Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Treasury Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Total
|
|
($ in millions, except share data)
|
Balance — December 31, 2016
|
121,642,556
|
|
|
$
|
1.2
|
|
|
$
|
1,078.9
|
|
|
$
|
(1,078.8
|
)
|
|
$
|
(186.9
|
)
|
|
$
|
2,113.9
|
|
|
$
|
1,928.3
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
354.9
|
|
|
354.9
|
|
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46.4
|
)
|
|
(46.4
|
)
|
Employee equity awards
|
667,845
|
|
|
—
|
|
|
22.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22.1
|
|
Stock forfeitures
|
(92,482
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net shares settled
|
(250,066
|
)
|
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
SERP shares issued
|
11,369
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Treasury shares
|
(7,531,617
|
)
|
|
(0.1
|
)
|
|
0.1
|
|
|
(502.1
|
)
|
|
—
|
|
|
—
|
|
|
(502.1
|
)
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58.4
|
|
|
—
|
|
|
58.4
|
|
Balance — December 31, 2017
|
114,447,605
|
|
|
$
|
1.1
|
|
|
$
|
1,086.9
|
|
|
$
|
(1,580.9
|
)
|
|
$
|
(128.5
|
)
|
|
$
|
2,422.4
|
|
|
$
|
1,801.0
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
617.0
|
|
|
617.0
|
|
Adoption of ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(277.0
|
)
|
|
(277.0
|
)
|
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(49.2
|
)
|
|
(49.2
|
)
|
Employee equity awards
|
466,719
|
|
|
—
|
|
|
27.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27.4
|
|
Stock forfeitures
|
(47,962
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net shares settled
|
(177,812
|
)
|
|
—
|
|
|
(15.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15.6
|
)
|
ESPP shares issued
|
24,996
|
|
|
—
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
Treasury shares
|
(9,251,729
|
)
|
|
—
|
|
|
0.1
|
|
|
(800.1
|
)
|
|
—
|
|
|
—
|
|
|
(800.0
|
)
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68.1
|
)
|
|
—
|
|
|
(68.1
|
)
|
Balance — December 31, 2018
|
105,461,817
|
|
|
$
|
1.1
|
|
|
$
|
1,100.9
|
|
|
$
|
(2,381.0
|
)
|
|
$
|
(196.6
|
)
|
|
$
|
2,713.2
|
|
|
$
|
1,237.6
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
530.1
|
|
|
530.1
|
|
Adoption of ASC 2018-02
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.3
|
)
|
|
8.3
|
|
|
—
|
|
Dividends declared
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(50.3
|
)
|
|
(50.3
|
)
|
Employee equity awards
|
448,594
|
|
|
$
|
—
|
|
|
$
|
34.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
34.4
|
|
Stock forfeitures
|
(125,055
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
Net shares settled
|
(137,500
|
)
|
|
$
|
—
|
|
|
$
|
(12.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(12.9
|
)
|
ESPP shares issued
|
32,341
|
|
|
$
|
—
|
|
|
$
|
2.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2.6
|
|
SERP shares issued
|
6,214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
Treasury shares
|
(804,032
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(75.8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(75.8
|
)
|
Other comprehensive income
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
95.7
|
|
|
$
|
—
|
|
|
95.7
|
|
Balance — December 31, 2019
|
104,882,379
|
|
|
$
|
1.1
|
|
|
$
|
1,125.0
|
|
|
$
|
(2,456.8
|
)
|
|
$
|
(109.2
|
)
|
|
$
|
3,201.3
|
|
|
$
|
1,761.4
|
|
See notes to consolidated financial statements
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Cash Flows
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|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|
($ in millions)
|
Operating activities
|
|
|
|
|
|
Net income
|
$
|
530.1
|
|
|
$
|
617.0
|
|
|
$
|
354.9
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
Depreciation expense
|
251.6
|
|
|
230.6
|
|
|
214.1
|
|
Amortization expense
|
0.1
|
|
|
0.4
|
|
|
0.2
|
|
Amortization of deferred financing fees
|
3.5
|
|
|
17.9
|
|
|
3.4
|
|
Accretion of customer supply agreement
|
4.3
|
|
|
4.1
|
|
|
2.6
|
|
Employee stock compensation expense
|
36.1
|
|
|
27.4
|
|
|
22.1
|
|
Loss (gain) from derivative instruments
|
8.1
|
|
|
(7.2
|
)
|
|
(0.9
|
)
|
Loss (gain) from foreign currency transactions
|
1.6
|
|
|
(0.3
|
)
|
|
(8.1
|
)
|
Loss on impairment and disposition of assets
|
4.9
|
|
|
1.8
|
|
|
9.5
|
|
Deferred taxes
|
86.1
|
|
|
(38.0
|
)
|
|
52.4
|
|
Pension and other post-retirement benefits, net
|
(20.0
|
)
|
|
(33.4
|
)
|
|
(34.7
|
)
|
Grant liability amortization
|
(16.2
|
)
|
|
(21.6
|
)
|
|
(19.0
|
)
|
Equity in net income of affiliates
|
0.2
|
|
|
(0.6
|
)
|
|
(0.3
|
)
|
Forward loss provision
|
40.7
|
|
|
(170.9
|
)
|
|
—
|
|
Changes in assets and liabilities
|
|
|
|
|
|
Accounts receivable, net
|
12.8
|
|
|
(47.9
|
)
|
|
(48.5
|
)
|
Inventory, net
|
(95.4
|
)
|
|
(61.3
|
)
|
|
319.6
|
|
Contract assets
|
(5.2
|
)
|
|
(8.5
|
)
|
|
—
|
|
Accounts payable and accrued liabilities
|
34.6
|
|
|
244.5
|
|
|
160.3
|
|
Profit sharing/deferred compensation
|
16.0
|
|
|
(40.9
|
)
|
|
7.6
|
|
Advance payments
|
120.8
|
|
|
(98.3
|
)
|
|
(209.6
|
)
|
Income taxes receivable/payable
|
(59.6
|
)
|
|
(28.4
|
)
|
|
25.7
|
|
Contract liabilities
|
(13.0
|
)
|
|
208.3
|
|
|
—
|
|
Deferred revenue and other deferred credits
|
6.2
|
|
|
16.9
|
|
|
(231.2
|
)
|
Other
|
(25.6
|
)
|
|
(41.7
|
)
|
|
(46.4
|
)
|
Net cash provided by operating activities
|
922.7
|
|
|
769.9
|
|
|
573.7
|
|
Investing activities
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(232.2
|
)
|
|
(271.2
|
)
|
|
(273.1
|
)
|
Proceeds from sale of assets
|
0.2
|
|
|
3.4
|
|
|
0.4
|
|
Equity in net assets of affiliates
|
(7.9
|
)
|
|
—
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Net cash used in investing activities
|
(239.9
|
)
|
|
(267.8
|
)
|
|
(272.8
|
)
|
Financing activities
|
|
|
|
|
|
Proceeds from issuance of debt
|
250.0
|
|
|
1,300.0
|
|
|
—
|
|
Proceeds from revolving credit facility
|
900.0
|
|
|
—
|
|
|
—
|
|
Principal payments of debt
|
(13.4
|
)
|
|
(6.7
|
)
|
|
(2.8
|
)
|
Payments on term loan
|
(16.6
|
)
|
|
(256.3
|
)
|
|
(25.0
|
)
|
Payments on revolving credit facility
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
Payments on bonds
|
—
|
|
|
(300.0
|
)
|
|
—
|
|
Taxes paid related to net share settlement awards
|
(12.9
|
)
|
|
(15.6
|
)
|
|
(14.2
|
)
|
Proceeds from issuance of ESPP stock
|
2.6
|
|
|
2.1
|
|
|
—
|
|
Debt issuance and financing costs
|
—
|
|
|
(23.2
|
)
|
|
(0.9
|
)
|
Proceeds from financing under the New Markets Tax Credit Program
|
—
|
|
|
—
|
|
|
7.6
|
|
Purchase of treasury stock
|
(75.8
|
)
|
|
(805.8
|
)
|
|
(496.3
|
)
|
Dividends paid
|
(50.4
|
)
|
|
(48.0
|
)
|
|
(47.1
|
)
|
Other
|
0.9
|
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
884.4
|
|
|
(153.5
|
)
|
|
(578.7
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
5.9
|
|
|
—
|
|
|
5.6
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period
|
1,573.1
|
|
|
348.6
|
|
|
(272.2
|
)
|
Cash, cash equivalents, and restricted cash, beginning of period
|
794.1
|
|
|
445.5
|
|
|
717.7
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
2,367.2
|
|
|
$
|
794.1
|
|
|
$
|
445.5
|
|
Supplemental information
|
|
|
|
|
|
Interest paid
|
$
|
93.2
|
|
|
$
|
70.4
|
|
|
$
|
43.6
|
|
Income taxes paid
|
$
|
105.0
|
|
|
$
|
202.3
|
|
|
$
|
101.9
|
|
Property acquired through finance leases
|
$
|
120.3
|
|
|
$
|
26.8
|
|
|
$
|
29.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
|
For the Twelve Months Ended
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|
($ in millions)
|
Cash and cash equivalents, beginning of the period
|
$
|
773.6
|
|
|
$
|
423.3
|
|
|
$
|
697.7
|
|
Restricted cash, short-term, beginning of the period
|
0.3
|
|
|
2.2
|
|
|
—
|
|
Restricted cash, long-term, beginning of the period
|
20.2
|
|
|
20.0
|
|
|
20.0
|
|
Cash, cash equivalents, and restricted cash, beginning of the period
|
$
|
794.1
|
|
|
$
|
445.5
|
|
|
$
|
717.7
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period
|
$
|
2,350.5
|
|
|
$
|
773.6
|
|
|
$
|
423.3
|
|
Restricted cash, short-term, end of the period
|
0.3
|
|
|
0.3
|
|
|
2.2
|
|
Restricted cash, long-term, end of the period
|
16.4
|
|
|
20.2
|
|
|
20.0
|
|
Cash, cash equivalents, and restricted cash, end of the period
|
$
|
2,367.2
|
|
|
$
|
794.1
|
|
|
$
|
445.5
|
|
See notes to consolidated financial statements
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements
($, €, and RM in millions other than per share amounts)
1. Nature of Business
Spirit AeroSystems Holdings, Inc. (“Holdings” or the “Company”) provides manufacturing and design expertise in a wide range of fuselage, propulsion, and wing products and services for aircraft original equipment manufacturers (“OEM”) and operators through its subsidiaries, including Spirit AeroSystems, Inc. (“Spirit”). The Company's headquarters are in Wichita, Kansas, with manufacturing and assembly facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita, Kansas; Kinston, North Carolina; Subang, Malaysia; Saint-Nazaire, France; and San Antonio, Texas.
2. Adoption of New Accounting Standards
Adoption of ASU 2016-02
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update requires recognition of lease assets and lease liabilities on the balance sheet of lessees. ASU 2016-02 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2018. The Company adopted ASU 2016-02 and related updates as of January 1, 2019 using the modified retrospective transition approach, with the cumulative effect of the initial application recognized at the date of adoption. Under this effective date method, financial results reported prior to the first quarter of 2019 are unchanged. The Company also chose to adopt the package of practical expedients.
The Company has reviewed all of its current active leases and has implemented the necessary processes and systems to comply with the requirements of ASU 2016-02. Upon adoption of ASU 2016-02, the Company recognized a Right of Use (“ROU”) asset on its books for the net present value of all of its active leases with terms greater than 12 months, with an offsetting lease liability. The ROU asset and corresponding lease liability will be amortized over the course of the lease term, which includes all options that the Company expects it will exercise.
The Consolidated Balance Sheet impact of the adoption of ASU 2016-02 was an increase to both assets and liabilities of $52.7. The adoption of ASU 2016-02 did not have any material impact to net income or cash flows.
Adoption of ASU 2018-02
In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”), Income Statement - Reporting Comprehensive Income (Topic 220). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to TCJA from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. As a result of the adoption of ASU 2018-02 in the first quarter of 2019, the Company reclassified $8.3 from accumulated other comprehensive income into retained earnings on the condensed consolidated balance sheet.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the Company’s financial statements and the financial statements of its majority owned or controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and Regulation S-X. All intercompany balances and transactions have been eliminated in consolidation.
After conducting the appropriate accounting processes with respect to the potential contingent liabilities, the Company concluded that it should have recorded an incremental contingent liability of less than $8.0 for the three-month and nine-month period ending September 26, 2019. We do not believe this amount is material, either quantitatively or qualitatively, to our consolidated financial statements as of and for the three-month period ending September 26, 2019.
The Company is the majority participant in the Kansas Industrial Energy Supply Company ("KIESC"), a tenancy-in-common with other Wichita companies established to purchase natural gas. KIESC is fully consolidated as the Company owns 77.8% of the entity’s equity.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The Company’s U.K. subsidiary uses local currency, the British pound, as its functional currency; the Malaysian subsidiary uses the British pound and the 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 currencies of the Company’s international subsidiaries are translated to U.S. dollars using the end-of-month translation rate for assets and liabilities and average period currency translation rates for revenue and income accounts.
Use of Estimates
The preparation of the Company's financial statements in conformity with GAAP requires management to use estimates and assumptions. The results of these estimates form the basis for making judgments that may affect the reported amounts of assets and liabilities, including the impacts of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period.
Management may make significant judgments when assessing estimated amounts of variable consideration and related constraints, the number of options likely to be exercised, and the standalone selling prices of the Company’s products and services. The Company also estimates the cost of satisfying the performance obligations in its contracts and options that may extend over many years. Cost estimates reflect currently available information and the impact of any changes to cost estimates, based upon the facts and circumstances, are recorded in the period in which they become known.
The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. The Company’s contracts with customers are typically for products and services to be provided at fixed stated prices but may also include variable consideration. Variable consideration may include, but is not limited to, unpriced contract modifications, cost sharing provisions, incentives and awards, non-warranty claims and assertions, provisions for non-conformance and rights to return, or other payments to, or receipts from, customers. The Company estimates the variable consideration using the expected value or the most likely amount based upon the facts and circumstances, available data and trends and the history of resolving variability with specific customers and suppliers.
The Company regularly commences work and incorporates customer-directed changes prior to negotiating pricing terms for engineering work, product modifications, and other statements of work. The Company's contractual terms typically provide for price negotiations after certain customer-directed changes have been accepted by the Company. Prices are estimated until they are contractually agreed upon with the customer. When a contract is modified, the Company evaluates whether additional distinct products and services have been promised at standalone selling prices, in which case the modification is treated as a separate contract. If not, depending on whether the remaining performance obligations are distinct from the goods or services transferred on or before the modification, the modification is either treated prospectively as if it were a termination of the existing contract and the creation of a new contract, treated as if it were a part of the existing contract, or treated as some combination.
The Company allocates the consideration for a contract to the performance obligations on the basis of their relative standalone selling price. The Company estimates the likelihood of the amount of options that the customer is going to exercise when assessing the existence of performance obligations with respect to this allocation or for assessing the impact of loss contracts.
The Company typically provides warranties on all the Company's products and services. Generally, warranties are not priced separately because customers cannot purchase them independently of the products or services under contract so they do not create performance obligations. Spirit warranties generally provide assurance to the Company's customers that the products or services meet the specifications in the contract. In the event that there is a warranty claim because of a covered design, material or workmanship issue, the Company may be required to redesign or modify the product, offer concessions, and/or pay the customer for repairs or perform the repair. Provisions for estimated expenses related to design, service, and product warranties and certain extraordinary rework are made at the time products are sold. These costs are accrued at the time of the sale and are recorded as unallocated cost of sales. These estimates are established using historical information on the nature, frequency, and the cost experience of warranty claims, including the experience of industry peers. In the case of new development products or new customers, Spirit also considers factors including the warranty experience of other entities in the same business, management judgment, and the type and nature of the new product or new customer, among others.
Actual results could differ from those estimates and assumptions.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Revenues and Profit Recognition
Substantially all of the Company’s revenues are from long-term supply agreements with Boeing, Airbus, and other aerospace manufacturers. The Company participates in its customers’ programs by providing design, development, manufacturing, fabrication, and support services for major aerostructures in the fuselage, propulsion, and wing segments. During the early stages of a program, this frequently involves nonrecurring design and development services, including tooling. As the program matures, the Company provides recurring manufacturing of products in accordance with customer design and schedule requirements. Many contracts include clauses that provide sole supplier status to the Company for the duration of the program’s life (including derivatives). The Company's long-term supply agreements typically include fixed price volume-based terms and require the satisfaction of performance obligations for the duration of the program’s life.
