UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

(Mark One)

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

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

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

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

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

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (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

     As of October 29, 2010, the registrant had outstanding 107,141,824 shares of class A common stock, $0.01 par value per share and 35,371,419 shares of class B common stock, $0.01 par value per share.

 

 

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			53
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			53
Item 1A. Risk Factors			53
Item 6. Exhibits			54
Signatures			55
Supplemental Indenture
Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1.		Condensed Consolidated Financial Statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Operations
(unaudited)

		For the Three								For the Nine
		Months Ended								Months Ended
		September 30, 2010				October 1, 2009				September 30, 2010				October 1, 2009
		($ in millions, except per share data)
Net revenues		$	1,002.0			$	1,053.8			$	3,101.3			$	3,000.8
Operating costs and expenses
Cost of sales			868.5				878.3				2,689.2				2,637.2
Selling, general and administrative			38.5				30.5				115.9				103.6
Research and development			12.6				14.0				35.1				41.6
Total operating costs and expenses			919.6				922.8				2,840.2				2,782.4
Operating income			82.4				131.0				261.1				218.4
Interest expense and financing fee amortization			(12.8	)			(10.2	)			(40.6	)			(29.1	)
Interest income			—				1.6				0.2				6.2
Other income (expense), net			2.5				(0.5	)			(0.3	)			5.2
Income before income taxes and equity in net loss of affiliates			72.1				121.9				220.4				200.7
Income tax provision			(25.4	)			(34.4	)			(62.8	)			(58.8	)
Income before equity in net loss of affiliates			46.7				87.5				157.6				141.9
Equity in net loss of affiliates			(0.3	)			(0.2	)			(0.6	)			(0.2	)
Net income		$	46.4			$	87.3			$	157.0			$	141.7
Earnings per share
Basic		$	0.33			$	0.63			$	1.13			$	1.03
Diluted		$	0.33			$	0.62			$	1.11			$	1.01

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Balance Sheets
(unaudited)

		September 30,				December 31,
		2010				2009
		($ in millions)
Current assets
Cash and cash equivalents		$	66.3			$	369.0
Accounts receivable, net			290.0				160.4
Inventory, net			2,479.2				2,206.9
Deferred tax asset-current			57.2				55.8
Other current assets			12.8				60.8
Total current assets			2,905.5				2,852.9
Property, plant and equipment, net			1,391.6				1,279.3
Pension assets			188.6				171.2
Deferred tax asset-non-current			81.5				95.8
Other assets			80.7				74.6
Total assets		$	4,647.9			$	4,473.8
Current liabilities
Accounts payable		$	425.9			$	441.3
Accrued expenses			184.3				161.9
Profit sharing/deferred compensation			22.0				3.6
Current portion of long-term debt			7.9				9.1
Advance payments, short-term			182.8				237.4
Deferred revenue, short-term			73.2				107.1
Other current liabilities			20.8				21.8
Total current liabilities			916.9				982.2
Long-term debt			1,015.5				884.7
Advance payments, long-term			665.5				727.5
Deferred revenue and other deferred credits			39.7				46.0
Pension/OPEB obligation			67.6				62.6
Deferred grant income liability			135.5				129.3
Other liabilities			46.3				67.7
Shareholders’ 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, 107,120,392 and 105,064,561 shares issued, respectively			1.1				1.0
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 34,938,808 and 35,669,740 shares issued, respectively			0.3				0.4
Additional paid-in capital			978.1				949.8
Accumulated other comprehensive loss			(57.9	)			(59.7	)
Retained earnings			838.8				681.8
Total shareholders’ equity			1,760.4				1,573.3
Noncontrolling interest			0.5				0.5
Total equity			1,760.9				1,573.8
Total liabilities and equity		$	4,647.9			$	4,473.8

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows
(unaudited)

		For the Nine				For the Nine
		Months Ended				Months Ended
		September 30, 2010				October 1, 2009
		($ in millions)
Operating activities
Net income		$	157.0			$	141.7
Adjustments to reconcile net income to net cash (used in) operating activities
Depreciation expense			84.5				91.9
Amortization expense			3.5				3.1
Amortization of deferred financing fees			5.7				4.6
Accretion of long-term receivable			—				(5.8	)
Employee stock compensation expense			23.5				6.7
Excess tax benefit of share-based payment arrangements			(4.9	)			—
(Gain) loss from foreign currency transactions			4.4				(3.9	)
Deferred taxes			6.1				(20.5	)
Long-term tax benefit			(17.6	)			—
Pension and other post retirement benefits, net			(6.3	)			1.6
Grant income			(1.9	)			(1.4	)
Equity in net loss of affiliates			0.6				0.2
Changes in assets and liabilities
Accounts receivable			(130.5	)			(84.6	)
Inventory, net			(268.1	)			(319.5	)
Accounts payable and accrued liabilities			(5.7	)			117.2
Profit sharing/deferred compensation			18.4				(12.3	)
Advance payments			(116.6	)			(61.6	)
Deferred revenue and other deferred credits			(38.0	)			(54.9	)
Income taxes receivable/payable			52.5				(8.7	)
Other			(5.6	)			(5.1	)
Net cash (used in) operating activities			(239.0	)			(211.3	)
Investing activities
Purchase of property, plant and equipment			(183.0	)			(158.0	)
Long-term receivable			—				86.5
Other			(0.5	)			0.2
Net cash (used in) investing activities			(183.5	)			(71.3	)
Financing activities
Proceeds from revolving credit facility			125.0				300.0
Payments on revolving credit facility			—				(300.0	)
Proceeds from issuance of bonds			—				293.4
Principal payments of debt			(8.0	)			(5.8	)
Proceeds from government grants			—				0.7
Debt issuance and financing costs			(0.2	)			(17.2	)
Excess tax benefit of share-based payment arrangements			4.9				—
Net cash provided by financing activities			121.7				271.1
Effect of exchange rate changes on cash and cash equivalents			(1.9	)			1.7
Net (decrease) in cash and cash equivalents for the period			(302.7	)			(9.8	)
Cash and cash equivalents, beginning of period			369.0				216.5
Cash and cash equivalents, end of period		$	66.3			$	206.7
Supplemental information
Property acquired through capital leases		$	10.6			$	6.0

