively

            (4.2 )

Less: reclassification adjustment for loss realized in net income, net of tax effect of zero, $1.7, $3.1, respectively

        2.9     5.3  
               

Net gain on interest rate swaps

        2.9     1.1  

Unrealized gain (loss) on foreign currency hedge contracts, net of tax effect of zero, zero, $0.2, respectively

            0.5  

Less: reclassification adjustment for loss realized in net income, net of tax effect of zero, zero, $0.1, respectively

        0.1     0.2  

Less: reclassification adjustment for loss realized in net other assets, net of tax effect of zero, zero, $0.4, respectively

            0.7  
               

Net gain on foreign currency hedge contracts

        0.1     1.4  

Pension, SERP, and Retiree medical adjustments, net of tax effect of ($51.5), $19.5, $30.5, respectively              

    84.8     (30.5 )   (52.9 )

Unrealized foreign exchange gain on intercompany loan, net of tax effect of ($0.4), ($0.8), zero, respectively              

    1.2     2.2      

Foreign currency translation adjustments

    4.6     6.3     (0.5 )
               

Total other comprehensive income (loss)

    90.6     (19.0 )   (50.9 )
               

Total comprehensive (loss) income

  $ (530.8 ) $ 15.8   $ 141.5  
               
               

   

See notes to consolidated financial statements

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Spirit AeroSystems Holdings, Inc.

Consolidated Balance Sheets

 
  December 31,
2013
  December 31,
2012
 
 
  ($ in millions)
 

Current assets

             

Cash and cash equivalents

  $ 420.7   $ 440.7  

Accounts receivable, net

    550.8     420.7  

Inventory, net

    1,842.6     2,410.8  

Deferred tax asset-current

    26.9     57.1  

Other current assets

    103.2     26.1  
           

Total current assets

    2,944.2     3,355.4  

Property, plant and equipment, net

    1,803.3     1,698.5  

Pension assets

    252.6     78.4  

Deferred tax asset-non-current, net

        192.0  

Other assets

    107.1     91.0  
           

Total assets

  $ 5,107.2   $ 5,415.3  
           
           

Current liabilities

             

Accounts payable

  $ 753.7   $ 659.0  

Accrued expenses

    220.6     216.3  

Profit sharing

    38.4     28.3  

Current portion of long-term debt

    16.8     10.3  

Advance payments, short-term

    133.5     70.7  

Deferred revenue, short-term

    19.8     18.4  

Deferred grant income liability — current

    8.6     6.9  

Other current liabilities

    144.2     57.1  
           

Total current liabilities

    1,335.6     1,067.0  

Long-term debt

    1,150.5     1,165.9  

Advance payments, long-term

    728.9     833.6  

Pension/OPEB obligation

    69.8     75.6  

Deferred grant income liability — non-current

    108.2     116.6  

Deferred revenue and other deferred credits

    30.9     30.8  

Other liabilities

    202.3     128.9  

Equity

             

Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued          

         

Common stock, Class A par value $0.01, 200,000,000 shares authorized, 120,946,429 and 119,671,298 shares issued, respectively

    1.2     1.2  

Common stock, Class B par value $0.01, 150,000,000 shares authorized, 23,851,694 and 24,025,880 shares issued, respectively

    0.2     0.2  

Additional paid-in capital

    1,025.0     1,012.3  

Accumulated other comprehensive loss

    (54.6 )   (145.2 )

Retained earnings

    508.7     1,127.9  
           

Total shareholders' equity

    1,480.5     1,996.4  

Noncontrolling interest

    0.5     0.5  
           

Total equity

    1,481.0     1,996.9  
           

Total liabilities and equity

  $ 5,107.2   $ 5,415.3  
           
           

   

See notes to consolidated financial statements

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Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Changes in Shareholders' Equity

 
  Common Stock    
  Accumulated
Other
Comprehensive
Income (Loss)
  Retained
Earnings/
Accumulated
Deficit
   
 
 
  Additional
Paid-in
Capital
   
 
 
  Shares   Amount   Total  
 
  ($ in millions, except share data)
 

Balance — December 31, 2010

    142,098,702   $ 1.4   $ 983.6   $ (75.3 ) $ 900.7   $ 1,810.4  

Net income

                    192.4     192.4  

Employee equity awards

    909,244         12.4             12.4  

Stock forfeitures

    (221,165 )       (1.2 )           (1.2 )

Excess tax benefits from share-based payment arrangements

            1.1             1.1  

SERP shares issued

    78,862                      

Other comprehensive loss

                (50.9 )       (50.9 )
                           

Balance — December 31, 2011

    142,865,643     1.4     995.9     (126.2 )   1,093.1     1,964.2  

Net income

                    34.8     34.8  

Employee equity awards

    905,438         15.3             15.3  

Stock forfeitures

    (123,439 )                    

Excess tax benefits from share-based payment arrangements

            1.1             1.1  

SERP shares issued

    49,536                      

Other comprehensive loss

                (19.0 )       (19.0 )
                           

Balance — December 31, 2012

    143,697,178     1.4     1,012.3     (145.2 )   1,127.9     1,996.4  

Net loss

                    (621.4 )   (621.4 )

Equity in joint venture

                    2.2     2.2  

Employee equity awards

    1,979,066         12.6             12.6  

Stock forfeitures

    (668,263 )                    

Net shares settled

    (240,359 )                    

Excess tax benefits from share-based payment arrangements

            0.1             0.1  

SERP shares issued

    30,501                      

Other comprehensive income

                90.6         90.6  
                           

Balance — December 31, 2013

    144,798,123   $ 1.4   $ 1,025.0   $ (54.6 ) $ 508.7   $ 1,480.5  
                           
                           

   

See notes to consolidated financial statements

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Table of Contents


Spirit AeroSystems Holdings, Inc.

Consolidated Statements of Cash Flows

 
  Twelve Months
Ended
December 31,
2013
  Twelve Months
Ended
December 31,
2012
  Twelve Months
Ended
December 31,
2011
 
 
  ($ in millions)
 

Operating activities

                   

Net (loss) income

  $ (621.4 ) $ 34.8   $ 192.4  

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities

                   

Depreciation expense

    158.2     151.1     129.2  

Amortization expense

    3.1     5.1     4.9  

Amortization of deferred financing fees

    6.7     14.6     5.6  

Accretion of customer supply agreement

    0.6     0.2      

Bad debt expense

            1.4  

Employee stock compensation expense

    19.6     15.3     11.2  

Excess tax benefit of share-based payment arrangements

    (0.6 )   (1.2 )   (1.3 )

Loss from discontinued hedge accounting on interest rate swaps

        5.2