The identification of an accounting contract with a customer and the related promises require an assessment of each party’s rights and obligations regarding the products or services to be transferred, including an evaluation of termination clauses and presently enforceable rights and obligations. In general, these long-term supply agreements are legally governed by master supply agreements (or general terms agreements) together with special business provisions (or work package agreements), which define specific program requirements. Purchase orders (or authorizations to proceed) are issued under these agreements to reflect presently enforceable rights and obligations for the units of products and services being purchased. The units for accounting purposes (“accounting contract”) are typically determined by the purchase orders. Revenue is recognized when the Company has a contract with presently enforceable rights and obligations, including an enforceable right to payment for work performed. These agreements may lead to continuing sales for more than twenty years. Customers generally contract with the Company for requirements in a segment relating to a specific program, and the Company’s performance obligations consist of a wide range of engineering design services and manufactured structural components, as well as spare parts and repairs for OEMs. A single program may result in multiple contracts for accounting purposes, and within the respective contracts, non-recurring work elements and recurring work elements may result in multiple performance obligations. The Company generally contracts directly with its customers and is the principal in all current contracts.
Management considers a number of factors when determining the existence of an accounting contract and the related performance obligations that include, but are not limited to, the nature and substance of the business exchange, the contractual terms and conditions, the promised products and services, the termination provisions in the contract, including the presently enforceable rights and obligations of the parties to the contract, the nature and execution of the customer’s ordering process and how the Company is authorized to perform work, whether the promised products and services are distinct or capable of being distinct within the context of the contract, as well as how and when products and services are transferred to the customer.
Revenue is recognized when, or as, control of promised products or services transfers to a customer and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those products or services. Revenue is recognized over time as work progresses when the Company is entitled to the reimbursement of costs plus a reasonable profit for work performed for which the Company has no alternate use. For these performance obligations that are satisfied over time, the Company generally recognizes revenue using an input method with revenue amounts being recognized proportionately as costs are incurred relative to the total expected costs to satisfy the performance obligation. The Company believes that costs incurred as a portion of total estimated costs is an appropriate measure of progress towards satisfaction of the performance obligation since this measure reasonably depicts the progress of the work effort. When we experience abnormal production costs such as excess capacity costs the Company will expense the costs in the period incurred separately from the costs incurred for satisfaction of the performance obligations under our contracts with customers.
Revenue for performance obligations that are not recognized over time are recognized at the point in time when control transfers to the customer (which is generally upon delivery). For performance obligations that are satisfied at a point in time, the Company evaluates the point in time when the customer can direct the use of, and obtain the benefits from, the products and services. Shipping and handling costs are not considered performance obligations and are included in cost of sales as incurred.
The transaction price for a contract reflects the consideration the Company expects to receive for fully satisfying the performance obligations in the contract. The Company’s current contracts do not include any significant financing components because the timing of the transfer of the underlying products and services under contract are at the customers’ discretion. Additionally, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. The Company's contracts with customers generally require payment under normal commercial terms after delivery. Payment terms are typically within 30 to 120 days of
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
delivery. The total transaction price is allocated to each of the identified performance obligations using the relative standalone selling price to reflect the amount the Company expects to be entitled for transferring the promised products and services to the customer. A majority of the Company’s agreements with customers include options for future purchases. For the purposes of allocating transaction price, the Company assesses, based upon the facts and circumstances of the business arrangement, the amount and likelihood of options to be exercised that may result in deferral of revenue to future contracts and options. Deferred revenues are recognized as, or when, the underlying future performance obligations are satisfied.
Standalone selling price is the price at which the Company would sell a promised good or service separately to a customer. Standalone selling prices are established at contract inception and subsequent changes in transaction price are allocated on the same basis as at contract inception. Standalone selling prices for the Company’s products and services are generally not observable and the Company uses the “Expected Cost plus a Margin” approach to determine standalone selling price. Expected costs are typically derived from the available periodic forecast information. If a contract modification changes the overall transaction price of an existing contract, the Company allocates the new transaction price on the basis of the relative standalone selling prices of the performance obligations and cumulative adjustments, if any, are recorded in the current period.
The Company also identifies and estimates variable consideration for contractual provisions such as unpriced contract modifications, cost sharing provisions, incentives and awards, non-warranty claims and assertions, provisions for non-conformance and rights to return, or other payments to, or receipts from, customers and suppliers. The timing of satisfaction of performance obligations and actual receipt of payment from a customer may differ and affects the balances of the contract assets and liabilities.
For contracts that are deemed to be loss contracts, the Company establishes forward loss reserves for total estimated costs that are in excess of total estimated consideration in the period in which they become known. These reserves are based on estimates for accounting contracts, plus options that the Company believes are likely to be exercised. The Company records forward loss reserves for all performance obligations in the aggregate for the accounting contract.
Adoption of New Revenue Standard
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) that superseded ASC 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts (“legacy GAAP”). Subsequently, the FASB issued several updates to ASU 2014-09, which are codified in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). ASC 606 also included new guidance on costs related to a contract, which is codified in ASC Subtopic 340-40 (“ASC 340-40”). The Company adopted ASC 606 using the modified retrospective method (“method”) effective as of January 1, 2018 (“date of initial application”). Under this method, the cumulative effect of the adoption of ASC 606 was recognized as an adjustment to retained earnings on the date of initial application (“Transition Adjustment”), and the comparative financial statements for prior periods were not adjusted and continue to be reported under legacy GAAP. The Transition Adjustment was an after tax decrease to retained earnings of approximately $277.0. Financial information for 2019 and 2018 is presented under ASC 606 and financial information for 2017 is presented under legacy GAAP.
The adoption of ASC 606 did not impact the Company's cash flows or the underlying economics of the Company's contracts with customers. However, the pattern and timing of revenue and profit recognition, as well as financial statement presentation and disclosures, has changed.
The significant changes and the qualitative and quantitative impact of the adoption of ASC 606 are noted below:
a.Revenue from Contracts with Customers
The Company no longer uses the units-of-delivery method, and the historical use of contract blocks to define contracts for accounting purposes has been replaced by accounting contracts as identified under ASC 606. The Company's accounting contracts under ASC 606 are for the specific number of units for which orders have been received, which is typically for fewer units than what was used to define contract blocks under legacy GAAP. In most of the Company's contracts, the customer has options or requirements to purchase additional products and services.
b.Deferred Production Costs
Under legacy GAAP, certain production costs were deferred over the life of the contract block, which is not permitted under ASC 606. Accordingly, deferred production costs of $640.3 (pretax), net of previously recognized forward loss reserves of $364.0 (pretax), were eliminated, resulting in a decrease to retained earnings in the Transition Adjustment.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
c.Contract Assets and Contract Liabilities
Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets in the amount of $342.0 were established in the Transition Adjustment. Contract liabilities primarily represent cash received that is in excess of revenues recognized and is contingent upon the satisfaction of performance obligations. For certain contracts, the allocation of consideration to the performance obligations results in a deferral of revenue that was previously recognized under legacy GAAP. Contract liabilities in the amount of $113.0 were established in the Transition Adjustment, which reflects consideration received prior to the date of initial application that is in excess of the standalone selling price. This liability includes an allocation of consideration to future units, including those under options that the Company believes are likely to be exercised, with prices that are lower than standalone selling price. This liability will be recognized earlier if the options are not fully exercised, or immediately if the contract is terminated prior to the options being fully exercised.
d.Contract Costs
The Company’s accounting for preproduction, tooling, and certain other costs has not changed since these costs generally do not fall within the scope of ASC 340-40. Incurred production costs for anticipated contracts (satisfaction of performance obligations, which have commenced because the Company expects the customer to exercise options) continue to be classified as inventory.
Research and Development
Research and development includes costs incurred for experimentation, design, and testing that are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents represent all highly liquid investments with original maturities of three months or less.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. Unbilled receivables are recorded on the balance sheet as contract assets, as per ASC 606 guidance. The Company determines an allowance for doubtful accounts based on a review of outstanding receivables. Account balances are charged off against the allowance after the potential for recovery is considered remote. See Note 6, Accounts Receivable, net, for more information.
The Company has two agreements to sell, on a revolving basis, certain trade accounts receivable balances with Boeing and Airbus to a third party financial institution. These programs were primarily entered into as a result of Boeing and Airbus seeking payment term extensions with the Company and continue to allow Spirit to monetize prior to the payment date for the receivables, subject to payment of a discount. No guarantees are delivered under the agreements. Our ability to continue using such agreements is primarily dependent upon the strength of Boeing’s and Airbus’s financial condition. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the Company's balance sheet. For additional information on the sale of receivables see Note 6, Accounts Receivable, net.
Inventory
Raw materials are stated at lower of cost (principally on an actual or average cost basis) or net realizable value. Production costs for contracts, including costs expected to be recovered on specific anticipated contracts (work that has commenced because the Company expects the customer to exercise options), are classified as work-in-process and include direct material, labor, overhead, and purchases. When we experience abnormal production costs such as excess capacity costs the Company will expense the costs in the period incurred excluded from inventoriable costs. Typically, anticipated contracts materialize and the related performance obligations are satisfied within 6-12 months. Revenue and related cost of sales are recognized as the performance obligations are satisfied. These costs are evaluated for impairment periodically and capitalized costs for which anticipated contracts do not materialize are written off in the period in which it becomes known. Valuation reserves for excess, obsolete, and slow-moving inventory are estimated by evaluating inventory of individual raw materials and parts against both historical usage rates and forecasted production requirements. See Note 9, Inventory.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is applied using a straight-line method over the useful lives of the respective assets as described in the following table:
|
|
|
|
Estimated Useful Life
|
Land improvements
|
20 years
|
Buildings
|
45 years
|
Machinery and equipment
|
3-20 years
|
Tooling — Airplane program — B787, Rolls-Royce
|
5-20 years
|
Tooling — Airplane program — all others
|
2-10 years
|
Capitalized software
|
3-7 years
|
The Company capitalizes certain costs, such as software coding, installation, and testing, that are incurred to purchase or to create and implement internal-use computer software. The Company’s capitalization policy includes specifications that the software must have a service life greater than one year, is legally and substantially owned by Spirit, and has an acquisition cost of greater than $0.1.
Where the Company is involved in build-to-suit leasing arrangements, the Company is deemed the owner of the asset for accounting purposes during the construction period of the asset. The Company records the related assets and liabilities for construction costs incurred under these build-to-suit leasing arrangements during the construction period. Upon completion of the asset, the Company considers whether the assets and liabilities qualify for derecognition under the sale-leaseback accounting guidance.
Impairment or Disposal of Long-Lived Assets and Goodwill
Spirit reviews capital and amortization of intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the recorded amount may not be recoverable. Under the standard, assets must be classified as either held-for-use or available-for-sale. An impairment loss is recognized when the recorded amount of the asset that is held for use exceeds its fair value, which is measured by discounted cash flows when quoted market prices are not available. For assets available-for-sale, an impairment loss is recognized when the recorded amount exceeds the fair value less cost to sell. The Company performs an annual impairment test for goodwill in the fourth quarter of each year, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below current value.
Deferred Financing Costs
Costs relating to long-term debt are deferred and included in other long-term assets. These costs are amortized over the term of the related debt or debt facilities and are included as a component of interest expense.
Derivative Instruments and Hedging Activity
The Company uses derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates and interest rates. Derivative financial instruments are recognized on the balance sheet as either assets or liabilities and are measured at fair value. Changes in fair value of derivatives are recorded each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item or when the hedge is no longer effective. Cash flows associated with the Company’s derivatives are presented as a component of the operating section of the statement of cash flows. The use of derivatives has generally been limited to interest rate swaps and foreign currency forward contracts. The Company enters into foreign currency forward 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.
Fair Value of Financial Instruments
Financial instruments are measured in accordance with FASB authoritative guidance related to fair value measurements. This guidance clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
on the inputs used to measure fair value, and expands disclosures about fair value measurements. See Note 14, Fair Value Measurements.
Income Taxes
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, we assess all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified.
We record an income tax expense or benefit based on the income earned or 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. See Note 20, Income Taxes, for further discussion.
Stock-Based Compensation and Other Share-Based Payments
Many of the Company’s employees are participants in various stock compensation plans. The expense attributable to the Company’s employees is recognized over the period the amounts are earned and vested, as described in Note 19, Stock Compensation. The expense includes an estimate of expected forfeitures, based on historical forfeiture trends.
4. New Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures. Certain disclosures in ASU 2018-13 are required to be applied on a retrospective basis and others on a prospective basis. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit losses (Topic 326) (“ASU 2016-13”), which requires the immediate recognition of management's estimates of current expected credit losses. ASU 2016-13 is effective for
fiscal years and interim reporting periods within those years beginning after December 15, 2019. Early adoption is permitted after fiscal years beginning December 15, 2018. The Company is planning the adoption of ASC 326 effective January 1, 2020, by means of the required cumulative-effect adjustment to the opening retained earnings as of that date. The Company has assessed the scope, approach, and processes required for implementation of the new standard. The Company expects that ASU 2016-13 will be primarily applicable to trade receivables (“AR”) and Contract Assets recorded on our consolidated financial statements. The Company does not expect a material impact of adopting this guidance on our consolidated financial statements, other than incorporating the required changes to our existing presentation and disclosures, which will impact the information reported in our financial statements.
5. Changes in Estimates
The Company has a periodic forecasting process in which management assesses the progress and performance of the Company’s programs. This process requires management to review each program’s progress by evaluating the program schedule, changes to identified risks and opportunities, changes to estimated revenues and costs for the accounting contracts (and options if applicable), and any outstanding contract matters. Risks and opportunities include but are not limited to management’s judgment about the cost associated with the Company’s ability to achieve the schedule, technical requirements (e.g., a newly-developed product versus a mature product), and any other program requirements. Due to the span of years it may take to completely satisfy the performance obligations for the accounting contracts (and options, if any) and the scope and nature of the work required to be performed on those contracts, the estimation of total revenue and costs is subject to many variables and, accordingly, is subject to change based upon judgment. When adjustments in estimated total consideration or estimated total cost are required, any changes from prior estimates for fully satisfied performance obligations are recognized in the current period as a cumulative catch-up adjustment for the inception-to-date effect of such changes. Cumulative catch-up adjustments are driven by several factors including production efficiencies, assumed rate of production, the rate of overhead absorption, changes to scope of work, and contract modifications. For 2017, the changes in estimates apply to contract blocks under legacy GAAP under the units-of-delivery method. For 2019 and 2018, cumulative catch-up adjustments are primarily related to changes in the estimated margin of contracts with performance obligations that are satisfied over time.
Changes in estimates are summarized below:
|
|
|
|
|
|
|
|
Changes in Estimates
|
December 31, 2019
|
December 31, 2018
|
December 31, 2017
|
(Unfavorable) Favorable Cumulative Catch-up Adjustments by Segment
|
|
|
|
Fuselage
|
(1.3
|
)
|
(5.3
|
)
|
4.0
|
|
Propulsion
|
(1.2
|
)
|
(0.2
|
)
|
3.8
|
|
Wing
|
0.5
|
|
1.7
|
|
23.4
|
|
Total (Unfavorable) Favorable Cumulative Catch-up Adjustment
|
(2.0
|
)
|
(3.8
|
)
|
31.2
|
|
|
|
|
|
(Forward Loss) and Changes in Estimates on Loss Programs by Segment
|
|
|
|
Fuselage
|
(37.9
|
)
|
3.4
|
|
(223.2
|
)
|
Propulsion
|
(15.1
|
)
|
(0.7
|
)
|
(40.2
|
)
|
Wing
|
(10.5
|
)
|
1.2
|
|
(63.9
|
)
|
Total (Forward Loss) and Change in Estimate on Loss Program
|
(63.5
|
)
|
3.9
|
|
(327.3
|
)
|
|
|
|
|
Total Change in Estimate
|
(65.5
|
)
|
0.1
|
|
(296.1
|
)
|
EPS Impact (diluted per share based on statutory rates)
|
(0.50
|
)
|
0.00
|
|
(1.58
|
)
|
2019 Changes in Estimates
During the twelve months ended December 31, 2019, we recognized net forward loss charges of $65.5 primarily driven by the production rate change on B787 from 14 aircraft per month to 10 aircraft per month.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
2018 Changes in Estimates
Favorable changes in estimates on loss programs were primarily driven by favorable performance on cost initiatives and mitigation of risks, partially offset by forward loss charges due to the adoption of ASU 2017-07 on the B787 program. Total unfavorable cumulative catch-up adjustments were driven by increased production costs incurred due to factory disruption challenges on the B737 program.
2017 Changes in Estimates
On August 1, 2017, Boeing and the Company through its subsidiary, Spirit, entered into a Collective Resolution Memorandum of Understanding (the “2017 MOU”), which required Boeing and Spirit to negotiate and execute definitive documentation implementing the agreements set forth in the 2017 MOU by September 29, 2017.
On September 22, 2017, Boeing and Spirit completed their negotiation of such definitive documentation and entered into Amendment 30 to the long-term supply agreement covering products for Boeing’s B737, B747, B767, and B777 commercial aircraft programs (“Sustaining Amendment #30”) and Amendment 25 to the long-term supply agreement covering products for Boeing's B787 commercial aircraft program (the “787 Amendment #25” and, together with the Sustaining Amendment #30, the “Definitive Documentation”) generally established pricing terms for the B737, B747, B767, and B777 models (excluding the B777X) through December 31, 2022 (with certain limited exceptions), and for the B787-8, -9, and -10 models through line unit 1405.