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

1. Organization and Basis of Interim Presentation

     Spirit AeroSystems Holdings, Inc. (“Holdings” or the “Company”) was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of The Boeing Company’s (“Boeing”) operations in Wichita, Kansas, Tulsa, Oklahoma and McAlester, Oklahoma (the “Boeing Acquisition”). Holdings provides manufacturing and design expertise in a wide range of products and services for aircraft original equipment manufacturers and operators through its subsidiary, Spirit AeroSystems, Inc. (“Spirit”). Onex Corporation (“Onex”) of Toronto, Canada maintains majority voting power of Holdings. In April 2006, Holdings acquired the aerostructures division of BAE Systems (Operations) Limited (“BAE Aerostructures”), which builds structural components for Airbus, a division of the European Aeronautic Defense and Space NV (“Airbus”) and Boeing. Prior to this acquisition, Holdings sold essentially all of its production to Boeing. Since Spirit’s incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Bombardier, Mitsubishi Aircraft Corporation, Southwest Airlines and Continental Airlines. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita, Kansas; and Subang, Malaysia. In July 2010, the Company opened its new 500,000 square-foot manufacturing facility in Kinston, North Carolina, which is designed to initially produce components for the Airbus A350 XWB (Xtra Wide-Body) aircraft. The Company also recently constructed an assembly plant for the A350 XWB aircraft in Saint-Nazaire, France, which is expected to be operational by the fourth quarter of 2010.

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

     The Company participates in two joint ventures, Spirit-Progresstech LLC (“Spirit-Progresstech”) and Taikoo Spirit AeroSystems Composite Co. Ltd. (“TSACCL”), of which Spirit’s ownership interest is 50.0% and 31.5%, respectively. Spirit-Progresstech provides aerospace engineering support services and TSACCL was formed to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region.

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

     As part of the monthly consolidation process, the functional currencies of our international subsidiaries are translated to U.S. dollars using the end-of-month translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts.

     In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. Certain reclassifications have been made to the prior year financial statements and notes to conform to the 2010 presentation. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2010.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

2. New Accounting Pronouncements

     In February 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASC) No. 2010-09, Subsequent Events (Topic 855) — Amendments to Certain Recognition and Disclosure Requirements, which stated, among other things, that filers with the SEC are not required to disclose the date through which an entity has evaluated subsequent events. The guidance was effective upon issuance and did not have a material impact on the Company’s consolidated financial statements.

     In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Instruments, which, among other things, expands disclosures on recurring fair value measurements, including activity, transfers and reconciliation of asset and liability classes, using Levels 1, 2 and 3 as defined. The guidance also clarifies existing disclosures on levels of disaggregation between such classes and input and valuation techniques used to measure recurring and nonrecurring Level 2 or Level 3 fair value measurements. This guidance was effective for the Company’s first quarter reporting of 2010, except for the requirement related to purchases, sales, issuances, and settlements in the roll forward activity of Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Adoption of FASB ASU 2010-06 did not have a material effect on the Company’s consolidated financial statements.

     In January 2010, FASB issued Accounting Standards Update No. 2010-02, Consolidation (Topic 810) — Accounting and Reporting for Decreases in Ownership of a Subsidiary — A Scope Clarification, which expands the disclosure requirements about deconsolidation of a subsidiary or derecognition of a group of assets. The guidance in this update is effective for periods beginning in the first interim or annual reporting period ending on or after December 15, 2009 and thus was effective for the Company’s first quarter reporting in 2010. Adoption of FASB ASU 2010-02 did not have a material impact on the Company’s consolidated financial statements.

     In December 2009, FASB issued Accounting Standards Update No. 2009-17, Consolidation (Topic 810) — Improvements to Financial Reporting by Enterprises with Variable Interest Entities to incorporate the changes made by FASB Statement No. 167 into the FASB Codification. The guidance in this update is effective for periods beginning after November 15, 2009 and thus has been effective since the Company’s first quarter reporting in 2010. Adoption of FASB ASU 2009-17 did not have a material impact on the Company’s consolidated financial statements.

3. Accounts Receivable

     Accounts receivable, net consists of the following:

		September 30,				December 31,
		2010				2009
Trade receivables		$	280.8			$	151.7
Other			9.2				8.8
Total			290.0				160.5
Less: allowance for doubtful accounts			—				(0.1	)
Accounts receivable, net		$	290.0			$	160.4

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

4. Inventory

     Inventories are summarized as follows:

		September 30,				December 31,
		2010				2009
Raw materials		$	234.6			$	209.1
Work-in-process			1,731.0				1,526.0
Finished goods			34.2				30.8
Product inventory			1,999.8				1,765.9
Capitalized pre-production			479.4				441.0
Total inventory, net		$	2,479.2			$	2,206.9

     Inventories are summarized by platform as follows:

		September 30,				December 31,
		2010				2009
B737		$	267.2			$	298.4
B747(1)			176.4				140.6
B767			21.5				18.5
B777			133.7				146.3
B787(2)			1,075.3				896.3
Airbus — All platforms			146.7				129.9
Gulfstream(3)			480.3				365.8
Rolls-Royce			67.7				55.5
Cessna Citation Columbus(4)			22.9				23.0
Aftermarket			40.1				29.3
Other in-process inventory related to long-term contracts and other programs(5)			47.4				103.3
Total inventory		$	2,479.2			$	2,206.9

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

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     The following is a roll forward of the capitalized pre-production included in the inventory balance at September 30, 2010:

Balance, December 31, 2009		$	441.0
Charges to costs and expenses			(9.7	)
Capitalized costs			48.1
Total capitalized pre-production, September 30, 2010		$	479.4

     At September 30, 2010, work-in-process inventory included $701.3 of deferred production costs, which is comprised of $606.3 related to the B787, $109.0 on certain other contracts for the excess of production costs over the estimated average cost per ship set, and $(14.0) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. These balances were $457.4, including $412.9 related to the B787 and $50.5 for certain other contracts, and $(6.0) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated cost per ship set for units delivered under the current production blocks, respectively, at December 31, 2009. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts will be fully recovered.