In the second quarter of 2017, in connection with the 2017 MOU, the Company formally extended the current contract block ending at line unit 1003 to line unit 1300 and established a planning block from line units 1301 to 1405. Based on cost updates, contract block extension, and planning block addition, the Company updated its estimated contract costs and revenue for the B787 program. As a result, the Company recorded a second quarter 2017 forward loss of $352.8 on its B787 program. In the fourth quarter of 2017, favorable cost initiatives and benefits from absorption of fixed costs due to announced rate increases, resulted in a favorable change in estimate on the B787 program of $41.1.
During 2017, the Company recorded a forward loss on the A350XWB program of $19.4, primarily related to unfavorable exchange rate impacts on labor and non-labor costs and supplier claims.
6. Accounts Receivable, net
Accounts receivable represent the Company’s unconditional rights to consideration, subject to the payment terms of the contract, for which only the passage of time is required before payment. Unbilled receivables are reflected under contract assets on the balance sheet. The Company determines an allowance for doubtful accounts based on a review of outstanding receivables that are charged off against the allowance after the potential for recovery is considered remote.
Accounts receivable, net consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Trade receivables
|
$
|
515.2
|
|
|
$
|
527.9
|
|
Other
|
32.6
|
|
|
17.9
|
|
Less: allowance for doubtful accounts
|
(1.4
|
)
|
|
(0.7
|
)
|
Accounts receivable, net
|
$
|
546.4
|
|
|
$
|
545.1
|
|
_______________________________________
The Company has two agreements to sell, on a revolving basis, certain trade accounts receivable balances with Boeing and Airbus to a third party financial institution. These programs were primarily entered into as a result of Boeing and Airbus seeking payment term extensions with the Company and continue to allow Spirit to monetize prior to the payment date for the receivables, subject to payment of a discount. No guarantees are delivered under the agreements. Our ability to continue using such agreements is primarily dependent upon the strength of Boeing’s and Airbus’s financial condition. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being derecognized from the Company's balance sheet.
During 2019, $6,064.6 of accounts receivable have been sold via this arrangement. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows. The recorded net loss on sale of receivables is $24.7 for the year ended December 31, 2019 and is included in Other (expense) income. See Note 23, Other (Expense) Income, net.
7. Contract Assets and Contract Liabilities
Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets, current are those for which performance obligations have been fully satisfied and billing is expected within 12 months of contract origination and contract assets, long-term are fully satisfied obligations that are expected to be billed in more than 12 months. No impairments to contract assets were recorded for the period ended December 31, 2019.
Contract liabilities are established for cash received that is in excess of revenues recognized and are contingent upon the satisfaction of performance obligations. Contract liabilities primarily consist of cash received on contracts for which revenue has been deferred since the receipts are in excess of transaction price resulting from the allocation of consideration based on relative standalone selling price to future units (including those under option that the Company believes are likely to be exercised) with prices that are lower than standalone selling price. These contract liabilities will be recognized earlier if the options are not fully exercised, or immediately, if the contract is terminated prior to the options being fully exercised.
|
|
|
|
|
|
|
|
|
|
|
|
December 21, 2018
|
|
December 31, 2019
|
|
Change
|
|
Contract assets
|
$
|
523.5
|
|
$
|
534.7
|
|
$
|
11.2
|
|
Contract liabilities
|
(527.7
|
)
|
(514.6
|
)
|
13.1
|
|
Net contract assets (liabilities)
|
$
|
(4.2
|
)
|
$
|
20.1
|
|
$
|
24.3
|
|
The increase in contract assets reflects the net impact of additional revenue recognized in excess of billed revenues during the period. The decrease in contract liabilities reflects the net impact of additional deferred revenues recorded in excess of revenue recognized during the period. For the period ended December 31, 2019, the Company recognized $139.0 of revenue that was included in the contract liability balance at the beginning of the period.
8. Revenue Disaggregation and Outstanding Performance Obligations
Disaggregation of Revenue
The Company disaggregates revenue based on the method of measuring satisfaction of the performance obligation either over time or at a point in time. Additionally, the Company disaggregates revenue based upon the location where products and services are transferred to the customer, and based upon major customer. The Company’s principal operating segments and related revenue are noted in Note 26, Segment and Geographical Information.
The following table disaggregates revenues by the method of performance obligation satisfaction:
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
Revenue
|
December 31,
2019
|
|
December 31,
2018
|
|
Contracts with performance obligations satisfied over time
|
$
|
5,963.5
|
|
$
|
5,628.5
|
|
Contracts with performance obligations satisfied at a point in time
|
1,899.6
|
|
1,593.5
|
|
Total Revenue
|
$
|
7,863.1
|
|
$
|
7,222.0
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The following table disaggregates revenue by major customer:
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
Customer
|
December 31,
2019
|
|
December 31,
2018
|
|
Boeing
|
$
|
6,237.2
|
|
$
|
5,677.7
|
|
Airbus
|
1,250.6
|
|
1,180.8
|
|
Other
|
375.3
|
|
363.5
|
|
Total net revenues
|
$
|
7,863.1
|
|
$
|
7,222.0
|
|
The following table disaggregates revenue based upon the location where control of products are transferred to the customer:
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
Location
|
December 31,
2019
|
|
December 31,
2018
|
|
United States
|
$
|
6,566.3
|
|
$
|
5,967.1
|
|
International
|
|
|
United Kingdom
|
771.9
|
|
763.3
|
|
Other
|
524.9
|
|
491.6
|
|
Total International
|
1,296.8
|
|
1,254.9
|
|
Total Revenue
|
$
|
7,863.1
|
|
$
|
7,222.0
|
|
Remaining Performance Obligations
Unsatisfied, or partially unsatisfied, performance obligations currently under contract that are expected to be recognized to revenue in the future are noted in the table below. The Company expects options to be exercised in addition to the amounts presented below.
|
|
|
|
|
|
|
2020
|
2021
|
2022
|
2023 and After
|
Unsatisfied performance obligations
|
$3,777.2
|
$4,645.0
|
$4,686.1
|
$2,829.2
|
9. Inventory
Inventory consists of raw materials used in the production process, work-in-process, which is direct material, direct labor, overhead and purchases, and capitalized preproduction costs. Raw materials are stated at lower of cost (principally on an actual or average cost basis) or net realizable value. Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically amortized over a period that is consistent with the satisfaction of the underlying performance obligations to which these relate. See Note 3, Summary of Significant Accounting Policies - Inventory.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
Raw materials
|
$
|
253.1
|
|
|
$
|
240.4
|
|
Work-in-process(1)
|
822.8
|
|
|
727.8
|
|
Finished goods
|
14.5
|
|
|
7.1
|
|
Product inventory
|
1,090.4
|
|
|
975.3
|
|
Capitalized pre-production
|
28.4
|
|
|
37.3
|
|
Total inventory, net
|
$
|
1,118.8
|
|
|
$
|
1,012.6
|
|
_______________________________________
Product inventory, summarized in the table above, is shown net of valuation reserves of $39.0 and $55.2 as of December 31, 2019 and December 31, 2018, respectively.
|
|
(1)
|
For the period ended December 31, 2019, work-in-process inventory includes direct labor, direct material, overhead, and purchases on contracts for which revenue is recognized at a point in time, as well as sub-assembly parts that have not been issued to production on contracts for which revenue is recognized using the input method. For the period ended December 31, 2019, and December 31, 2018, work-in-process inventory includes $157.2 and $151.6, respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the period.
|
10. Property, Plant and Equipment, net
Property, plant and equipment, net consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
Land
|
$
|
15.9
|
|
|
$
|
15.0
|
|
Buildings (including improvements)
|
924.0
|
|
|
822.7
|
|
Machinery and equipment
|
1,941.5
|
|
|
1,697.0
|
|
Tooling
|
1,047.4
|
|
|
1,032.3
|
|
Capitalized software
|
277.8
|
|
|
269.2
|
|
Construction-in-progress
|
192.8
|
|
|
227.8
|
|
Total
|
4,399.4
|
|
|
4,064.0
|
|
Less: accumulated depreciation
|
(2,127.7
|
)
|
|
(1,896.4
|
)
|
Property, plant and equipment, net
|
$
|
2,271.7
|
|
|
$
|
2,167.6
|
|
Capitalized interest was $6.5 and $6.7 for the twelve months ended December 31, 2019 and 2018, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs of $142.2, $136.2, and $130.0 for the twelve months ended December 31, 2019, 2018 and 2017, respectively.
The Company capitalizes certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal use computer software. Depreciation expense related to capitalized software was $17.7, $16.7, and $19.2 for the twelve months ended December 31, 2019, 2018, and 2017, respectively.
The Company reviews capital and amortizing intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company evaluated its long-lived assets at its locations and determined that an impairment of $3.8 and $1.9 primarily related to unused machinery, was necessary for the twelve months ended December 31, 2019 and 2018 respectively. For the twelve months ended December 31, 2017 an impairment of $8.2 was recorded, primarily related to abandoned construction-in-progress. The Company records impairments related to property, plant and equipment to costs of sales on the statement of operations.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
11. Leases
The Company determines if an arrangement is a lease at the inception of a signed agreement. Operating leases are included in ROU assets (long-term), short-term operating lease liabilities, and long-term operating lease liabilities on the Company’s consolidated balance sheet. Finance leases are included in Property, Plant and Equipment, current portion of long-term debt, and long-term debt.
ROU assets represent the right of the Company to use an underlying asset for the length of the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
To determine the present value of lease payments, the Company uses its estimated incremental borrowing rate or the implicit rate, if readily determinable. The estimated incremental borrowing rate is based on information available at the lease commencement date, including any recent debt issuances and publicly available data for instruments with similar characteristics. The ROU asset also includes any lease payments made and excludes lease incentives.
The Company's lease terms may include options to extend or terminate the lease and, when it is reasonably certain that an option will be exercised, those options are included in the net present value calculation. Leases with a term of 12 months or less, which are primarily related to automobiles and manufacturing equipment, are not recorded on the balance sheet. The aggregate amount of lease cost for leases with a term of 12 months or less is not material.
The Company has lease agreements that include lease and non-lease components, which are generally accounted for separately. For certain leases (primarily related to IT equipment), the Company does account for the lease and non-lease components as a single lease component. A portfolio approach is applied to effectively account for the ROU assets and liabilities for those specific leases referenced above. The Company does not have any material leases containing variable lease payments or residual value guarantees. The Company also does not have any material subleases.
The Company currently has operating and finance leases for items such as manufacturing facilities, corporate offices, manufacturing equipment, transportation equipment, and vehicles. The Company's active leases have remaining lease terms that range between less than one year to 18 years, some of which include options to extend the leases for up to 30 years, and some of which include options to terminate the leases within one year.
Comparable information presented in the financial statements for periods prior to January 1, 2019 represent legacy GAAP treatment of leases. For more information on the effective date and transition approach for implementation, see Note 2, Adoption of New Accounting Standards.
For the twelve months ended December 31, 2019, total net lease cost was $25.1. This was comprised of $9.0 of operating lease costs, $13.1 amortization of assets related to finance leases, and $3.0 interest on finance lease liabilities.
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
For the Twelve Months Ended
|
|
December 31, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
Operating cash flows from operating leases
|
$
|
8.9
|
|
Operating cash flows from finance leases
|
$
|
3.0
|
|
Financing cash flows from finance leases
|
$
|
12.1
|
|
|
|
ROU assets obtained in exchange for lease obligations:
|
|
Operating leases
|
$
|
2.3
|
|
Finance leases
|
$
|
—
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Supplemental balance sheet information related to leases:
|
|
|
|
|
|
December 31, 2019
|
Finance leases:
|
|
Property and equipment, gross
|
$
|
165.5
|
|
Accumulated amortization
|
(23.5
|
)
|
Property and equipment, net
|
$
|
142.0
|
|
The weighted average remaining lease term as of December 31, 2019 for operating and finance leases was 10.2 years and 6.5 years, respectively. The weighted average discount rate as of December 31, 2019 for operating and finance leases was 5.6% and 4.3%, respectively. See Note 16, Debt, for current and non-current finance lease obligations.
As of December 31, 2019, remaining maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025 and thereafter
|
|
Total Lease Payments
|
|
Less: Imputed Interest
|
Total Lease Obligations
|
|
Operating Leases
|
$
|
8.5
|
|
$
|
7.5
|
|
$
|
7.1
|
|
$
|
6.0
|
|
$
|
5.6
|
|
$
|
30.3
|
|
$
|
65.0
|
|
$
|
(16.0
|
)
|
$
|
49.0
|
|
Financing Leases
|
$
|
31.4
|
|
$
|
31.1
|
|
$
|
27.2
|
|
$
|
24.1
|
|
$
|
18.7
|
|
$
|
36.3
|
|
$
|
168.8
|
|
$
|
(21.7
|
)
|
$
|
147.1
|
|
As of December 31, 2019, the Company had additional operating and financing lease commitments that have not yet commenced of approximately $2.6 and $59.8 for manufacturing equipment and facilities which are in various phases of construction or customization for the Company's ultimate use, with lease terms between 3 and 7 years. The Company's involvement in the construction and design process for these assets is generally limited to project management.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
12. Other Assets
Other assets are summarized as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Intangible assets
|
|
|
|
Patents
|
$
|
2.0
|
|
|
$
|
2.0
|
|
Favorable leasehold interests
|
2.8
|
|
|
6.2
|
|
Total intangible assets
|
4.8
|
|
|
8.2
|
|
Less: Accumulated amortization-patents
|
(1.9
|
)
|
|
(1.9
|
)
|
Accumulated amortization-favorable leasehold interest
|
(1.7
|
)
|
|
(4.9
|
)
|
Intangible assets, net
|
1.2
|
|
|
1.4
|
|
Deferred financing
|
|
|
|
Deferred financing costs
|
41.7
|
|
|
41.7
|
|
Less: Accumulated amortization-deferred financing costs
|
(36.9
|
)
|
|
(35.6
|
)
|
Deferred financing costs, net
|
4.8
|
|
|
6.1
|
|
Other
|
|
|
|
Goodwill — Europe
|
2.4
|
|
|
2.4
|
|
Equity in net assets of affiliates
|
7.7
|
|
|
—
|
|
Supply agreement(1)
|
11.5
|
|
|
14.6
|
|
Restricted cash
|
16.4
|
|
|
20.2
|
|
Other
|
36.4
|
|
|
38.5
|
|
Total
|
$
|
80.4
|
|
|
$
|
83.2
|
|
_______________________________________
|
|
(1)
|
Certain payments accounted for as consideration paid by the Company to a customer are being amortized as reductions to net revenues.
|
13. Advance Payments
Advances on the B787 Program. Boeing has made advance payments to Spirit under the B787 Special Business Provisions and General Terms Agreement (collectively, the "B787 Supply Agreement"), that are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. Advance repayments were originally scheduled to be spread evenly over the remainder of the first 1,000 B787 shipsets delivered to Boeing. On April 8, 2014, the Company signed a memorandum of agreement with Boeing that suspended advance repayments related to the B787 program for a period of twelve months beginning April 1, 2014. Repayment recommenced on April 1, 2015, and any repayments that otherwise would have become due during such twelve-month period were to offset the purchase price for shipsets 1001 through 1120. On December 21, 2018, the Company signed the 2018 MOA with Boeing that again suspended the advance repayments beginning with line unit 818. The advance repayments will resume at a lower rate of $0.45 per shipset at line number 1135 and continue through line number 1605.
In the event Boeing does not take delivery of a sufficient number of shipsets to repay the full amount of advances prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 due on December 15th of each year until the advance payments have been fully recovered by Boeing. As of December 31, 2019, the amount of advance payments received by us from Boeing and not yet repaid was approximately $231.9.
Advances on the B737 Program. On April 12, 2019, Boeing and the Company executed a Memorandum of Agreement (the "MOA") relating to Spirit's production of aircraft with respect to the B737 program. In an effort to minimize the disruption to Spirit's operations and its supply chain, the Company received an advance payment from Boeing in the amount of $123.0, during the third quarter of 2019. On February 6, 2020, Boeing and Spirit entered into a Memorandum of Agreement (the “2020 MOA”) that included terms and conditions for the advance repayment that will occur over 2022 shipset deliveries.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
14. Fair Value Measurements
The FASB’s authoritative guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance discloses three levels of inputs that may be used to measure fair value:
|
|
Level 1
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.
|
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of the interest rate swaps and foreign currency hedge contracts.
Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The Company’s long-term debt includes a senior unsecured term loan, an unsecured revolver, and senior unsecured notes. The estimated fair value of the Company’s debt obligations is based on the quoted market prices for such obligations or the historical default rate for debt with similar credit ratings. The following table presents the carrying amount and estimated fair value of long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Senior unsecured term loan A (including current portion)
|
$
|
438.5
|
|
|
$
|
440.1
|
|
(2)
|
|
$
|
204.7
|
|
|
$
|
197.8
|
|
(2)
|
Revolver
|
800.0
|
|
|
800.0
|
|
(2)
|
|
—
|
|
|
—
|
|
|
Floating Rate Notes
|
299.1
|
|
|
298.4
|
|
(1)
|
|
298.5
|
|
|
292.9
|
|
(1)
|
Senior unsecured notes due 2023
|
298.3
|
|
|
307.2
|
|
(1)
|
|
297.9
|
|
|
297.5
|
|
(1)
|
Senior unsecured notes due 2026
|
297.8
|
|
|
305.6
|
|
(1)
|
|
297.5
|
|
|
274.5
|
|
(1)
|
Senior unsecured notes due 2028
|
694.1
|
|
|
734.4
|
|
(1)
|
|
693.5
|
|
|
663.0
|
|
(1)
|
Total
|
$
|
2,827.8
|
|
|
$
|
2,885.7
|
|
|
|
$
|
1,792.1
|
|
|
$
|
1,725.7
|
|
|
_______________________________________
|
|
(1)
|
Level 1 Fair Value hierarchy
|
|
|
(2)
|
Level 2 Fair Value hierarchy
|
15. Derivative and Hedging Activities
The Company has historically entered into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The Company has historically entered into derivative instruments covered by master netting arrangements whereby, in the event of a default as defined by the 2018 Credit Agreement (as defined below) 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. See Note 16, Debt, for more information.
Derivatives Not Accounted for as Hedges
Interest Rate Swaps
On March 15, 2017, the Company entered into an interest rate swap agreement, with an effective date of March 31, 2017. The swaps have a notional value of $250.0 and fix the variable portion of the Company’s floating rate debt at 1.815%. The fair value of the interest rate swaps, using Level 2 inputs, was a liability of $0.1 as of December 31, 2019 and an asset of $2.2 as of December 31, 2018. The Company recorded a loss related to swap activity of $2.3 and a gain of $1.4 to Other (expense) income, net in the Consolidated Statement of Operations for the twelve months ended December 31, 2019 and 2018, respectively.
Foreign Currency Forward Contract
On May 1, 2018, the Company and its wholly-owned subsidiary Spirit AeroSystems Belgium Holdings BVBA (“Spirit Belgium”) entered into a definitive agreement (as amended, the “Purchase Agreement”) with certain private sellers pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of S.R.I.F. N.V., the parent company of Asco Industries N.V. (“Asco”), subject to certain customary closing adjustments, including foreign currency adjustments. A significant portion of the purchase price in the Asco acquisition is payable in Euros and, accordingly, movements in the Euro exchange rate could cause the purchase price to fluctuate, affecting our cash flows.
To minimize the risk of currency exchange rate movements on the Company’s cash flows, the Company entered into foreign currency forward contracts; however the Company has not designated these forward contracts as a hedge and has not applied hedge accounting to them. During the second quarter of 2018, to reduce the Euro exchange rate exposure of the purchase of Asco, the Company entered into a foreign currency forward contract in the amount of $580.0; this foreign currency forward contract was net settled in the third quarter of 2018 and a new contract was entered into in the amount of $568.3; this contract was net settled and a third contract was entered into with a settlement date in the first quarter of 2019 in the amount of $547.7. The third contract was net settled at the end of the first quarter of 2019 and a fourth contract was entered into in the amount of $542.1; this contract was net settled early in the second quarter of 2019 and a fifth contract was entered into and also net settled early in the second quarter of 2019 in the amount of $537.6. There are no foreign currency forward contracts outstanding as of December 31, 2019. The Company recorded a net loss related to foreign currency forward contract activity of $16.7 for the year ended December 31, 2019.
Derivatives Accounted for as Hedges
Cash Flow Hedges
During the third quarter of 2019 the Company entered into two interest rate swap agreements with a combined notional value of $450.0. These derivatives have been designated as cash flow hedges by the Company. The fair value of these hedges was a liability of $0.8 as of December 31, 2019.
Changes in the fair value of cash flow hedges are recorded in Accumulated Other Comprehensive Income (“AOCI”) and recorded in earnings in the period in which the hedged transaction occurs. For the twelve months ended December 31, 2019, the Company recorded a net loss in AOCI of $0.8. For the twelve months ended December 31, 2019, $0.1 of income was reclassified from AOCI to earnings. Within the next 12 months, the Company expects to recognize $0.3 in earnings related to these hedged contracts. As of December 31, 2019, the maximum term of hedged forecasted transactions was 3 years.
16. Debt
Total debt shown on the balance sheet is comprised of the following:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Current
|
Noncurrent
|
|
Current
|
Noncurrent
|
Senior unsecured term loan A
|
$
|
22.8
|
|
$
|
415.7
|
|
|
$
|
22.7
|
|
$
|
182.0
|
|
Revolver
|
—
|
|
800.0
|
|
|
—
|
|
—
|
|
Floating Rate Notes
|
|
|
299.1
|
|
|
—
|
|
298.5
|
|
Senior notes due 2023
|
|
|
298.3
|
|
|
—
|
|
297.9
|
|
Senior notes due 2026
|
|
|
297.8
|
|
|
—
|
|
297.5
|
|
Senior notes due 2028
|
|
|
694.1
|
|
|
—
|
|
693.5
|
|
Present value of finance lease obligations
|
25.8
|
|
121.3
|
|
|
7.1
|
|
35.3
|
|
Other
|
1.6
|
|
57.8
|
|
|
1.6
|
|
59.3
|
|
Total
|
$
|
50.2
|
|
$
|
2,984.1
|
|
|
$
|
31.4
|
|
$
|
1,864.0
|
|
2018 Credit Agreement
On July 12, 2018, the Company entered into a $1,256.0 senior unsecured Second Amended and Restated Credit Agreement among Spirit, as borrower, the Company, as parent guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents named therein (the “2018 Credit Agreement”), consisting of an $800.0 revolving credit facility (the “Revolver”), a $206.0 term loan A facility (the “Term Loan”) and a $250.0 delayed draw term loan facility (the “Delayed Draw Term Loan”).
Each of the Revolver, the Term Loan and the Delayed Draw Term Loan matures July 12, 2023, and bears interest, at Spirit’s option, at either LIBOR plus 1.375% or a defined “base rate” plus 0.375%, subject to adjustment to between LIBOR plus 1.125% and LIBOR plus 1.875% (or between base rate plus 0.125% and base rate plus 0.875%, as applicable) based on changes to Spirit’s senior unsecured debt rating provided by Standard & Poor’s Financial Services LLC and/or Moody’s Investors Service, Inc. The principal obligations under the Term Loan are to be repaid in equal quarterly installments of $2.6, commencing with the fiscal quarter ending March 31, 2019, and with the balance due at maturity of the Term Loan. The principal obligations under the Delayed Draw Term Loan are to be repaid in equal quarterly installments of $3.1, subject to adjustments for any extension of the availability period of the Delayed Draw Term Loan, commencing with the fiscal quarter ending September 26, 2019, with the balance due at maturity of the Delayed Draw Term Loan.
The 2018 Credit Agreement also contains an accordion feature that provides Spirit with the option to increase the Revolver commitments and/or institute one or more additional term loans by an amount not to exceed $750.0 in the aggregate, subject to the satisfaction of certain conditions and the participation of the lenders. The 2018 Credit Agreement contains customary affirmative and negative covenants, including certain financial covenants that are tested on a quarterly basis. Spirit’s obligations under the 2018 Credit Agreement may be accelerated upon an event of default, which includes non-payment of principal or interest, material breach of a representation or warranty, breach of a covenant, cross-default to material indebtedness, material judgments, ERISA events, change in control, bankruptcy and invalidity of the guarantee of Spirit’s obligations under the 2018 Credit Agreement made by the Company.
In addition to paying interest on outstanding principal under the 2018 Credit Agreement, Spirit is required to pay an unused line fee at a rate per annum equal to the applicable percentage for the applicable pricing tier set forth in the table below under the heading “Commitment Fee” on the unused portion of the commitments under the revolving credit facility. Spirit is required to pay letter of credit fees at a rate per annum equal to the applicable percentage for the applicable pricing tier set forth in the table below under the heading “Letter of Credit Fee” on the amounts available to be drawn under each standby letter of credit. Spirit is also required to pay fronting fees in respect of letters of credit to the issuing banks and customary administrative fees to the administrative agent. At December 31, 2019, Spirit had no letters of credit outstanding. The Company was subject to pricing tier 3 at December 31, 2019. However, the Company’s credit ratings were downgraded two notches in January 2020.
As compared to the Company’s prior investment grade rating, this rating and our current credit condition affects, among other things, our ability to access new capital. Further negative changes to these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Pricing Tier
|
Credit Rating (S&P/Moody's)
|
|
Commitment
Fee
|
|
Letter of
Credit
Fee
|
|
Eurodollar Rate Loans
|
|
Base Rate
Loans
|
1
|
≥BBB+/Baa1
|
|
0.125%
|
|
1.125%
|
|
1.125%
|
|
0.125%
|
2
|
BBB/Baa2
|
|
0.150%
|
|
1.250%
|
|
1.250%
|
|
0.250%
|
3
|
BBB-/Baa3
|
|
0.200%
|
|
1.375%
|
|
1.375%
|
|
0.375%
|
4
|
BB+/Ba1
|
|
0.250%
|
|
1.625%
|
|
1.625%
|
|
0.625%
|
5
|
≤BB/Ba2
|
|
0.300%
|
|
1.875%
|
|
1.875%
|
|
0.875%
|
As a result of the modification and extinguishment of the Company's prior credit agreement, the Company recognized a loss on extinguishment of $1.1, all of which is reflected within amortization of deferred financing fees on the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2018. As of December 31, 2019, the outstanding balance of the Term Loan and Delayed Draw Term Loan was $439.7 and the carrying value was $438.5. The outstanding balance of the Revolver, drawn in December 2019 was $800.0 and the carrying value was $800.0.
The 2018 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 2018 Credit Agreement also contains the following financial covenants:
|
|
|
|
Interest Coverage Ratio
|
|
Shall not be less than 4.0:1.0
|
Total Leverage Ratio
|
|
Shall not exceed 3.5:1.0
|
The 2020 Amendment
On February 24, 2020, the Company entered into an amendment (the “2020 Amendment”) to the 2018 Credit Agreement. The primary purpose for entering into the 2020 Amendment was to obtain covenant relief with respect to expected breaches of the total leverage ratio and interest coverage ratios under the 2018 Credit Agreement. Given the production suspension and 2020 production rate for the B737 MAX, absent a waiver or an amendment of the 2018 Credit Agreement, the Company was expected to breach the total leverage ratio beginning with the first fiscal quarter of 2020 and continuing into 2021. The 2020 Amendment waived or modified the testing of the ratios set forth in the 2018 Credit Agreement until the commencement of the second fiscal quarter of 2021 (the “Reversion Date”) and put the following financial ratios and tests in place for such time period:
|
|
•
|
Senior Secured Leverage Ratio: Commencing with the first fiscal quarter of 2020, the ratio of senior secured debt to consolidated EBITDA over the last twelve months shall not, as of the end of the applicable fiscal quarter, be greater than: (i) 3.00:1.00, with respect to the first fiscal quarter of 2020; (ii) 4.25:1.00, with respect to the second fiscal quarter of 2020; (iii) 5.50:1.00, with respect to the third fiscal quarter of 2020; (iv) 5.00:1.00, with respect to the fourth fiscal quarter of 2020; and (v) 3.00:1.00, with respect to the first fiscal quarter of 2021.
|
|
|
•
|
Interest Coverage Ratio: Commencing with the first fiscal quarter of 2020, the interest coverage ratio as of the end of the applicable fiscal quarter shall not be less than: (i) 4.00:1.00, with respect to the first fiscal quarter of 2020; (ii) 3.75:1.00, with respect to the second fiscal quarter of 2020; (iii) 2.50:1.00, with respect to the third fiscal quarter of 2020; (iv) 2.25:1.00, with respect to the fourth fiscal quarter of 2020; and (v) 3.75:1.00, with respect to the first fiscal quarter of 2021.
|
|
|
•
|
Minimum Liquidity: As of the end of each fiscal month, commencing with the first fiscal month after entering into the 2020 Amendment, the Company shall have minimum liquidity of not less than: (i) $1,000 through, and including, the last fiscal month ending in the third fiscal quarter of 2020; (ii) $850, as of the end of each fiscal month ending in the fourth fiscal quarter of 2020; and (iii) $750 , as of the end of each fiscal month ending in the first fiscal quarter of 2021; provided, however, that if the Company receives proceeds of at least $750 from the issuance of indebtedness before the Reversion Date, the minimum liquidity requirement shall remain at $1,000. Liquidity includes cash and cash equivalents and amounts available to be drawn under the Revolver and the 2020 DDTL (as defined below).
|
Upon the Reversion Date, the ratios will revert back to the ratios in the 2018 Credit Agreement except that the total leverage ratio will be 4.00:1.00, with respect to the second fiscal quarter of 2021, returning to 3.50:1:00 thereafter. The Senior Secured Leverage Ratio and minimum liquidity covenants will no longer be applicable following the Reversion Date.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The 2020 Amendment adds Spirit AeroSystems North Carolina, Inc. as an additional guarantor (the “New Guarantor”) and provides for the grant of security interests to the lenders under the 2018 Credit Agreement with respect to certain real property and personal property, including certain equity interests, owned by Spirit, as borrower, and the Guarantors, which include Holdings and the New Guarantor. Such guarantee and security interests will be released, at the option of Spirit, so long as no default or event of default shall exist at the time thereof, or immediately after giving effect thereto, if (A) (I) the senior unsecured debt rating of Spirit is “BBB-” or higher as determined by Standard & Poor’s Financial Services LLC (“S&P”), and (II) the senior unsecured debt rating of Spirit is “Baa3” or higher as determined by Moody’s Investors Service, Inc. (“Moody’s”), or (B) S&P and Moody’s have each confirmed, in a writing in form and substance reasonably satisfactory to the administrative agent, that (I) the senior unsecured debt rating of Spirit will be “BBB-” or higher as determined by S&P, and (II) the senior unsecured debt rating of Spirit will be “Baa3” or higher as determined by Moody’s, in each case of the foregoing clauses (B)(I) and (B)(II), after giving effect to the release of the security (the date of such release, the “Security Release Date”).
Each of the Revolver, the Term Loan and the Delayed Draw Term Loan continues to mature on July 12, 2023, and, following the 2020 Amendment, bears interest, at Spirit’s option, at either LIBOR plus 2.375% or a defined “base rate” plus 1.375%, subject to adjustment to between LIBOR plus 1.625% and LIBOR plus 2.625% (or between base rate plus 0.625% and base rate plus 1.625%, as applicable) based on Spirit’s senior unsecured debt ratings provided by S&P and/or Moody’s.
The 2020 Amendment also added increased restrictions on our ability to incur additional indebtedness, consolidate or merge, make acquisitions and other investments (although the Asco Acquisition and the Bombardier Acquisition are expressly permitted thereunder), guarantee obligations of third parties, make loans or advances, declare or pay certain dividends or distributions on our stock, redeem or repurchase shares of our stock, or pledge assets. The 2020 Amendment provides that a number of these increased restrictions will no longer apply following the Security Release Date. The accordion feature to increase the 2018 Revolver commitments and/or institute one or more additional term loans will not be available to Spirit during the period between the effective date of the 2020 Amendment and the Security Release Date.
Spirit’s obligations under the 2018 Credit Agreement may be accelerated upon an event of default, which includes non-payment of principal or interest, material breach of a representation or warranty, breach of a covenant, cross-default to material indebtedness, material judgments, ERISA events, change in control, bankruptcy and invalidity of the guarantee of the Borrower’s obligations under the Credit Agreement made by the Company. The 2020 Amendment added new events of default for validity, perfection and priority of liens and the public announcement by Boeing of the termination or permanent cessation of the B737 MAX program, which will no longer apply following the Security Release Date.