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

     The following is a roll forward of the deferred production included in the inventory balance at September 30, 2010:

Balance, December 31, 2009		$	457.4
Charges to costs and expenses			(114.7	)
Capitalized costs (1)			359.2
Exchange rate			(0.6	)
Total deferred production, September 30, 2010		$	701.3

     The following is a roll forward of the inventory obsolescence and surplus reserve included in the inventory balance at September 30, 2010:

Balance, December 31, 2009		$	15.1
Charges to costs and expenses			8.4
Write-offs, net of recoveries			(9.4	)
Exchange rate			—
Total inventory obsolescence and surplus reserve, September 30, 2010		$	14.1

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

5. Property, Plant and Equipment

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

		September 30,				December 31,
		2010				2009
Land		$	17.4			$	17.7
Buildings (including improvements)			408.8				258.1
Machinery and equipment			643.9				503.4
Tooling			509.1				488.5
Capitalized software			106.1				121.4
Construction in progress			216.4				316.3
Total			1,901.7				1,705.4
Less: accumulated depreciation			(510.1	)			(426.1	)
Property, plant and equipment, net		$	1,391.6			$	1,279.3

     In January 2010, we adopted a change in accounting estimate which extended the useful lives of certain assets. The effect of this change was a decrease in depreciation charges to inventory of $10.4 for the nine month period ended September 30, 2010, which will eventually flow through cost of sales following the process for contract accounting.

     Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $2.7 and $2.6 for the three months ended September 30, 2010 and October 1, 2009, respectively, and $8.2 and $5.1 for the nine months ended September 30, 2010 and October 1, 2009, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized $21.0 and $14.3 of repair and maintenance expense for the three months ended September 30, 2010 and October 1, 2009, respectively, and $66.1 and $58.5 for the nine months ended September 30, 2010 and October 1, 2009, respectively.

     We capitalize certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal use computer software in accordance with FASB authoritative guidance pertaining to capitalization of costs for internal-use software. Depreciation expense related to capitalized software was $4.2 and $3.9 for the three months ended September 30, 2010 and October 1, 2009, respectively, and $12.1 and $11.2 for the nine months ended September 30, 2010 and October 1, 2009, respectively.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

6. Other Assets

     Other assets are summarized as follows:

		September 30,				December 31,
		2010				2009
Intangible assets
Patents		$	2.0			$	2.0
Favorable leasehold interests			9.7				9.7
Customer relationships			27.5				28.1
Total intangible assets			39.2				39.8
Less: Accumulated amortization-patents			(0.8	)			(0.7	)
Accumulated amortization-favorable leasehold interest			(3.5	)			(3.1	)
Accumulated amortization-customer relationships			(15.4	)			(13.2	)
Intangible assets, net			19.5				22.8
Deferred financing costs, net			19.5				25.0
Fair value of derivative instruments			1.1				1.2
Goodwill — Europe			2.9				3.0
Equity in net assets of affiliates			4.3				3.9
Customer supply agreement			26.4				—
Other			7.0				18.7
Total		$	80.7			$	74.6

     Deferred financing costs are recorded net of $27.1 and $21.4 of accumulated amortization at September 30, 2010 and December 31, 2009, respectively. In 2009, the Company incurred $10.2 of additional deferred financing costs in connection with the amendment to its revolving credit facility and $7.2 of additional deferred financing costs in connection with the issuance and registration of its long-term bonds.

     The Company recognized $1.0 of amortization expense of intangibles for each of the three month periods ended September 30, 2010 and October 1, 2009, and $3.0 for each of the nine month periods ended September 30, 2010 and October 1, 2009.

     The following is a roll forward of the carrying amount of goodwill at September 30, 2010:

Balance, December 31, 2009		$	3.0
Goodwill acquired			—
Exchange rate			(0.1	)
Total goodwill, September 30, 2010		$	2.9

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

7. Advance Payments and Deferred Revenue/Credits

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

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

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

		September 30,				December 31,
		2010				2009
B737		$	38.9			$	59.8
B747			6.7				3.0
B787			807.9				924.3
Airbus — All platforms			51.7				66.8
Gulfstream			40.4				42.5
Other			15.6				21.6
Total advance payments and deferred revenue/credits		$	961.2			$	1,118.0

8. Government Grants

     As part of our site construction projects in Kinston, North Carolina and Subang, Malaysia, we have the benefit of grants related to government funding of a portion of these buildings and other specific capital assets. Due to the terms of the lease agreements, we are deemed to own the construction projects. During the construction phase of the facilities, as amounts eligible under the terms of the grants are expended, we will record that spending as property, plant and equipment (construction-in-progress) and deferred grant income liability (less the present value of any future minimum lease payments). Upon completion of the facilities, the deferred grant income will be amortized as a reduction to production cost. This amortization is based on specific terms associated with the different grants. In North Carolina, the deferred grant income related to the capital investment criteria, which represents half of the grant, will be amortized over the lives of the assets purchased to satisfy the capital investment performance criteria. The other half of the deferred grant income will be amortized over a ten-year period in a manner consistent with the job performance criteria. In Malaysia, the deferred grant income will be amortized based on the lives of the eligible assets constructed with the grant funds as there are no performance criteria. As of September 30, 2010, we recorded $135.5 within property, plant and equipment and deferred grant income liability related to the use of grant funds in North Carolina and Malaysia. Of this amount, $134.4 in property, plant and equipment represents transactions where funds have been paid directly to contractors by an agency of the Malaysian Government in the case of Malaysia, and by the escrow agent in North Carolina, so they are not reflected on the Condensed Consolidated Statements of Cash Flows.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     Deferred grant income liability, net consists of the following:

		September 30,				December 31,
		2010				2009
Beginning Balance		$	129.3			$	38.8
Grant liability recorded			8.9				89.2
Grant income recognized			(1.9	)			(1.9	)
Exchange rate			(0.8	)			3.2
Total deferred grant income liability		$	135.5			$	129.3

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

		September 30,				December 31,
		2010				2009
Beginning Balance		$	129.3			$	38.8
Amount paid by Spirit (reimbursed by third parties)			—				0.7
Amount paid by agency/escrow agent			8.9				88.5
Depreciation offset to amortization of grant			(1.5	)			(1.9	)
Exchange rate			(0.8	)			3.2
Total asset value related to deferred grant income		$	135.9			$	129.3

9. Derivative and Hedging Activities

     The Company enters into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. The Company also enters into foreign currency hedge contracts to reduce the risks associated with the changes in foreign exchange rates on sales and cost of sales denominated in currencies other than the entities’ functional currency. Any gains or losses on the hedges are included in earnings when the underlying transaction that was hedged occurs. The Company does not use these contracts for speculative or trading purposes. On the inception date, the Company designates a derivative contract as either a fair value or cash flow hedge in accordance with FASB guidance on accounting for derivatives and hedges and links the contract to either a specific asset or liability on the balance sheet, or to forecasted commitments or transactions. The Company formally documents the hedging relationship between the hedging instrument and the hedged item as well as its risk-management objective and strategy for undertaking the hedge, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on a quarterly basis, whether the derivative item is effective in offsetting changes in fair value or cash flows.