Under the 2020 Amendment, the pricing table and tiers were updated to reflect the below. The pricing table will revert back to the 2018 Credit Agreement pricing table upon the Security Release Date.
|
|
|
|
|
|
|
|
|
Pricing Tier
|
Credit Rating (S&P/Moody's)
|
|
Revolving Commitment
Fee
|
|
Applicable Rate For LIBOR Loans and Letter of Credit Fees
|
|
Applicable Rate for Base Rate Loans
|
I
|
Greater than or equal to BBB+ / Baa1
|
|
0.125%
|
|
1.625%
|
|
0.625%
|
II
|
BBB / Baa2
|
|
0.15%
|
|
1.75%
|
|
0.75%
|
III
|
BBB- / Baa3
|
|
0.2%
|
|
1.875%
|
|
0.875%
|
IV
|
BB+ / Ba1
|
|
0.3%
|
|
2.125%
|
|
1.125%
|
V
|
BB / Ba2
|
|
0.375%
|
|
2.375%
|
|
1.375%
|
VI
|
Less than or equal to BB- / Ba3
|
|
0.5%
|
|
2.625%
|
|
1.625%
|
2020 Delayed Draw Term Loan
On February 24, 2020, Spirit also entered into a $375.0 senior unsecured delayed draw term loan among Spirit, as borrower, the Company, as parent guarantor, the New Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (the “2020 DDTL”). The 2020 DDTL is available to be drawn until August 15, 2020. The 2020 DDTL matures and shall be repaid in full (if drawn) on the earlier to occur of (a) September 15, 2020 and (b) the date that is 45 days after the date on which the Federal Aviation Administration re-certifies the B737 MAX program.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The 2020 DDTL bears interest, at Spirit’s option, at either LIBOR plus 3.625% or a defined “base rate” plus 2.625%. The 2020 DDTL is subject to substantially the same affirmative, negative and financial covenants and events of default as the 2018 Credit Agreement (as amended by the 2020 Amendment), except with respect to any covenants or events of default relating to security.
The 2020 DDTL is intended to function as a short-term liquidity facility, if needed. The commitments and loans under the 2020 DDTL are subject to mandatory reduction or prepayment, as applicable, with 100% of the net cash proceeds from issuances of indebtedness and equity interests, subject to certain exceptions. As a result, if Spirit receives net cash proceeds from issuances of indebtedness or equity that exceed the amount of the 2020 DDTL, the commitments under that facility will be canceled and any amounts outstanding prepaid. Spirit may pursue financing options in the near term that would result in the cancellation of this facility.
Senior Notes
2026 Notes. In June 2016, Spirit issued $300.0 in aggregate principal amount of 3.850% Senior Notes due June 15, 2026 (the “2026 Notes”) with interest payable, in cash in arrears, on June 15 and December 15 of each year, beginning December 15, 2016. As of December 31, 2019, the outstanding balance of the 2026 Notes was $300.0 and the carrying value was $297.8. The indenture for the 2026 Notes contains covenants that limit Spirit’s, the Company’s and certain of the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to create liens without granting equal and ratable liens to the holders of the 2026 Notes and enter into sale and leaseback transactions. These covenants are subject to a number of qualifications and limitations. In addition, the indenture provides for customary events of default. On February 24, 2020, Spirit entered into a Second Supplemental Indenture (the “Supplemental Indenture”) by and among Spirit, the Company, the New Guarantor, and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with the 2026 Notes. Under the Supplemental Indenture, the noteholders were granted security on an equal and ratable basis with the lenders under the 2018 Credit Agreement (as amended by the 2020 Amendment) until the security in favor of the lenders under the 2028 Credit Agreement is released. The Supplemental Indenture also added the New Guarantor as an additional guarantor under the indenture governing the 2026 Notes. The guarantee of the New Guarantor will be released upon the release of its guarantee under the 2018 Credit Agreement.
2022 Notes. On May 22, 2018, the Company commenced an offer to purchase for cash (the “Tender Offer”) any and all of the $300.0 outstanding principal amount of our 5 1/4% Senior Notes due 2022 (the “2022 Notes”). The Tender Offer was made pursuant to an Offer to Purchase dated May 22, 2018, and a related Letter of Transmittal and Notice of Guaranteed Delivery, which set forth the terms and conditions of the Tender Offer in full detail. Under the terms of the Tender Offer, holders of 2022 Notes who validly tendered their notes at or prior to May 29, 2018 received, in whole dollars, $1,028.50 per $1,000 principal amount of Notes tendered. Tendering holders received accrued and unpaid interest from the last applicable interest payment date to, but not including, the settlement date of the Tender Offer.
On May 30, 2018, Spirit repurchased $202.6 aggregate principal amount of its 2022 Notes pursuant to the Tender Offer. In addition, on June 29, 2018, Spirit redeemed the remaining $97.4 aggregate principal amount of the 2022 Notes outstanding. The redemption price of the 2022 Notes was 102.85% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date of June 29, 2018. Following the redemption on June 29, 2018, none of the 2022 Notes remain outstanding.
As a result of the extinguishment of the 2022 Notes, the Company recognized a loss on extinguishment of $13.2, all of which is reflected within amortization of deferred financing fees on the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2018.
New Notes. On May 30, 2018, Spirit entered into an Indenture (the “Indenture”) by and among Spirit, the Company and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with Spirit’s offering of $300.0 aggregate principal amount of its Senior Floating Rate Notes due 2021 (the “Floating Rate Notes”), $300.0 aggregate principal amount of its 3.950% Senior Notes due 2023 (the “2023 Notes”) and $700.0 aggregate principal amount of its 4.600% Senior Notes due 2028 (the “2028 Notes” and, together with the Floating Rate Notes and the 2023 Notes, the “New Notes”). The Company guaranteed Spirit’s obligations under the Notes on a senior unsecured basis (the “Guarantees”).
The Floating Rate Notes bear interest at a rate per annum equal to three-month LIBOR, as determined in the case of the initial interest period, on May 25, 2018, and thereafter at the beginning of each quarterly period as described herein, plus 80 basis points and mature on June 15, 2021. Interest on the Floating Rate Notes is payable on March 15, June 15, September 15 and December 15 of each year, beginning on September 15, 2018. The 2023 Notes bear interest at a rate of 3.950% per annum and mature on June 15, 2023. The 2028 Notes bear interest at a rate of 4.600% per annum and mature on June 15, 2028. Interest on the 2023 Notes and 2028 Notes is payable on June 15 and December 15 of each year, beginning on December 15, 2018. The outstanding
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
balance of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $300.0, $300.0, and $700.0 as of December 31, 2019, respectively. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $299.1, $298.3, and $694.1 as of December 31, 2019, respectively.
The Notes and the Guarantees have been registered under the Securities Act of 1933, as amended (the “Act”), pursuant to a Registration Statement on Form S-3 (No. 333-211423) previously filed with the SEC under the Act.
The Indenture contains covenants that limit Spirit’s, the Company’s and certain of the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to create liens without granting equal and ratable liens to the holders of the New Notes and enter into sale and leaseback transactions. These covenants are subject to a number of qualifications and limitations. In addition, the Indenture provides for customary events of default.
As of December 31, 2019, the Company was and expects to remain in full compliance with all covenants contained in the indentures governing the 2021 Notes, 2023 Notes, 2026 Notes, and the 2028 Notes through December 31, 2020.
17. Pension and Other Post-Retirement Benefits
Multi-employer Pension Plan
In connection with the collective bargaining agreement signed with the International Association of Machinists and Aerospace Workers (“IAM”), the Company contributes to a multi-employer defined benefit pension plan (“IAM National Pension Fund”). As of July 1, 2015, the level of contribution, as specified in the bargaining agreement was, in whole dollars, $1.75 per hour of employee service. The AIM bargaining agreement provided for a $0.05 per hour increase, in whole dollars, effective July 1 of each year through 2019. Effective July 1, 2019 the level of employee contribution increased to $1.95 per hour and will remain at $1.95 per hour through contract expiration. The IAM contract expires June 24, 2023.
The collective bargaining agreement with the International Union, Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) requires the Company to contribute a specified amount per hour of service to the IAM National Pension Fund. The specified amount was $1.70 per hour in 2019. Per the negotiated UAW collective bargaining agreement, the pension contributions, in whole dollars, was $1.70 per hour effective January 1, 2019 and will be $1.75 per hour effective January 1, 2020 through year 2025.
The risk of this multi-employer plan is different from single-employer plans in the following aspects:
|
|
1.
|
Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.
|
|
|
2.
|
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
|
|
|
3.
|
If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
|
The following table summarizes the multi-employer plan to which the Company contributes. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2018 and 2019 is for the plan's year-end at December 31, 2018, and December 31, 2019, respectively. The zone status is based on information received from the plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Protection Act Zone Status
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
Date of
Collective-
Bargaining
Agreement
|
|
|
|
|
FIP/RP
Status
Pending/
Implemented
|
|
Contributions of the Company
|
|
|
|
|
EIN/Pension
Plan Number
|
|
|
Surcharge
Imposed
|
|
Pension Fund
|
2018
|
|
2019
|
|
2017
|
|
2018
|
|
2019
|
|
IAM National Pension Fund
|
51-60321295
|
|
Green
|
|
Red
|
|
Yes
|
|
$
|
30.3
|
|
|
$
|
35.0
|
|
|
$
|
40.7
|
|
|
Yes
|
|
IAM June 24, 2023
UAW December 7, 2025
|
Pension Fund
|
Year Company Contributions to Plan Exceeded More Than 5 Percent of
Total Contributions (as of December 31 of the Plan’s Year-End)
|
IAM National Pension Fund
|
2017, 2018, 2019
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Defined Contribution Plans
The Company contributes to a defined contribution plan available to all U.S. employees, excluding IAM and UAW represented employees. Under the plan, the Company makes a matching contribution of 75% of the employee contribution to a maximum 8% of eligible individual employee compensation. In addition, non-matching contributions based on an employee’s age and years of service are paid at the end of each calendar year for certain employee groups.
The Company recorded $35.9, $35.1, and $33.6 in contributions to these plans for the twelve months ended December 31, 2019, 2018, and 2017, respectively.
On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined contribution pension plan for those employees who are hired after the date of acquisition. Under the plan, the Company contributes 8% of base salary while participating employees are required to contribute 4% of base salary. The Company recorded $4.1 in contributions to this plan for the twelve months ended December 31, 2019, $6.8 in contributions for the twelve months ended December 31, 2018 and $5.4 in contributions for the twelve months ended December 31, 2017.
Defined Benefit Pension Plans
Effective June 17, 2005, pension assets and liabilities were spun-off from three Boeing qualified plans into four qualified Spirit plans for each Spirit employee who did not retire from Boeing by August 1, 2005. Effective December 31, 2005, all four qualified plans were merged together. In addition, Spirit has one nonqualified plan providing supplemental benefits to executives who transferred from a Boeing nonqualified plan to a Spirit plan and elected to keep their benefits in this plan. Both plans are frozen as of the date of the Boeing Acquisition (i.e., no future service benefits are being earned in these plans). The Company intends to fund its qualified pension plan through a trust. Pension assets are placed in trust solely for the benefit of the pension plans’ participants and are structured to maintain liquidity that is sufficient to pay benefit obligations.
On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined benefit pension plan for those employees that had pension benefits remaining in BAE Systems’ pension plan. In accordance with U.K. legislation, the plan and its assets are managed by an independent trustee company. The investment strategy adopted by this trustee is documented in a Statement of Investment Principles in line with U.K. legislation. The principles for the investment strategy are to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. The trustee has invested the plan assets in pooled arrangements with authorized investment companies that were selected to be consistent with the plan's overall investment principles and strategy. Effective December 31, 2013, the U.K. pension plan was closed and benefits were frozen and thereafter subject only to statutory pension revaluation.
Other Post-Retirement Benefit Plans
The Company also has post-retirement health care coverage for eligible U.S. retirees and qualifying dependents prior to age 65. Eligibility for employer-provided benefits is limited to those employees who were employed at the date of the Boeing Acquisition and retire on or after attainment of age 62 and 10 years of service. Employees who do not satisfy these eligibility requirements can retire with post-retirement medical benefits at age 55 and 10 years of service, but they must pay the full cost of medical benefits provided.
Obligations and Funded Status
The following tables reconcile the funded status of both pension and post-retirement medical benefits to the balance on the balance sheets for the fiscal years 2019 and 2018. Benefit obligation balances presented in the tables reflect the projected benefit obligation and accumulated benefit obligation for the Company’s pension plans, and accumulated post-retirement benefit obligations for the Company’s post-retirement medical plan. The Company uses an end of fiscal year measurement date of December 31 for the Company's U.S. pension and post-retirement medical plans. Special termination benefits for the period ended December 31, 2019 are related to a voluntary retirement program offered by the Company in the second quarter of 2019.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other
Post-Retirement
Benefits
|
|
Periods Ended
December 31,
|
|
Periods Ended
December 31,
|
U.S. Plans
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
997.0
|
|
|
$
|
1,084.4
|
|
|
$
|
40.3
|
|
|
$
|
47.2
|
|
Service cost
|
—
|
|
|
—
|
|
|
0.9
|
|
|
1.1
|
|
Employee contributions
|
—
|
|
|
—
|
|
|
0.9
|
|
|
1.0
|
|
Interest cost
|
36.5
|
|
|
34.7
|
|
|
1.2
|
|
|
1.0
|
|
Actuarial losses (gains)
|
141.1
|
|
|
(91.7
|
)
|
|
1.8
|
|
|
(2.4
|
)
|
Special termination benefits
|
5.2
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
Plan Settlements
|
(49.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Benefits paid
|
(33.3
|
)
|
|
(30.4
|
)
|
|
(7.2
|
)
|
|
(7.6
|
)
|
Projected benefit obligation at the end of the period
|
$
|
1,096.6
|
|
|
$
|
997.0
|
|
|
$
|
41.8
|
|
|
$
|
40.3
|
|
Assumptions used to determine benefit obligation:
|
|
|
|
|
|
|
|
Discount rate
|
3.19
|
%
|
|
4.21
|
%
|
|
2.55
|
%
|
|
3.74
|
%
|
Rate of compensation increase
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Medical assumptions:
|
|
|
|
|
|
|
|
Trend assumed for the year
|
N/A
|
|
|
N/A
|
|
|
5.90
|
%
|
|
6.24
|
%
|
Ultimate trend rate
|
N/A
|
|
|
N/A
|
|
|
4.50
|
%
|
|
4.50
|
%
|
Year that ultimate trend rate is reached
|
N/A
|
|
|
N/A
|
|
|
2038
|
|
|
2038
|
|
Change in fair value of plan assets:
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
1,302.8
|
|
|
$
|
1,410.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual (loss) return on assets
|
299.7
|
|
|
(77.1
|
)
|
|
—
|
|
|
—
|
|
Employer contributions to plan
|
0.1
|
|
|
0.1
|
|
|
6.3
|
|
|
6.6
|
|
Employee contributions to plan
|
—
|
|
|
—
|
|
|
0.9
|
|
|
1.0
|
|
Plan Settlements
|
(49.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Benefits paid
|
(33.2
|
)
|
|
(30.5
|
)
|
|
(7.2
|
)
|
|
(7.6
|
)
|
Expenses paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Ending balance
|
$
|
1,519.5
|
|
|
$
|
1,302.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Reconciliation of funded status to net amounts recognized:
|
|
|
|
|
|
|
|
Funded status (deficit)
|
$
|
422.9
|
|
|
$
|
305.8
|
|
|
$
|
(41.8
|
)
|
|
$
|
(40.3
|
)
|
Net amounts recognized
|
$
|
422.9
|
|
|
$
|
305.8
|
|
|
$
|
(41.8
|
)
|
|
$
|
(40.3
|
)
|
Amounts recognized in the balance sheet:
|
|
|
|
|
|
|
|
Noncurrent assets
|
$
|
424.2
|
|
|
$
|
307.0
|
|
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(0.1
|
)
|
|
—
|
|
|
(7.3
|
)
|
|
(6.9
|
)
|
Noncurrent liabilities
|
(1.2
|
)
|
|
(1.2
|
)
|
|
(34.5
|
)
|
|
(33.4
|
)
|
Net amounts recognized
|
$
|
422.9
|
|
|
$
|
305.8
|
|
|
$
|
(41.8
|
)
|
|
$
|
(40.3
|
)
|
Amounts not yet reflected in net periodic benefit cost and included in AOCI:
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income
|
$
|
(46.0
|
)
|
|
$
|
(141.9
|
)
|
|
$
|
22.6
|
|
|
$
|
27.5
|
|
Cumulative employer contributions in excess of net periodic benefit cost
|
468.9
|
|
|
447.7
|
|
|
(64.4
|
)
|
|
(67.8
|
)
|
Net amount recognized in the balance sheet
|
$
|
422.9
|
|
|
$
|
305.8
|
|
|
$
|
(41.8
|
)
|
|
$
|
(40.3
|
)
|
Information for pension plans with benefit obligations in excess of plan assets:
|
|
|
|
|
|
|
|
Projected benefit obligation
|
$
|
1.3
|
|
|
$
|
1.2
|
|
|
$
|
41.8
|
|
|
$
|
40.3
|
|
Accumulated benefit obligation
|
1.3
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Periods Ended
December 31,
|
U.K. Plans
|
2019
|
|
2018
|
Change in projected benefit obligation:
|
|
|
|
Beginning balance
|
$
|
59.9
|
|
|
$
|
76.9
|
|
Service cost
|
0.9
|
|
|
1.3
|
|
Interest cost
|
1.6
|
|
|
1.7
|
|
Actuarial loss (gain)
|
5.5
|
|
|
(6.9
|
)
|
Benefits paid
|
(0.8
|
)
|
|
(0.6
|
)
|
Expense paid
|
(0.9
|
)
|
|
(1.3
|
)
|
Plan settlements
|
(2.1
|
)
|
|
(7.5
|
)
|
Exchange rate changes
|
2.6
|
|
|
(3.7
|
)
|
Projected benefit obligation at the end of the period
|
$
|
66.7
|
|
|
$
|
59.9
|
|
Assumptions used to determine benefit obligation:
|
|
|
|
Discount rate
|
2.10
|
%
|
|
3.00
|
%
|
Rate of compensation increase
|
3.15
|
%
|
|
3.40
|
%
|
Change in fair value of plan assets:
|
|
|
|
Beginning balance
|
$
|
79.6
|
|
|
$
|
96.8
|
|
Actual return (loss) on assets
|
11.1
|
|
|
(3.0
|
)
|
Company contributions
|
1.7
|
|
|
1.7
|
|
Plan settlements
|
(2.6
|
)
|
|
(9.1
|
)
|
Expenses paid
|
(0.9
|
)
|
|
(1.3
|
)
|
Benefits paid
|
(0.8
|
)
|
|
(0.6
|
)
|
Exchange rate changes
|
3.5
|
|
|
(4.9
|
)
|
Ending balance
|
$
|
91.6
|
|
|
$
|
79.6
|
|
Reconciliation of funded status to net amounts recognized:
|
|
|
|
Funded status
|
24.9
|
|
|
19.7
|
|
Net amounts recognized
|
$
|
24.9
|
|
|
$
|
19.7
|
|
Amounts recognized in the balance sheet:
|
|
|
|
Noncurrent assets
|
$
|
24.9
|
|
|
$
|
19.7
|
|
Noncurrent liabilities
|
—
|
|
|
—
|
|
Net amounts recognized
|
$
|
24.9
|
|
|
$
|
19.7
|
|
Amounts not yet reflected in net periodic benefit cost and included in AOCI:
|
|
|
|
Accumulated other comprehensive income (loss)
|
5.9
|
|
|
3.1
|
|
Prepaid pension cost
|
19.0
|
|
|
16.6
|
|
Net amount recognized in the balance sheet
|
$
|
24.9
|
|
|
$
|
19.7
|
|
Information for pension plans with benefit obligations in excess of plan assets:
|
|
|
|
Projected benefit obligation
|
$
|
—
|
|
|
$
|
—
|
|
Accumulated benefit obligation
|
—
|
|
|
—
|
|
Fair value of assets
|
$
|
—
|
|
|
$
|
—
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Annual Expense
The components of pension and other post-retirement benefit plans expense for the U.S. plans and the assumptions used to determine benefit obligations for each of the periods ended December 31, 2019, 2018, and 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other
Post-Retirement
Benefits
|
|
Periods Ended
December 31,
|
|
Periods Ended
December 31,
|
U.S. Plans
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
Components of net periodic benefit cost (income):
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
1.1
|
|
|
$
|
1.2
|
|
Interest cost
|
36.5
|
|
|
34.7
|
|
|
35.7
|
|
|
1.2
|
|
|
1.1
|
|
|
1.2
|
|
Expected return on plan assets
|
(66.7
|
)
|
|
(66.9
|
)
|
|
(69.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of net (gain) loss
|
0.5
|
|
|
—
|
|
|
—
|
|
|
(2.2
|
)
|
|
(2.3
|
)
|
|
(2.2
|
)
|
Amortization of prior service costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
|
(0.9
|
)
|
|
(0.9
|
)
|
Settlement (gain) loss recognized(1)
|
3.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Special termination benefits(1)
|
5.2
|
|
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
Net periodic benefit (income) cost
|
(21.1
|
)
|
|
(32.2
|
)
|
|
(34.1
|
)
|
|
2.9
|
|
|
(1.0
|
)
|
|
(0.7
|
)
|
Other changes recognized in OCI:
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other OCI (income) loss
|
$
|
(95.9
|
)
|
|
$
|
52.3
|
|
|
$
|
(24.8
|
)
|
|
$
|
4.9
|
|
|
$
|
0.8
|
|
|
$
|
4.2
|
|
Total recognized in other net periodic benefit and OCI (income) loss
|
$
|
(117.0
|
)
|
|
$
|
20.1
|
|
|
$
|
(58.9
|
)
|
|
$
|
7.8
|
|
|
$
|
(0.2
|
)
|
|
$
|
3.5
|
|
Assumptions used to determine net periodic benefit costs:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
4.21
|
%
|
|
3.59
|
%
|
|
4.15
|
%
|
|
3.74
|
%
|
|
3.03
|
%
|
|
3.21
|
%
|
Expected return on plan assets
|
5.00
|
%
|
|
4.80
|
%
|
|
5.50
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Salary increases
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Medical Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Trend assumed for the year
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
6.24
|
%
|
|
6.59
|
%
|
|
6.93
|
%
|
Ultimate trend rate
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
4.50
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
Year that ultimate trend rate is reached
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
2038
|
|
|
2038
|
|
|
2038
|
|
(1) Special termination benefits as of December 31, 2019 is a combination of pension value plan, postretirement medical plan, offset by a reduction in the Company's net benefit obligation. Due to settlement accounting, the Company remeasured the pension assets and obligations which resulted in a $95.9 impact to OCI that is included in the Company's Consolidated Statements of Comprehensive Income and a charge of $3.4 that was recorded to Other income (expense).
The estimated net gain that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year is $0.0 for Pension Benefits and $2.8 for Other Post-Retirement Benefits plans.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The components of the pension benefit plan expense for the U.K. plans and the assumptions used to determine benefit obligations for each of the periods ended December 31, 2019, 2018, and 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Periods Ended
December 31,
|
U.K. Plans
|
2019
|
|
2018
|
|
2017
|
Components of net periodic benefit cost (income):
|
|
|
|
|
|
Service cost
|
$
|
0.9
|
|
|
$
|
1.3
|
|
|
$
|
1.3
|
|
Interest cost
|
1.7
|
|
|
1.7
|
|
|
2.0
|
|
Expected return on plan assets
|
(2.4
|
)
|
|
(2.8
|
)
|
|
(2.9
|
)
|
Settlement gain
|
(0.2
|
)
|
|
(0.4
|
)
|
|
(0.3
|
)
|
Net periodic benefit cost (income)
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
$
|
0.1
|
|
Other changes recognized in OCI:
|
|
|
|
|
|
Total (income) recognized in OCI
|
$
|
(3.2
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(6.7
|
)
|
Total recognized in net periodic benefit cost and OCI
|
$
|
(3.2
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(6.6
|
)
|
Assumptions used to determine net periodic benefit costs:
|
|
|
|
|
|
Discount rate
|
3.00
|
%
|
|
2.60
|
%
|
|
2.70
|
%
|
Expected return on plan assets
|
3.10
|
%
|
|
3.10
|
%
|
|
3.20
|
%
|
Salary increases
|
3.40
|
%
|
|
3.35
|
%
|
|
3.20
|
%
|
The estimated net (gain) loss that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year for the U.K. plan is zero.
The adoption of ASU 2017-07 in 2018 requires the Company to record only the service component of net periodic benefit cost in operating profit and the non-service components of net periodic benefit cost (i.e., interest cost, expected return on plan assets, amortization of prior service cost, special termination benefits, and net actuarial gains or losses) as part of non-operating income. Results for the period ended December 31, 2017 have been adjusted to reflect this accounting change.
Assumptions
The Company sets the discount rate assumption annually for each of its retirement-related benefit plans as of the measurement date, based on a review of projected cash flow and a long-term high-quality corporate bond yield curve. 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 (income)/cost for the upcoming plan year. During 2015, the mortality assumption for the U.S. plans was updated to Mercer’s MRP-2007 generational mortality tables for non-annuitants and Mercer’s MILES-2010 generational tables for the Auto, Industrial Goods and Transportation group for annuitants both reflecting Mercer’s MMP-2007 improvement scale. In 2018, the Company incorporated the MMP-2018 improvement scale. MMP-2018 is a Mercer-developed scale that uses the same basic model as the Society of Actuaries MP-2018 scale, but with different parameters and adjustments for actual experience since 2006. A blue collar adjustment is reflected for the hourly union participants and a white collar adjustment is reflected for all other participants. Actuarial gains and losses are amortized using the corridor method over the average working lifetimes of active participants/membership.
The pension expected return on assets assumption is derived from the long-term expected returns based on the investment allocation by class specified in the Company's investment policy. The expected return on plan assets determined on each measurement date is used to calculate the net periodic benefit (income)/cost of the upcoming plan year.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. To determine the health care cost trend rates the Company considers national health trends and adjusts for its specific plan design and locations. The trend and aging assumptions were updated during 2016 to reflect more current trends. These assumptions were reviewed in 2019, and it was determined they were still reasonable and therefore were unchanged.
A one-percentage point increase in the initial through ultimate assumed health care trend rates would have increased the accumulated post-retirement benefit obligation by $2.1 at December 31, 2019 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2019 by $0.1. A one-percentage point decrease would have decreased the
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
obligation by $2.0 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2019 by $0.1.
U.S. Plans
The Company’s investment objective is to achieve long-term growth of capital, with exposure to risk set at an appropriate level. This objective shall be accomplished through the utilization of a diversified asset mix consisting of equities (domestic and international) and taxable fixed income securities. The allowable asset allocation range is:
|
|
|
Equities
|
20 - 50%
|
Fixed income
|
50 - 80%
|
Real estate
|
0 - 7%
|
Investment guidelines include that no security, except issues of the U.S. Government, shall comprise more than 5% of total Plan assets and further, no individual portfolio shall hold more than 7% of its assets in the securities of any single entity, except issues of the U.S. Government. The following derivative transactions are prohibited — leverage, unrelated speculation and “exotic” collateralized mortgage obligations or CMOs. Investments in hedge funds, private placements, oil and gas and venture capital must be specifically approved by the Company in advance of their purchase.
The Company’s plans have asset allocations for the U.S., as of December 31, 2019 and December 31, 2018, as follows:
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Asset Category — U.S.
|
|
|
|
Equity securities — U.S.
|
25
|
%
|
|
24
|
%
|
Equity securities — International
|
4
|
%
|
|
3
|
%
|
Debt securities
|
69
|
%
|
|
71
|
%
|
Real estate
|
2
|
%
|
|
2
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
U.K. Plans
The Trustee’s investment objective is to ensure that they can meet their obligation to the beneficiaries of the Plan. An additional objective is to achieve a return on the total Plan, which is compatible with the level of risk considered appropriate. The overall benchmark allocation of the Plan’s assets is:
|
|
|
Equity securities
|
12 - 16%
|
Debt securities
|
80%
|
Property
|
6 - 8%
|
The Company’s plans have asset allocations for the U.K., as of December 31, 2019 and December 31, 2018, as follows:
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Asset Category — U.K.
|
|
|
|
Equity securities
|
15
|
%
|
|
36
|
%
|
Debt securities
|
80
|
%
|
|
60
|
%
|
Other
|
5
|
%
|
|
4
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
Projected contributions and benefit payments
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Required pension contributions under Employee Retirement Income Security Act (ERISA) regulations are expected to be zero in 2020 and discretionary contributions are not expected in 2020. SERP and post-retirement medical plan contributions in 2020 are expected to be $7.3. Expected contributions to the U.K. plan for 2020 are $1.8.
The Company monitors its defined benefit pension plan asset investments on a quarterly basis and believes that the Company is not exposed to any significant credit risk in these investments.
The total benefits expected to be paid over the next ten years from the plans' assets or the assets of the Company, by country, are as follows:
|
|
|
|
|
|
|
|
|
U.S.
|
Pension Plans
|
|
Other
Post-Retirement
Benefit Plans
|
2020
|
$
|
39.2
|
|
|
$
|
7.3
|
|
2021
|
$
|
42.7
|
|
|
$
|
6.7
|
|
2022
|
$
|
46.2
|
|
|
$
|
5.5
|
|
2023
|
$
|
49.2
|
|
|
$
|
5.0
|
|
2024
|
$
|
52.2
|
|
|
$
|
4.2
|
|
2025-2029
|
$
|
295.3
|
|
|
$
|
15.1
|
|
|
|
|
|
|
U.K.
|
Pension Plans
|
2020
|
$
|
0.8
|
|
2021
|
$
|
0.9
|
|
2022
|
$
|
0.9
|
|
2023
|
$
|
0.9
|
|
2024
|
$
|
0.9
|
|
2025-2029
|
$
|
4.8
|
|
Fair Value Measurements
The pension plan assets are valued at fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
Temporary Cash Investments — These investments consist of U.S. dollars and foreign currencies held in master trust accounts. Foreign currencies held are reported in terms of U.S. dollars based on currency exchange rates readily available in active markets. These temporary cash investments are classified as level 1 investments.
Collective Investment Trusts — These investments are public investment vehicles valued using market prices and performance of the fund. The trust allocates notional units to the policy holder based on the underlying notional unit buy (offer) price using the middle market price plus transaction costs. These investments are classified within level 2 of the valuation hierarchy. In addition, the collective investment trust includes a real estate fund, which is classified within level 3 of the valuation hierarchy.
Commingled Equity and Bond Funds — These investments are valued at the closing price reported by the Plan Trustee. These investments are not being traded in an active market, but are backed by various investment securities managed by the Bank of New York. Fair value is being calculated using inputs that rely on the Bank of New York’s own assumptions, which are based on underlying investments that are traded on an active market and classified within level 2 of the valuation hierarchy.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
As of December 31, 2019 and December 31, 2018, the pension plan assets measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2019 Using
|
Description
|
December 31, 2019 Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Temporary Cash Investments
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collective Investment Trusts
|
91.6
|
|
|
—
|
|
|
87.6
|
|
|
3.4
|
|
Commingled Equity and Bond Funds
|
1,519.5
|
|
|
—
|
|
|
1,519.5
|
|
|
—
|
|
|
$
|
1,611.8
|
|
|
$
|
0.7
|
|
|
$
|
1,607.1
|
|
|
$
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018 Using
|
Description
|
December 31, 2018 Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Temporary Cash Investments
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collective Investment Trusts
|
79.4
|
|
|
—
|
|
|
76.2
|
|
|
3.2
|
|
Commingled Equity and Bond Funds
|
1,302.8
|
|
|
—
|
|
|
1,302.8
|
|
|
—
|
|
|
$
|
1,382.4
|
|
|
$
|
0.2
|
|
|
$
|
1,379.0
|
|
|
$
|
3.2
|
|
The table below sets forth a summary of changes in the fair value of the Plan’s level 3 investment assets and liabilities for the years ended December 31, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
Description
|
Beginning
Fair Value
|
|
Purchases
|
|
Gain (Loss)
|
|
Sales,
Maturities,
Settlements, Net
|
|
Exchange
rate
|
|
Ending Fair
Value
|
Collective Investment Trusts
|
$
|
3.2
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
3.4
|
|
|
$
|
3.2
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Description
|
Beginning
Fair Value
|
|
Purchases
|
|
Gain (Loss)
|
|
Sales,
Maturities,
Settlements, Net
|
|
Exchange
rate
|
|
Ending Fair
Value
|
Collective Investment Trusts
|
$
|
5.9
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
(2.8
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
3.2
|
|
|
$
|
5.9
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
(2.8
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
3.2
|
|
18. Capital Stock
Holdings has authorized 210,000,000 shares of stock. Of that, 200,000,000 shares are Common Stock, par value $0.01 per share, one vote per share and 10,000,000 shares are preferred stock, par value $0.01 per share.
In association with the Boeing Acquisition, Spirit executives with balances in Boeing’s Supplemental Executive Retirement Plan (“SERP”) were authorized to purchase a fixed number of units of Holdings “phantom stock” at $3.33 per unit based on the present value of their SERP balances. Under this arrangement, 860,244 phantom units were purchased. Any payment on account
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
of units may be made in cash or shares of Common Stock at the sole discretion of Holdings. The balance of SERP units was 38,754 and 47,487 as of December 31, 2019 and December 31, 2018, respectively.
Repurchases of Common Stock
During the twelve months ended December 31, 2018, the Company repurchased 9.3 million shares of its Common Stock for $800.0.
On October 28, 2018, the Board of Directors increased the capacity of its share repurchase program to $1,000. During the three months ended March 28, 2019, the Company repurchased 0.8 million shares of its Common Stock for $75.0. As a result, the total authorization amount remaining under the share repurchase program is $925.0. Share repurchases are currently on hold pending the outcome of the B737 MAX grounding. The 2020 Amendment imposes additional restrictions on the Company’s ability to repurchase shares.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
19. Stock Compensation
Holdings has established the stockholder-approved 2014 Omnibus Incentive Plan, as amended (the “Omnibus Plan”) to grant cash and equity awards to certain individuals. Compensation values are based on the value of Holdings’ Common Stock on the grant date, which is added to equity and charged to period expense. The Company’s Omnibus Plan was amended in October 2018 to allow for participants to make tax elections with respect to their equity awards.