     Changes in the fair value of derivative instruments considered to be effective hedges are reported in accumulated other comprehensive income, net of tax. In the case of interest rate swaps, amounts are subsequently reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. If the actual interest rate on the fixed rate portion of debt is less than LIBOR, the monies received are recorded as an offset to interest expense. Conversely, if the actual interest rate on the fixed rate portion of debt is greater than LIBOR, then the Company pays the difference, which is recorded to interest expense. Reclassifications of the amounts related to the foreign currency hedge contracts are recorded to earnings in the same period in which the underlying transaction occurs. Any change in the fair value resulting from ineffectiveness is immediately recognized in earnings.

     The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has applied these valuation techniques as of September 30, 2010 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.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

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

     To the extent that derivative instruments do not qualify for hedge accounting treatment, the changes in fair market value of the instruments are reported in the results of operations for the current period.

     The Company enters into master netting arrangements for its derivatives to mitigate the credit risk of financial instruments.

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

     The entire asset classes of the Company, including hedges, are pledged as collateral for both the term loan and the revolving credit facility under the Company’s senior secured credit facility (see Note 11- Long-Term Debt).

Interest Rate Swaps

     As required under our senior secured credit facility (see Note 11- Long-Term Debt), we enter into floating-to-fixed interest rate swap agreements periodically. As of September 30, 2010, the interest swap agreements had notional amounts totaling $400.0.

										Effective				Fair Value,
Notional Amount		Expires		Variable Rate		Fixed Rate (1)				Fixed Rate(2)				September 30, 2010
$100		July 2011		LIBOR			4.27	%			6.02	%		$	(3.8	)
$300		July 2011		LIBOR			3.23	%			4.98	%			(8.3	)
														$	(12.1	)

     The purpose of entering into these swaps was to reduce the Company’s exposure to variable interest rates. The interest rate swaps settle on a quarterly basis when interest payments are made. These settlements occur through the maturity date. The interest rate swaps are being accounted for as cash flow hedges in accordance with FASB authoritative guidance. The fair value of the interest rate swaps was a liability (unrealized loss) of $(12.1) and $(20.3) at September 30, 2010 and December 31, 2009, respectively.

Foreign Currency Forward Contracts

     Spirit’s wholly-owned subsidiary Spirit AeroSystems (Europe) Limited (“Spirit Europe”) has certain sales, expenses, assets and liabilities that are denominated in British pounds sterling. However, certain sales of Spirit Europe’s products 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

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

pound sterling will affect our reported results of operations and the value of our assets and liabilities on our consolidated balance sheet, even if our results of operations or the value of those assets and liabilities has not changed in its original currency. These transactions could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets, liabilities and shareholders’ equity.

     We use foreign currency hedge contracts to reduce our exposure to currency exchange rate fluctuations. The objective of these contracts is to minimize the impact of currency exchange rate movements on our operating results. The hedges are being accounted for as cash flow hedges in accordance with FASB authoritative guidance. Gains and losses from these cash flow hedges are recorded to other comprehensive income until the underlying transaction for which the hedge was placed occurs and then the value in other comprehensive income is reclassified to earnings. In the second quarter of 2010, we entered into new hedging contracts to hedge the U.S. dollar revenue from certain customers. The fair value of the forward contracts was a net liability (unrealized loss) of $(1.8) as of September 30, 2010 and December 31, 2009.

Notional Amount

		September 30, 2010								December 31, 2009
						Foreign								Foreign
		USD				Currency				USD				Currency
Year		Buy/(Sell)(1)				Buy/(Sell) (1)				Buy/(Sell) (1)				Buy/(Sell)(1)
2010		$	(26.7	)		£	16.5			$	(37.8	)		£	22.8
2011			(23.3	)			14.4				(16.7	)			10.0
2012-2013			(9.0	)			5.6				(2.8	)			1.6
		$	(59.0	)		£	36.5			$	(57.3	)		£	34.4

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     The following table summarizes the Company’s fair value of outstanding derivatives at September 30, 2010 and December 31, 2009:

		Fair Values of Derivative Instruments
		Other Asset Derivatives								Other Liability Derivatives
		September 30, 2010				December 31, 2009				September 30, 2010				December 31, 2009
Derivatives designated as hedging instruments
Interest rate swaps
Current		$	—			$	—			$	12.1			$	16.9
Non-current			—				—				—				3.4
Foreign currency hedge contracts
Current			0.2				—				1.4				0.9
Non-current			0.1				—				0.4				0.6
Total derivatives designated as hedging instruments			0.3				—				13.9				21.8
Derivatives not designated as hedging instruments
Foreign currency hedge contracts
Current			0.6				0.4				0.6				0.5
Non-current			1.0				1.2				1.3				1.4
Total derivatives not designated as hedging instruments			1.6				1.6				1.9				1.9
Total derivatives		$	1.9			$	1.6			$	15.8			$	23.7

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     The impact on other comprehensive income (OCI) and earnings from cash flow hedges for the three months ended September 30, 2010 and October 1, 2009 was as follows:

																				Location of
																				Loss
										Location of										Recognized in		Amount of Loss
										Loss		Amount of Loss								Income on		Recognized in Income on
		Amount of Loss								Reclassified		Reclassified from								Derivative		Derivative (Ineffective
		Recognized in OCI, net of								from		Accumulated OCI into								(Ineffective		Portion and Amount
		tax, on Derivative								Accumulated		Income								Portion and		Excluded from
		(Effective Portion)								OCI into		(Effective Portion)								Amount		Effectiveness Testing)
Derivatives in		For the Three Months Ended								Income		For the Three Months Ended								Excluded from		For the Three Months Ended
Cash Flow Hedging		September 30,				October 1,				(Effective		September 30,				October 1,				Effectiveness		September 30,				October 1,
Relationships		2010				2009				Portion)		2010				2009				Testing)		2010				2009
Interest rate swaps		$	(0.8	)		$	(2.3	)		Interest expense		$	3.2			$	4.0			Other (income)/ expense		$	—			$	—
Foreign currency hedge contracts			1.4				(1.8	)		Sales/Revenue			0.2				—			Other (income)/ expense			—				—
Total		$	0.6			$	(4.1	)				$	3.4			$	4.0					$	—			$	—

The impact on OCI and earnings from cash flow hedges for the nine months ended September 30, 2010 and October 1, 2009 was as follows:

																				Location of
																				Loss
										Location of										Recognized in		Amount of Loss
										Loss		Amount of Loss								Income on		Recognized in Income on
		Amount of Loss								Reclassified		Reclassified from								Derivative		Derivative (Ineffective
		Recognized in OCI, net of								from		Accumulated OCI into								(Ineffective		Portion and Amount
		tax, on Derivative								Accumulated		Income								Portion and		Excluded from
		(Effective Portion)								OCI into		(Effective Portion)								Amount		Effectiveness Testing)
Derivatives in		For the Nine Months Ended								Income		For the Nine Months Ended								Excluded from		For the Nine Months Ended
Cash Flow Hedging		September 30,				October 1,				(Effective		September 30,				October 1,				Effectiveness		September 30,				October 1,
Relationships		2010				2009				Portion)		2010				2009				Testing)		2010				2009
Interest rate swaps		$	(2.9	)		$	(5.0	)		Interest expense		$	11.7			$	11.3			Other (income)/ expense		$	—			$	—
Foreign currency hedge contracts			(1.1	)			(1.8	)		Sales/Revenue			1.0				3.2			Other (income)/ expense			—				(0.1	)
Total		$	(4.0	)		$	(6.8	)				$	12.7			$	14.5					$	—			$	(0.1	)

     The impact on earnings from foreign currency hedge contracts that do not qualify as cash flow hedges was not material for the three and nine months ended September 30, 2010 and October 1, 2009.

     Gains and losses accumulated in OCI for interest rate swaps are reclassified into earnings as each interest rate period is reset. During the next twelve months, the Company estimates that a loss of $(7.7) will be reclassified from OCI, net of tax, as a charge to earnings from interest rate swaps. Interest rate swaps are placed for a period of time not to exceed the maturity of the Company’s senior secured term loan. None of the gains or losses reclassified to earnings were attributable to the discontinuance of cash flow hedges.

     Gains and losses accumulated in OCI for foreign currency hedge contracts are reclassified into earnings as the underlying transactions for which the contracts were entered into are realized. During the next twelve months, the Company estimates that a loss of $(1.2) will be reclassified from OCI, net of tax. None of the gains or losses reclassified to earnings are attributable to the discontinuance of cash flow hedges.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

10. Fair Value Measurements

     FASB’s authoritative guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance discloses three levels of inputs that may be used to measure fair value:

Level 1		Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.
Level 2		Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of our interest rate swaps and foreign currency hedge contracts.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

		Fair Value Measurements
														At September 30, 2010
														Using
														Quoted Prices in				Significant
		September 30, 2010												Active Markets				Other				Significant
		Total Carrying				Assets				Liabilities				for Identical				Observable				Unobservable
		Amount in				Measured at				Measured at				Assets				Inputs				Inputs
Description		Balance Sheet				Fair Value				Fair Value				(Level 1)				(Level 2)				(Level 3)
Money Market Fund		$	39.1			$	39.1			$	—			$	39.1			$	—			$	—
Interest Rate Swaps		$	(12.1	)		$	—			$	(12.1	)		$	—			$	(12.1	)		$	—
Foreign Currency Hedge Contracts		$	(1.8	)		$	1.9			$	(3.7	)		$	—			$	(1.8	)		$	—

		Fair Value Measurements
														At December 31, 2009
														Using
														Quoted Prices in				Significant
		December 31, 2009												Active Markets				Other				Significant
		Total Carrying				Assets				Liabilities				for Identical				Observable				Unobservable
		Amount in				Measured at				Measured at				Assets				Inputs				Inputs
Description		Balance Sheet				Fair Value				Fair Value				(Level 1)				(Level 2)				(Level 3)
Money Market Fund		$	240.0			$	240.0			$	—			$	240.0			$	—			$	—
Interest Rate Swaps		$	(20.3	)		$	—			$	(20.3	)		$	—			$	(20.3	)		$	—
Foreign Currency Hedge Contracts		$	(1.8	)		$	1.6			$	(3.4	)		$	—			$	(1.8	)		$	—

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

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     The Company’s long-term debt consists of obligations with variable interest rates and senior unsecured notes. The estimated fair value of our debt obligations is based on the quoted market prices for such obligations. The following table presents the carrying amount and estimated fair value of long-term debt in accordance with FASB authoritative guidance on fair value measurements related to disclosures of financial instruments:

		September 30, 2010								December 31, 2009
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Senior secured term loan (including current portion)		$	567.6			$	554.5			$	572.0			$	549.9
Senior unsecured notes			294.0				312.6				293.6				289.5
Malaysian loan			18.1				17.8				16.3				16.1
		$	879.7			$	884.9			$	881.9			$	855.5