Holdings has recognized a net total of $36.1, $27.4, and $22.1 of stock compensation expense for the twelve months ended December 31, 2019, 2018, and 2017, respectively. Stock compensation expense is charged in its entirety directly to selling, general and administrative expense.
Short-Term Incentive Plan
The Short-Term Incentive Program under the Omnibus Plan enables eligible employees to receive incentive benefits in the form of cash as determined by the Compensation Committee.
Board of Directors Stock Awards
The Company’s Omnibus Plan provides non-employee directors the opportunity to receive grants of restricted shares of Common Stock, or Restricted Stock Units (“RSUs”) or a combination of both Common Stock and RSUs. The Common Stock grants and RSU grants vest one year from the grant date subject to the directors compliance with the one-year service condition; however, the RSU grants are not payable until the director’s separation from service. The Board of Directors is authorized to make discretionary grants of shares or RSUs from time to time. Compensation values are based on the value of Holdings’ Common Stock on the grant date, which is added to equity and charged to period expense or included in inventory and cost of sales.
The Company expensed a net amount of $1.4, $1.3, and $1.0 for the restricted shares of Common Stock and RSUs for the twelve months ended December 31, 2019, 2018, and 2017, respectively. The Company’s unamortized stock compensation related to these restricted shares of Common Stock and RSUs is $0.5, which will be recognized over a weighted average remaining period of 5 months. The intrinsic value of the unvested restricted shares of Common Stock and RSUs, based on the value of the Company's stock at December 31, 2019, was $1.3, based on the value of the Company’s Common Stock and the number of unvested shares of restricted Common Stock and RSUs.
The following table summarizes grants of restricted Common Stock and RSUs to members of the Company’s Board of Directors for the twelve months ended December 31, 2019, 2018, and 2017:
|
|
|
|
|
|
|
|
|
|
Shares
|
Value(1)
|
|
Class A
|
|
Class A
|
|
|
(Thousands)
|
|
|
Board of Directors Stock Grants
|
|
|
|
|
Nonvested at December 31, 2016
|
26
|
|
|
$
|
1.2
|
|
|
Granted during period
|
24
|
|
|
1.2
|
|
|
Vested during period
|
(26
|
)
|
|
(1.2
|
)
|
|
Forfeited during period
|
—
|
|
|
—
|
|
|
Nonvested at December 31, 2017
|
24
|
|
|
1.2
|
|
|
Granted during period
|
17
|
|
|
1.4
|
|
|
Vested during period
|
(19
|
)
|
|
(1.0
|
)
|
|
Forfeited during period
|
—
|
|
|
—
|
|
|
Nonvested at December 31, 2018
|
22
|
|
|
1.6
|
|
|
Granted during period
|
17
|
|
|
1.5
|
|
|
Vested during period
|
(22
|
)
|
|
(1.7
|
)
|
|
Forfeited during period
|
—
|
|
|
—
|
|
|
Nonvested at December 31, 2019
|
17
|
|
|
$
|
1.4
|
|
|
_______________________________________
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
(1)
|
Value represents grant date fair value.
|
Long-Term Incentive Awards
Holdings has established the Long-Term Incentive Plan (the “LTIP”) under the Omnibus Plan to grant equity awards to certain employees. Generally, specified employees are entitled to receive a long-term incentive award that, for the 2019 year, consisted of the following:
|
|
•
|
60% of the award consisted of time-based, service-condition restricted Common Stock that vests in equal installments over a three-year period (the “RS Award”). Values for these awards are based on the value of Common Stock on the grant date.
|
|
|
•
|
20% of the award consisted of performance-based, market-condition restricted Common Stock that vests on the three-year anniversary of the grant date contingent upon TSR compared to the Company’s peers (the “TSR Award”). Values for these awards are initially measured on the grant date using estimated payout levels derived from a Monte Carlo valuation model.
|
|
|
•
|
20% of the award consisted of performance-based, (performance-condition) restricted Common Stock that vests on the three-year anniversary of the grant date contingent upon the Company’s cumulative three-year free cash flow as a percentage of the Company’s cumulative three-year revenues meeting certain pre-established goals (the “FCF Percentage Award”). Values for these awards are based on the dividend adjusted value of Common Stock on the grant date.
|
For the twelve months ended December 31, 2019, 303,638 shares of Common Stock with an aggregate grant date fair value of $27.3 were granted as RS Awards under the Company's LTIP. In addition, 127,802 shares of Common Stock with an aggregate grant date fair value of $13.4 were granted as TSR Awards and FCF Percentage Awards under the Company’s LTIP.
For the twelve months ended December 31, 2018, 295,482 shares of Common Stock with an aggregate grant date fair value of $25.6 were granted as RS Awards under the Company's LTIP. In addition, 156,279 shares of Common Stock with an aggregate grant date fair value of $14.1 were granted as TSR Awards under the Company’s LTIP.
For the twelve months ended December 31, 2017, 352,053 shares of Common Stock with an aggregate grant date fair value of $20.4 were granted as RS Awards under the Company’s LTIP. In addition, 292,160 shares of Common Stock with an aggregate grant date fair value of $15.0 were granted as TSR Awards under the Company’s LTIP.
The Company expensed a net total of $32.2, $26.1, and $21.1 for share of Common Stock issued under the LTIP for the twelve month periods ended December 31, 2019, 2018, and 2017, respectively.
The Company’s unamortized stock compensation related to these unvested shares of Common Stock is $33.7, which will be recognized over a weighted average remaining period of 1.7 years. The intrinsic value of the unvested shares of Common Stock issued under the LTIP at December 31, 2019 was $66.3, based on the value of the Company’s Common Stock and the number of unvested shares.
The following table summarizes the activity of the restricted shares under the LTIP for the twelve month periods ended December 31, 2019, 2018, and 2017:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value(1)
|
|
|
Common Stock
|
|
Common Stock
|
|
|
(Thousands)
|
|
|
|
Long-Term Incentive Plan/Long-Term Incentive Award under Omnibus Plan
|
|
|
|
|
Nonvested at December 31, 2016
|
1,557
|
|
|
$
|
67.3
|
|
|
Granted during period
|
644
|
|
|
35.5
|
|
|
Vested during period
|
(655
|
)
|
|
(25.0
|
)
|
|
Forfeited during period
|
(93
|
)
|
|
(4.4
|
)
|
|
Nonvested at December 31, 2017
|
1,453
|
|
|
73.4
|
|
|
Granted during period
|
451
|
|
|
39.7
|
|
|
Vested during period
|
(465
|
)
|
|
(24.1
|
)
|
|
Forfeited during period
|
(48
|
)
|
|
(3.0
|
)
|
|
Nonvested at December 31, 2018
|
1,391
|
|
|
86.0
|
|
|
Granted during period
|
431
|
|
|
40.6
|
|
|
Vested during period
|
(393
|
)
|
|
(24.2
|
)
|
|
Forfeited during period
|
(125
|
)
|
|
(8.4
|
)
|
|
Nonvested at December 31, 2019
|
1,304
|
|
|
$
|
94.0
|
|
|
_______________________________________
|
|
(1)
|
Value represents grant date fair value.
|
20. Income Taxes
The following summarizes pretax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
U.S.
|
$
|
552.4
|
|
|
$
|
655.0
|
|
|
$
|
426.6
|
|
International
|
110.7
|
|
|
101.2
|
|
|
108.0
|
|
Total (before equity earnings)
|
$
|
663.1
|
|
|
$
|
756.2
|
|
|
$
|
534.6
|
|
The tax provision contains the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Current
|
|
|
|
|
|
Federal
|
$
|
57.8
|
|
|
$
|
159.4
|
|
|
$
|
107.3
|
|
State
|
0.7
|
|
|
4.1
|
|
|
0.7
|
|
Foreign
|
(12.8
|
)
|
|
11.4
|
|
|
20.0
|
|
Total current
|
$
|
45.7
|
|
|
$
|
174.9
|
|
|
$
|
128.0
|
|
Deferred
|
|
|
|
|
|
Federal
|
$
|
71.8
|
|
|
$
|
(27.8
|
)
|
|
$
|
53.6
|
|
State
|
(11.4
|
)
|
|
(12.8
|
)
|
|
(0.2
|
)
|
Foreign
|
26.7
|
|
|
5.5
|
|
|
(1.4
|
)
|
Total deferred
|
87.1
|
|
|
(35.1
|
)
|
|
52.0
|
|
Total income tax provision
|
$
|
132.8
|
|
|
$
|
139.8
|
|
|
$
|
180.0
|
|
The income tax provision from operations differs from the tax provision computed at the U.S. federal statutory income tax rate due to the following:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Tax at U.S. Federal statutory rate
|
$
|
139.3
|
|
|
21.0
|
%
|
|
$
|
158.8
|
|
|
21.0
|
%
|
|
$
|
187.1
|
|
|
35.0
|
%
|
State income taxes, net of Federal benefit
|
14.9
|
|
|
2.3
|
|
|
18.1
|
|
|
2.4
|
|
|
8.8
|
|
|
1.6
|
|
State income tax credits, net of Federal benefit
|
(22.6
|
)
|
|
(3.4
|
)
|
|
(22.7
|
)
|
|
(3.0
|
)
|
|
(9.7
|
)
|
|
(1.8
|
)
|
Foreign rate differences
|
(7.1
|
)
|
|
(1.1
|
)
|
|
(6.2
|
)
|
|
(0.8
|
)
|
|
(20.6
|
)
|
|
(3.8
|
)
|
Research and experimentation
|
0.7
|
|
|
0.1
|
|
|
(5.4
|
)
|
|
(0.7
|
)
|
|
(2.6
|
)
|
|
(0.5
|
)
|
Domestic Production Activities Deduction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.1
|
)
|
|
(1.3
|
)
|
Interest on assessments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
Excess tax benefits
|
(2.5
|
)
|
|
(0.4
|
)
|
|
(4.0
|
)
|
|
(0.5
|
)
|
|
(4.8
|
)
|
|
(0.9
|
)
|
Non-deductible expenses
|
4.0
|
|
|
0.6
|
|
|
4.6
|
|
|
0.6
|
|
|
2.4
|
|
|
0.5
|
|
Transition tax
|
1.6
|
|
|
0.2
|
|
|
(5.4
|
)
|
|
(0.7
|
)
|
|
44.9
|
|
|
8.4
|
|
Re-measurement of Deferred Taxes
|
(2.0
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
(16.2
|
)
|
|
(3.0
|
)
|
Global Intangible Low-Taxed Income (GILTI) Tax
|
7.1
|
|
|
1.1
|
|
|
1.8
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
Other
|
(0.6
|
)
|
|
(0.1
|
)
|
|
0.2
|
|
|
—
|
|
|
(2.1
|
)
|
|
(0.5
|
)
|
Total income tax provision
|
$
|
132.8
|
|
|
20.0
|
%
|
|
$
|
139.8
|
|
|
18.5
|
%
|
|
$
|
180.0
|
|
|
33.7
|
%
|
In 2019, an amended tax return was filed in a foreign jurisdiction for one of the Company’s foreign subsidiaries impacting the amount of undistributed earnings included in the transition tax liability enacted by TCJA. The increase to the transition tax in 2019 is $1.6 which has been included as a component of income tax expense from continuing operations.
The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 31, 2019 there was $7.1 of GILTI tax expense resulting from $0.6 of income tax expense related to activity in 2019 and $6.5 of income tax expense related to the finalization of the 2018 amounts related to GILTI reported in the tax return as agreed upon with the IRS in the course of the Company’s participation in the Internal Revenue Service’s Compliance Assurance Process (“CAP”) program. As of December 31, 2018 there was $1.8 of GILTI tax expense. Tax expense related to GILTI is included as a component of income tax expense from continuing operations.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Significant tax effected temporary differences comprising the net deferred tax asset are as follows:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Long-term contracts
|
$
|
107.5
|
|
|
$
|
210.2
|
|
Post-retirement benefits other than pensions
|
9.8
|
|
|
9.5
|
|
Pension and other employee benefit plans
|
(88.5
|
)
|
|
(60.4
|
)
|
Employee compensation accruals
|
39.2
|
|
|
36.1
|
|
Depreciation and amortization
|
(117.8
|
)
|
|
(115.1
|
)
|
Inventory
|
0.4
|
|
|
0.5
|
|
State income tax credits
|
108.3
|
|
|
94.1
|
|
Accruals and reserves
|
40.3
|
|
|
46.2
|
|
Deferred production
|
—
|
|
|
(1.8
|
)
|
Net operating loss carryforward
|
0.4
|
|
|
0.4
|
|
Interest swap contract
|
0.2
|
|
|
—
|
|
Other
|
8.6
|
|
|
(2.3
|
)
|
Net deferred tax asset
|
108.4
|
|
|
217.4
|
|
Valuation allowance
|
(10.2
|
)
|
|
(13.2
|
)
|
Net deferred tax asset
|
98.2
|
|
|
204.2
|
|
Deferred tax detail above is included in the balance sheet and supplemental information as follows:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Non-current deferred tax assets
|
106.5
|
|
|
205.0
|
|
Non-current deferred tax liabilities
|
(8.3
|
)
|
|
(0.8
|
)
|
Net non-current deferred tax assets
|
$
|
98.2
|
|
|
$
|
204.2
|
|
Total deferred tax asset
|
$
|
98.2
|
|
|
$
|
204.2
|
|
The following is a roll forward of the deferred tax valuation allowance at December 31, 2019, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Balance at January 1
|
$
|
13.2
|
|
|
$
|
15.0
|
|
|
$
|
13.5
|
|
Income tax credits
|
(3.2
|
)
|
|
(2.2
|
)
|
|
1.6
|
|
Depreciation and amortization
|
0.2
|
|
|
0.1
|
|
|
0.1
|
|
Other
|
—
|
|
|
0.3
|
|
|
(0.2
|
)
|
Balance at December 31
|
$
|
10.2
|
|
|
$
|
13.2
|
|
|
$
|
15.0
|
|
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, we assess all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified.
The Company continues to maintain $10.2 in valuation allowances primarily against separate company North Carolina income tax credit deferred tax assets and North Carolina state net operating loss carryforwards. It is the Company's opinion that none of these North Carolina state income tax credits will be utilized before they expire and an $8.8 valuation allowance is recorded against the deferred tax asset. Additionally, it is the Company's opinion that none of the $16.0 North Carolina loss carryforwards, resulting in a $0.4 deferred tax asset, will be utilized before they expire and a $0.4 valuation allowance is recorded against the deferred tax asset.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Certain provisions within the TCJA effectively transition the U.S. to a territorial system and eliminates deferral on U.S. taxation for certain amounts of income which is not taxed at a minimum level. At this time, we continue to maintain that earnings of all foreign operating subsidiaries are indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation, inclusive of management actions and plans associated with the 737MAX production halt and slowdown, will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings to fund working capital requirements, service existing obligations, execute M&A transactions, and invest in efforts to secure future business. As a result, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities.
To the extent cash in excess of the needs identified above are generated from a key international operating subsidiary and a dividend is declared, we have completed analysis regarding potential dividend withholding taxes and anticipate that any associated withholding taxes would be immaterial based upon current law. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.
The beginning and ending unrecognized tax benefits reconciliation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Beginning balance at January 1
|
$
|
7.2
|
|
|
$
|
6.7
|
|
|
$
|
6.3
|
|
Gross increases related to current period tax positions
|
0.4
|
|
|
—
|
|
|
—
|
|
Gross increases related to prior period tax positions
|
—
|
|
|
0.5
|
|
|
0.4
|
|
Gross decreases related to prior period tax positions
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
Statute of limitations' expiration
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
Ending balance at December 31
|
$
|
5.4
|
|
|
$
|
7.2
|
|
|
$
|
6.7
|
|
Included in the December 31, 2019 balance was $5.4 in unrecognized tax benefits of which $4.2 would reduce the Company's effective tax rate if ultimately recognized. The Company’s federal audit is effectively complete under the CAP program for the 2018 tax year. The Company will continue to participate in the CAP program for the 2019 and 2020 tax year. The CAP program’s objective is to resolve issues in a timely, contemporaneous manner and eliminate the need for a lengthy post-filing examination. There are no open audits in the Company’s foreign jurisdictions.
The Company reports interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2019, and December 31, 2018, there was no accrued interest on the unrecognized tax benefit liability included in the balance sheets and there was no impact of interest on the Company’s unrecognized tax benefit liability during 2019 and 2018.
The Company continues to operate under a tax holiday in Malaysia effective through September 2024. The Company’s 2019 income tax expense reflects $5.7 of Malaysia tax holiday benefit for the year ended December 31, 2019.