11. Long-Term Debt

 Credit Agreement

     In connection with the Boeing Acquisition, the Company executed an $875.0 credit agreement that consisted of a $700.0 senior secured term loan used to fund the acquisition and pay all related fees and expenses associated with the acquisition and the credit agreement, and a $175.0 senior secured revolving credit facility. In March 2008, the revolving credit facility was increased to $650.0. In June 2009, the Company entered into amendment No. 2 to its senior secured credit facility, whereby borrowing capacity under the revolving credit facility was increased from $650.0 to $729.0. The maturity date with respect to $408.8 of the revolver was extended to June 30, 2012. The remaining $320.2 of the revolver matured June 30, 2010. Commitment fees associated with the portion of the revolver that was extended to June 30, 2012 increased from a rate of 50 basis points on the undrawn amount to 75 basis points. Commitment fees associated with the undrawn portion of the revolver that terminated on June 30, 2010 were 50 basis points. The applicable margin payable on revolving loans with respect to which the underlying revolving credit commitment has been extended to June 30, 2012 (“Extending Revolving Loans”) has been increased. The applicable margin continues to be determined in accordance with a performance grid based on total leverage ratio and, for Extending Revolving Loans, ranges from 3.00% to 4.00% per annum in the case of LIBOR advances and from 2.00% to 3.00% per annum in the case of alternate base rate advances. At September 30, 2010, the Company’s total leverage ratio was 2.06:1.00 resulting in margins of 3.0% per annum on LIBOR borrowings on Extending Revolving Loans and margins of 2.0% per annum on alternative base rate borrowings on Extending Revolving Loans. The entire asset classes of the Company, including inventory and property, plant and equipment, are pledged as collateral for both the term loan and the revolving credit facility. As of September 30, 2010 and December 31, 2009, the outstanding balance of the term loan was $567.6 and $572.0, respectively. Amounts outstanding under the revolving credit facility were $125.0 at September 30, 2010 and zero at December 31, 2009. As of September 30, 2010, there were $19.0 of letters of credit outstanding.

     The amended credit agreement contains customary affirmative and negative covenants, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or transfers of assets, payments of dividends, transactions with affiliates, change in control and other matters customarily restricted in such agreements. The amended credit agreement contains a revised Covenant Leverage Ratio and a new Interest Coverage Ratio. The Covenant Leverage Ratio (as defined in the credit agreement) financial covenant was modified to provide that the maximum Covenant Leverage Ratio as of the last day of any fiscal quarter through the final maturity date of the credit agreement shall not exceed 2.5:1 through maturity. The new Interest Coverage Ratio (as defined in the credit agreement) financial covenant was added to provide that the Interest Coverage Ratio as of the last day of any fiscal quarter through the final maturity date of the credit agreement shall not be less than 4:1. The Financial Covenant ratios are calculated each quarter in accordance with the credit agreement. Failure to meet these financial covenants would be an event of default under the senior secured credit facility. As of September 30, 2010, we were and expect to continue to be in full compliance with all covenants contained within our credit agreement.

     On June 30, 2010, the capacity of the revolving credit facility was reduced to $408.8, and availability was further reduced by $19.0 of outstanding letters of credit as of September 30, 2010.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     On October 15, 2010, Spirit entered into Amendment No. 3 to its Second Amended and Restated Credit Agreement, dated as of November 27, 2006. As a result of the amendment, among other things, the revolving credit commitment was increased from $408.8 to $650.0 and the maturity date, with respect to $630.0 of the revolver, was extended to September 30, 2014. The maturity date for the remaining $20.0 of the revolver was subsequently extended to September 30, 2014 as a result of an assignment and acceptance agreement, dated November 1, 2010, which transferred the remaining $20.0 revolver commitment to a new revolver lender. The credit agreement amendment also extended the maturity date for $437.4 of the outstanding term loan to September 30, 2016. The maturity date for the $130.2 balance of the outstanding term loan remains at September 30, 2013. See Note 21- Subsequent Events.

 Long-Term Bond Debt

     On September 30, 2009, Spirit issued $300.0 of 7¹/2% Senior Notes due October 1, 2017 (the “Notes”), with interest payable semi-annually, in cash, in arrears on April 1 and October 1 of each year, beginning April 1, 2010. Prior to October 1, 2012, Spirit may redeem up to 35% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings at a redemption price of 107.5% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the redemption date. At any time prior to October 1, 2013, Spirit may redeem the Notes, in whole or in part, at a redemption price ratio equal to 100% of the principal amount of the Notes redeemed, plus a make-whole premium, plus any accrued and unpaid interest and additional interest, if any, to the redemption date. Spirit may redeem the Notes at its option, in whole or in part, at any time on or after October 1 of the years set forth below, upon not less than 30 nor more than 60 days’ notice at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth below, plus any accrued and unpaid interest and additional interest, if any, to the redemption date, if redeemed during the 12-month period beginning October 1 of the years indicated below.

Year		Price
2013			103.750	%
2014			101.875	%
2015 and thereafter			100.000	%

     If a change of control of Spirit occurs, each holder of the Notes shall have the right to require that Spirit repurchase all or a portion of such holder’s Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.

     The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Holdings and Spirit’s existing and future domestic subsidiaries that guarantee Spirit’s obligations under Spirit’s senior secured credit facility. As of September 30, 2010 and December 31, 2009, the outstanding balance of the Notes was $294.0 and $293.6, respectively.

     The Notes are Spirit’s senior unsecured obligations and rank equal in right of payment with all of Spirit’s and the guarantors’ other existing and future senior indebtedness. The Notes are senior in right of payment to all of Spirit’s and the guarantors’ existing and future indebtedness that is by its terms expressly subordinated to the Notes and the guarantees. The Notes are effectively subordinated in right of payment to all of Spirit’s and the guarantors’ secured indebtedness to the extent of the value of the assets securing such indebtedness, including obligations under Spirit’s senior secured credit facility, which is secured by substantially all of the assets of Spirit and the guarantors.

     The Indenture contains covenants that limit Spirit’s, Holdings’ and certain of Spirit’s subsidiaries’ ability, subject to certain exceptions and qualifications, to (i) incur additional debt; (ii) pay dividends, redeem stock or make other distributions, (iii) repurchase equity securities, prepay subordinated debt or make certain investments, (iv) make other restricted payments and investments, (v) issue certain disqualified stock and preferred stock, (vi) create liens without granting equal and ratable liens to the holders of the Notes, (vii) enter into sale and leaseback transactions, (viii) merge, consolidate or transfer or dispose of substantially all of their assets, (ix) enter into certain types of transactions with affiliates and (x) sell assets. These covenants are subject to a number of qualifications and limitations. In addition, the Indenture limits Spirit’s, Holdings’ and the guarantor subsidiaries’ ability to engage in businesses other than businesses in which such companies are engaged on the date of issuance of the Notes and related businesses.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     In addition, the Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among other things: failure to make payments on the Notes when due, failure to comply with covenants under the Indenture, failure to pay certain other indebtedness or acceleration of maturity of certain other indebtedness, failure to satisfy or discharge certain final judgments and occurrence of certain bankruptcy events. If an event of default occurs, the trustee or holders of at least 25% of the aggregate principal amount of the then outstanding Notes may, among other things, declare the entire outstanding balance of principal and interest on all outstanding Notes to be immediately due and payable. If an event of default involving certain bankruptcy events occurs, payment of principal and interest on the Notes will be accelerated without the necessity of notice or any other action on the part of any person.

 Malaysian Term Loan

     On June 2, 2008, the Company’s wholly-owned subsidiary, Spirit AeroSystems Malaysia SDN BHD (“Spirit Malaysia”) entered into a Facility Agreement (“Malaysia Facility Agreement”) for a term loan facility of Ringgit Malaysia (RM) 69.2 (approximately USD $20.0) (the “Malaysia Facility”) with EXIM Bank, to be used towards partial financing of plant and equipment (including the acquisition of production equipment), materials, inventory and administrative costs associated with the establishment of an aerospace-related composite component assembly plant, plus potential additional work packages in Malaysia at the Malaysia International Aerospace Center in Subang, Selangor, Malaysia (the “Project”). Funds for the Project were available on a drawdown basis over a twenty-four month period from the date of the Malaysia Facility Agreement. The indebtedness repayment requires quarterly principal installments of RM 3.3 (approximately $1.0) from September 2011 through May 2017, or until the entire loan principal has been repaid. Outstanding amounts drawn under the Malaysia Facility are subject to a fixed interest rate of 3.5% per annum, payable quarterly. As of September 30, 2010, the Company had drawn RM 55.8 of the term loan.

 France Factory

     On July 17, 2009, the Company’s indirect wholly-owned subsidiary, Spirit AeroSystems France SARL (“Spirit France”) entered into a capital lease agreement for €9.0 (approximately $13.1) with BNP Paribas Bank (“BNP”) to be used towards the construction of an aerospace-related component assembly plant in Saint-Nazaire, France (the “Saint-Nazaire Project”). The Company will act as BNP’s construction agent during the construction phase of the Saint-Nazaire Project and lease payments will begin upon completion of construction, which is expected during the fourth quarter of 2010.

     The capital lease repayment is variable based on the three-month Euribor rate plus 2.2% and is paid quarterly. Payments are expected to be approximately €0.2 (approximately $0.3) quarterly beginning July 2010 through April 2025 with a residual amount of €0.9 (approximately $1.3) to be paid at the conclusion of the capital lease agreement.

     Outstanding amounts expended by BNP under the capital lease agreement are capitalized as construction-in-progress on the Company’s books with a corresponding amount of construction debt. As of September 30, 2010, the Company has recorded $12.7 in construction debt.

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

		September 30,				December 31,
		2010				2009
Senior secured debt (short and long-term)		$	567.6			$	572.0
Revolving credit facility			125.0				—
Long-term bond debt			294.0				293.6
Malaysian term loan			18.1				16.3
Present value of capital lease obligations			17.6				10.3
Other			1.1				1.6
Total		$	1,023.4			$	893.8

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

12. Pension and Other Post-Retirement Benefits

		Defined Benefit Plans
		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,				October 1,				September 30,				October 1,
Components of Net Periodic Pension Income		2010				2009				2010				2009
Service cost		$	1.6			$	1.6			$	4.7			$	4.5
Interest cost			10.4				9.8				31.2				29.2
Expected return on plan assets			(15.9	)			(14.1	)			(47.8	)			(41.9	)
Amortization of prior service cost			—				—				—				—
Amortization of net (gain)/loss			(0.1	)			2.1				(0.2	)			6.2
Net periodic pension income		$	(4.0	)		$	(0.6	)		$	(12.1	)		$	(2.0	)

		Other Benefits
		For the Three								For the Nine
		Months Ended								Months Ended
		September 30,				October 1,				September 30,				October 1,
Components of Net Periodic Benefit Cost		2010				2009				2010				2009
Service cost		$	0.7			$	0.5			$	2.2			$	1.5
Interest cost			1.0				0.7				2.9				2.1
Expected return on plan assets			—				—				—				—
Amortization of prior service cost			—				—				—				—
Amortization of net loss			0.3				—				0.7				—
Net periodic benefit cost		$	2.0			$	1.2			$	5.8			$	3.6

Employer Contributions

     We expect to contribute zero dollars to the U.S. qualified pension plan and less than $0.3 to both the Supplemental Executive Retirement Plan (SERP) and post-retirement medical plans in 2010. Our projected contributions to the U.K. pension plan for 2010 are $7.3, of which $5.6 was contributed by the end of the third quarter of 2010. We anticipate contributing the additional $1.7 to the U.K. pension plan during the remainder of 2010. The entire amount contributed and the projected contributions can vary based on exchange rate fluctuations.

13. Stock Compensation

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

     For the three months ended September 30, 2010, the Company recognized a total of $1.9 of stock compensation expense, net of forfeitures, as compared to $0.7 of stock compensation expense, net of forfeitures, recognized for the three months ended October 1, 2009. Of the total $1.9 of stock compensation expense recorded for the three months ended September 30, 2010, $0.3 was charged directly to cost of sales,

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

$1.5 was recorded as expense in selling, general and administrative expense, and the remaining $0.1 was capitalized in inventory and is recognized through cost of sales consistent with the accounting methods we follow in accordance with FASB authoritative guidance related to revenue recognition for construction-type and production-type contracts. Of the $0.7 of stock compensation expense recorded for the three months ended October 1, 2009, $0.6 was recorded as expense in selling, general and administrative expense while the remaining $0.1 was capitalized in inventory in accordance with the guidance.

     For the nine months ended September 30, 2010, the Company recognized a total of $23.5 of stock compensation expense, net of forfeitures, as compared to $6.7 of stock compensation expense, net of forfeitures, recognized for the nine months ended October 1, 2009. Of the total $23.5 of stock compensation expense recorded for the nine months ended September 30, 2010, $17.6 was charged directly to cost of sales, $5.6 was recorded as expense in selling, general and administrative expense, and the remaining $0.3 was capitalized in inventory and is recognized through cost of sales consistent with the accounting methods we follow in accordance with FASB authoritative guidance related to revenue recognition for construction-type and production-type contracts. Of the $6.7 of stock compensation expense recorded for the nine months ended October 1, 2009, $6.4 was recorded as expense in selling, general and administrative expense while the remaining $0.3 was capitalized in inventory in accordance with the guidance.

     Between June and July 2010, 862,650 shares of Class A common stock with a value of $17.6 were granted to members of the International Association of Machinists (IAM) union under the new ten-year labor contract as part of the Company’s Long-Term Incentive Plan. The granted shares immediately vested and the value was charged directly to cost of sales.

     Due to the occurrence during the third quarter of 2010 of the five-year anniversaries of the Executive Incentive Plan grant dates for certain participants in the plan, those participants acquired an interest in the remaining 20% of the shares granted to them under the plan. The total number of additional shares in which an interest was acquired in the third quarter of 2010 was 556,211. The participants have a non-forfeitable interest in those shares; however, as per the plan document, the shares remain restricted until the earlier of a liquidity event or June 16, 2015. Participants do not have the unrestricted rights of stockholders as long as the shares remain restricted.

14. Income Taxes

     The process for calculating our income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total net deferred tax assets as of September 30, 2010 and December 31, 2009 were $127.7 and $136.0, respectively.

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

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

     The 28.5% effective tax rate for the nine months ended September 30, 2010 differs from the 29.3% effective tax rate for the same period in 2009 primarily due to settling the 2005 and 2006 U.S. Federal examination, partially offset by the U.S. Research Tax Credit (“Research Credit”) expiring on December 31, 2009.

     The Company expects no material change in its recorded unrecognized tax benefit liability in the next 12 months. We are not currently under examination in any tax jurisdictions.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

15. Equity

  Earnings per Share Calculation

     Basic earnings per share represents the income available to common shareholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted earnings per share represents the income available to common shareholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period.

     Subject to preferences that may apply to shares of preferred stock outstanding at the time, holders of the Company’s outstanding common stock are entitled to any dividend declared by the Board of Directors out of funds legally available for this purpose. No dividend may be declared on the class A or class B common stock unless at the same time an equal dividend is paid on every share of class A and class B common stock. Dividends paid in shares of the Company’s common stock must be paid, with respect to a particular class of common stock, in shares of that class. The Company does not intend to pay cash dividends on its common stock. In addition, the terms of the Company’s current financing agreements preclude it from paying any cash dividends on its common stock.

     In June 2008, the FASB issued authoritative guidance determining whether instruments granted in shared-based payment transactions are participating securities. Under the 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. The two-class method is an earnings allocation formula that treats a participating security as having rights to undistributed earnings that would otherwise have been available to common shareholders. The Company’s service-based restricted stock awards contain non-forfeitable rights to dividends and are considered participating securities. Upon adoption of this standard, the service-based restricted stock awards were included in the calculation of earnings per share using the two-class method for the three and nine month periods ended September 30, 2010 and October 1, 2009.

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

		For the Three Months Ended
		September 30, 2010												October 1, 2009
										Per Share												Per Share
		Income				Shares				Amount				Income				Shares				Amount
		(in millions)												(in millions)
Basic EPS
Income available to common shareholders		$	45.6				138.3			$	0.33			$	86.5				137.2			$	0.63
Income allocated to participating securities			0.8				2.3								0.8				1.4
Net income		$	46.4											$	87.3
Diluted potential common shares							0.9												1.6
Diluted EPS
Net income		$	46.4				141.5			$	0.33			$	87.3				140.2			$	0.62

		For the Nine Months Ended
		September 30, 2010												October 1, 2009
										Per Share												Per Share
		Income				Shares				Amount				Income				Shares				Amount
		(in millions)												(in millions)
Basic EPS
Income available to common shareholders		$	155.0				137.7			$	1.13			$	140.7				137.1			$	1.03
Income allocated to participating securities			2.0				1.8								1.0				1.1
Net income		$	157.0											$	141.7
Diluted potential common shares							1.4												1.8
Diluted EPS
Net income		$	157.0				140.9			$	1.11			$	141.7				140.0			$	1.01

     The balance of outstanding common shares presented in the consolidated statement of shareholders’ equity was 142.1 million and 141.0 million at September 30, 2010 and October 1, 2009, respectively. Included in the outstanding common shares were 2.9 million and 3.6 million of issued but unvested shares at September 30, 2010 and October 1, 2009, respectively, which are excluded from the basic EPS calculation.

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

     Comprehensive Income

     Components of comprehensive income, net of tax, consist of the following:

		For the Three Months Ended
		September 30,				October 1,
		2010				2009
Net income		$	46.4			$	87.3
Other Comprehensive Income, net of tax
Unrealized gain (loss) on investments
Unrealized gain (loss) on interest rate swaps, net of tax (1)			(0.8	)			(2.3	)
Pension, SERP, and Retiree Medical adjustments, net of tax (2)			0.2				(1.2	)
Unrealized gain (loss) on foreign currency forward contracts, net of tax (3)			1.4				(1.8	)
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax (4)			2.1				2.5
Foreign currency translation adjustments			8.2				(3.7	)
Total Other Comprehensive Income		$	57.5			$	80.8

Spirit AeroSystems Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)
($, €, £, and RM in millions other than per share amounts)

		For the Nine Months Ended
		September 30,				October 1,
		2010				2009
Net income		$	157.0			$	141.7
Other Comprehensive Income, net of tax
Unrealized gain (loss) on investments
Unrealized gain (loss) on interest rate swaps, net of tax (1)			(2.9	)			(5.0	)
Pension, SERP, and Retiree Medical adjustments, net of tax (2)			0.3				(3.7	)
Unrealized gain (loss) on foreign currency forward contracts, net of tax (3)			(1.1	)			(1.8	)
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax (4)			8.0				9.3
Foreign currency translation adjustments			(2.5	)			11.3
Total Other Comprehensive Income		$	158.8			$	151.8

Noncontrolling Interest

     Noncontrolling interest at September 30, 2010 remained unchanged from the prior year at $0.5.