Included in the deferred tax assets at December 31, 2019 are $94.1 in Kansas High Performance Incentive Program ("HPIP") Credit and $9.6 in Kansas Research & Development ("R&D") Credit, totaling $103.7 in gross Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas for which $8.9 expires in 2029, $14.6 expires in 2030, $8.7 expires in 2031, $14.6 expires in 2032, $15.2 expires in 2033, $28.8 expires in 2034, and $28.3 expires in 2035. The R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely.
The Company had $74.2 and $13.3 of income tax receivable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other current assets on the balance sheet as well as $6.3 and $5.8 of income tax payable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other current liabilities on the balance sheet. The Company had $5.3 and $3.7 of non-current income tax payable as of December 31, 2019 and December 31, 2018, respectively, which is reflected within other liabilities on the balance sheet.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
21. Equity
Employee Stock Purchase Plan
In April 2017, the stockholders approved the Spirit AeroSystems Holdings, Inc. Employee Stock Purchase Plan (the “ESPP”) with the associated registration statement on Form S-8 filed on September 6, 2017. The ESPP became effective on October 1, 2017. The Compensation Committee of the Board of Directors approved an amended and restated ESPP on January 21, 2020 to allow for dividend reinvestment, among other things. The ESPP is implemented over consecutive six-month offering periods, beginning on April 1 and October 1 of each year and ending on the last day of September and March, respectively. Shares are issued on the last trading day of each six-month offering period. Generally, any person who is employed by the Company, Spirit or by a subsidiary or affiliate of the Company that has been designated by the Compensation Committee may participate in the ESPP.
The maximum number of shares of the Company's Common Stock that may be purchased under the ESPP will be 1,000,000 shares, subject to adjustment for stock dividends, stock splits or combinations of shares of the Company's stock. The per-share purchase price for the Company's Common Stock purchased under the ESPP is 95% of the fair market value of a share of such stock on the last day of the offering period.
Dividends
The Company paid cash dividends of $0.12 per share of Common Stock in each quarter in 2019. The total amount of dividends paid during 2019 was $50.4. On February 6, 2020, the Company announced that its Board of Directors reduced its quarterly dividend to a penny per share to preserve liquidity until B737 MAX production reaches higher levels. Accordingly, on February 6, 2020, the Board declared a $0.01 per share quarterly cash dividend on the outstanding Common Stock of the Company payable on April 9, 2020 to stockholders of record at the close of business on March 20, 2020. The Board regularly evaluates the Company's capital allocation strategy and dividend policy. Any future determination to continue 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, including the requirements of financing agreements to which we may be a party. No assurance can be given that cash dividends will continue to be declared and paid at historical levels or at all.
Earnings per Share Calculation
Basic net income per share is computed using the weighted-average number of outstanding shares of Common Stock during the measurement period. Diluted net income per share is computed using the weighted-average number of outstanding shares of Common Stock and, when dilutive, potential outstanding shares of Common Stock during the measurement period.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Loss
|
|
Shares
|
|
Per
Share
Amount
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders
|
$
|
529.7
|
|
|
103.6
|
|
|
$
|
5.11
|
|
|
$
|
616.5
|
|
|
108.0
|
|
|
$
|
5.71
|
|
|
$
|
354.7
|
|
|
116.8
|
|
|
$
|
3.04
|
|
Income allocated to participating securities
|
0.4
|
|
|
0.1
|
|
|
|
|
|
0.5
|
|
|
0.1
|
|
|
|
|
|
0.2
|
|
|
0.1
|
|
|
|
|
Net income
|
$
|
530.1
|
|
|
|
|
|
|
|
|
$
|
617.0
|
|
|
|
|
|
|
|
|
$
|
354.9
|
|
|
|
|
|
|
|
Diluted potential common shares
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
530.1
|
|
|
104.7
|
|
|
$
|
5.06
|
|
|
$
|
617.0
|
|
|
109.1
|
|
|
$
|
5.65
|
|
|
$
|
354.9
|
|
|
117.9
|
|
|
$
|
3.01
|
|
Included in the outstanding common shares were 1.4 million, 1.4 million and 1.5 million of issued but unvested shares at December 31, 2019, 2018 and 2017, respectively, which are excluded from the basic EPS calculation.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss, net of tax, is summarized by component as follows:
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
Interest swaps
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Pension
|
$
|
(53.1
|
)
|
|
$
|
(116.7
|
)
|
SERP/ Retiree medical
|
17.1
|
|
|
17.2
|
|
Foreign currency impact on long term intercompany loan
|
(13.1
|
)
|
|
(17.4
|
)
|
Currency translation adjustment
|
(59.5
|
)
|
|
(79.7
|
)
|
Total accumulated other comprehensive loss
|
$
|
(109.2
|
)
|
|
$
|
(196.6
|
)
|
Amortization or settlement cost recognition of the pension plans’ net gain/(loss) reclassified from accumulated other comprehensive loss and realized into costs of sales and selling, general and administrative on the consolidated statements of operations was ($3.7), $0.3 and 0.3 for the twelve months ended December 31, 2019, 2018 and 2017, respectively.
Noncontrolling Interest
Noncontrolling interest at December 31, 2019 remained unchanged from the prior year at $0.5.
Repurchases of Common Stock
The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. As of December 31, 2019, no treasury shares have been reissued or retired.
On January 27, 2016, the Company announced that its Board of Directors authorized an additional new share repurchase program for the purchase of up to $600.0 of Common Stock (the “2016 Share Repurchase Program”). During the twelve month period ended December 31, 2016, the Company repurchased 14.2 million shares of its Common Stock for $649.6, which consisted of the remaining $50.0 from the prior share repurchase program and approximately all of the $600.0 of the authorized amount of the 2016 Share Repurchase Program.
On November 1, 2016, the Company's Board of Directors authorized a share repurchase program for the purchase of up to $600.0 of Common Stock (the “2017 Share Repurchase Program”). On July 25, 2017, the Company's Board of Directors authorized an increase to the 2017 Share Repurchase Program authorization up to an additional $400.0 of Common Stock. During the twelve month period ended December 31, 2017, the Company repurchased 7.5 million shares of common stock for $502.1.
On January 24, 2018, the Board of Directors approved an increase to the 2017 Share Repurchase Program authorization up to an additional $500.0. On October 24, 2018, the Board of Directors approved an increase to the 2017 Share Repurchase Program authorization up to an additional $800.0. During the twelve month ended December 31, 2018, the Company repurchased 9.3 million shares of common stock for $800.0.
During the twelve month ended December 31, 2019, the Company repurchased 0.8 million shares of its Common Stock for $75.8, which includes $75.0 repurchased under the 2017 Share Repurchase Program. As a result, the total authorization amount remaining under the current share repurchase program is approximately $925.0. Share repurchases are currently on hold pending the outcome of the B737 MAX grounding. The 2020 Amendment imposes additional restrictions on the Company’s ability to repurchase shares.
22. Commitments, Contingencies and Guarantees
Litigation
From time to time, the Company is subject to, and is presently involved in, litigation or other legal proceedings arising in the ordinary course of business.
On February 10, 2020 and February 24, 2020, two separate private securities class action lawsuits were filed against the Company in the U.S. District Court for the Northern District of Oklahoma, its Chief Executive Officer Tom Gentile III, former chief financial officer, Jose Garcia, and former controller (principal accounting officer), John Gilson. Allegations in each lawsuit
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
include (i) violations of Section 10(b) and Rule 10b-5 promulgated thereunder by all defendants, and (ii) violations of Section 20(a) of the Exchange Act against the individual defendants. The facts underlying the complaints relate to the accounting process compliance independent review (the “Accounting Review”) discussed in the Company’s January 30, 2020 press release and described under Management's Discussion and Analysis of Financial Condition and Results of Operations - Accounting Review.
Prior to the Company’s January 30, 2020 announcement, the Company voluntarily reported to the SEC the determination that, with respect to the third quarter of 2019, the Company did not comply with its established accounting processes related to potential third quarter contingent liabilities received after the quarter-end. The Company has communicated to the SEC that the Accounting Review is substantially complete. In the event the SEC commences an investigation with respect to these matters, the Company intends to cooperate fully.
While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available, it is the opinion of the Company that none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity.
From time to time, in the ordinary course of business and similar to others in the industry, the Company receives requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. The Company reviews such requests and notices and takes appropriate action. Additionally, the Company is subject to federal and state requirements for protection of the environment, including those for disposal of hazardous waste and remediation of contaminated sites. As a result, the Company is required to participate in certain government investigations regarding environmental remediation actions.
Customer and Vendor Claims
From time to time the Company receives, or is subject to, customer and vendor claims arising in the ordinary course of business, including, but not limited to, those related to product quality and late delivery. The Company accrues for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration multiple factors including without limitation our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of an unfavorable outcome, and the severity of any potential loss. Any accruals deemed necessary are reevaluated at least quarterly and updated as matters progress over time.
While the final outcome of these types of matters cannot be predicted with certainty, considering, among other things, the factual and legal defenses available, it is the opinion of the Company that, when finally resolved, no current claims will have a material adverse effect on the Company’s long-term financial position or liquidity. However, it is possible that the Company’s results of operations in a period could be materially affected by one or more of these other matters.
Commitments
The Company leases equipment and facilities under various non-cancelable finance and operating leases. The finance leasing arrangements extend through 2038. Minimum future lease payments under these leases at December 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
|
|
|
|
Operating
|
|
Present
Value
|
|
Interest
|
|
Total
|
2020
|
$
|
8.5
|
|
|
$
|
25.8
|
|
|
$
|
5.6
|
|
|
$
|
39.9
|
|
2021
|
$
|
7.5
|
|
|
$
|
26.7
|
|
|
$
|
4.4
|
|
|
$
|
38.6
|
|
2022
|
$
|
7.1
|
|
|
$
|
23.9
|
|
|
$
|
3.3
|
|
|
$
|
34.3
|
|
2023
|
$
|
6.0
|
|
|
$
|
21.8
|
|
|
$
|
2.3
|
|
|
$
|
30.1
|
|
2024
|
$
|
5.6
|
|
|
$
|
17.1
|
|
|
$
|
1.6
|
|
|
$
|
24.3
|
|
2025 and thereafter
|
$
|
30.3
|
|
|
$
|
31.8
|
|
|
$
|
4.5
|
|
|
$
|
66.6
|
|
Operating lease payments were as follows:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Minimum rentals
|
$
|
15.4
|
|
|
$
|
14.3
|
|
|
$
|
14.1
|
|
Total
|
$
|
15.4
|
|
|
$
|
14.3
|
|
|
$
|
14.1
|
|
Spirit's aggregate capital commitments totaled $119.9 and $114.9 at December 31, 2019 and December 31, 2018, respectively.
Guarantees
Contingent liabilities in the form of letters of guarantee have been provided by the Company. Outstanding guarantees were $21.5 and $27.3 at December 31, 2019 and December 31, 2018, respectively.
Restricted Cash - Collateral Requirements
The Company was required to maintain $16.4 and $20.2 of restricted cash as of December 31, 2019 and December 31, 2018, respectively, related to certain collateral requirements for obligations under its workers’ compensation programs. Restricted cash is included in "Other assets" in the Company's Consolidated Balance Sheet.
Indemnification
The Company has entered into customary indemnification agreements with its non-employee directors. Under those agreements, the Company agrees to indemnify each of these individuals against claims arising out of events or occurrences related to that individual’s service as the Company’s agent or the agent of any of its subsidiaries to the fullest extent legally permitted. In addition, the Company has obligations to its current and former officers to provide indemnification for litigation or governmental investigations, including expenses, consistent with the terms of its Bylaws and Certificate of Incorporation.
The Company has agreed to indemnify parties for specified liabilities incurred, or that may be incurred, in connection with transactions they have entered into with the Company. The Company is unable to assess the potential number of future claims that may be asserted under these indemnities, nor the amounts thereof (if any). As a result, the Company cannot estimate the maximum potential amount of future payments under these indemnities and therefore, no liability has been recorded.
Service and Product Warranties and Extraordinary Rework
Provisions for estimated expenses related to service and product warranties and certain extraordinary rework are evaluated on a quarterly basis. These costs are accrued and are recorded to unallocated cost of goods sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims, including the experience of industry peers. In the case of new development products or new customers, Spirit considers other factors including the experience of other entities in the same business and management judgment, among others. Service warranty and extraordinary work is reported in current liabilities and other liabilities on the balance sheet.
The warranty balance presented in the table below includes unresolved warranty claims that are in dispute in regards to their value as well as their contractual liability. The Company estimated the total costs related to some of these claims, however there is significant uncertainty surrounding the disposition of these disputed claims and as such, the ultimate determination of the provision’s adequacy requires significant management judgment. The amount of the specific provisions recorded against disputed warranty claims was $8.1 and $41.0 as of December 31, 2019 and December 31, 2018, respectively. These specific provisions represent the Company’s best estimate of probable warranty claims. Should the Company incur higher than expected warranty costs and/or discover new or additional information related to these warranty provisions, the Company may incur additional charges that exceed these recorded provisions. The Company utilized available information to make appropriate assessments, however the Company recognizes that data on actual claims experience is of limited duration and therefore, claims projections are subject to significant judgment. The amount of the reasonably possible disputed warranty claims in excess of the specific warranty provision was $12.1 and $34.0, as of December 31, 2019 and December 31, 2018, respectively.
The following is a roll forward of the service warranty and extraordinary rework balance at December 31, 2019, 2018 and 2017:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Balance, January 1
|
$
|
104.8
|
|
|
$
|
166.4
|
|
|
$
|
163.7
|
|
Charges to costs and expenses
|
(13.9
|
)
|
|
3.2
|
|
|
5.8
|
|
Payouts
|
(1.7
|
)
|
|
(1.2
|
)
|
|
(4.0
|
)
|
Impact of 2018 MOA(1)
|
—
|
|
|
(63.8
|
)
|
|
—
|
|
Impact of TGI Settlement(2)
|
(25.0
|
)
|
|
—
|
|
|
—
|
|
Exchange rate
|
0.5
|
|
|
0.2
|
|
|
0.9
|
|
Balance, December 31
|
$
|
64.7
|
|
|
$
|
104.8
|
|
|
$
|
166.4
|
|
_______________________________________
|
|
(1)
|
As part of the 2018 MOA, $63.8 of warranty provision was released, settled against previously held Accounts Receivable, net with no impact to earnings.
|
|
|
(2)
|
Due to a settlement on outstanding warranty issues in the first quarter of 2019, $25.0 of warranty provision was reclassified to accounts payable and was paid in the second quarter of 2019.
|
Bonds
Since the Company's incorporation, Spirit and its predecessor have periodically utilized City of Wichita issued Industrial Revenue Bonds (“IRBs”) to finance self-constructed and purchased real property at its Wichita site. Tax benefits associated with IRBs include provisions for a ten-year complete property tax abatement and a Kansas Department of Revenue sales tax exemption on all IRB funded purchases. Spirit and its predecessor purchased these IRBs so they are bondholders and debtor / lessee for the property purchased with the IRB proceeds.
Spirit recorded the property net of a finance lease obligation to repay the IRB proceeds on its balance sheet. Gross assets and liabilities associated with these IRBs were $376.2 and $343.5 as of December 31, 2019 and December 31, 2018, respectively.
23. Other (Expense) Income, Net
Other (expense) income, net is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
Kansas Development Finance Authority bond
|
$
|
3.7
|
|
|
$
|
3.8
|
|
|
$
|
3.2
|
|
Rental and miscellaneous income
|
0.2
|
|
|
0.2
|
|
|
1.2
|
|
Pension income
|
19.5
|
|
|
34.3
|
|
|
37.2
|
|
Interest income
|
12.9
|
|
|
8.0
|
|
|
6.4
|
|
Loss on foreign currency forward contract and interest rate swaps
|
(19.0
|
)
|
|
(35.3
|
)
|
|
—
|
|
Loss on sale of accounts receivable
|
(24.7
|
)
|
|
(16.5
|
)
|
|
(3.3
|
)
|
Foreign currency losses
|
(12.3
|
)
|
|
(1.9
|
)
|
|
(0.3
|
)
|
Litigation settlement
|
13.5
|
|
|
—
|
|
|
—
|
|
Other
|
0.4
|
|
|
0.4
|
|
|
—
|
|
Total Other (Expense) Income, net
|
$
|
(5.8
|
)
|
|
$
|
(7.0
|
)
|
|
$
|
44.4
|
|
Foreign currency losses are due to the impact of movement in foreign currency exchange rates on an intercompany revolver and long-term contractual rights/obligations, as well as trade and intercompany receivables/payables that are denominated in a currency other than the entity’s functional currency.
24. Significant Concentrations of Risk
Economic Dependence
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The Company’s largest customer (Boeing) accounted for approximately 79%, 79%, and 79% and of the revenues for the periods ended December 31, 2019, 2018, and 2017, respectively. Approximately 40%, 36%, and 44% of the Company's accounts receivable balance at December 31, 2019, 2018, and 2017, respectively, was attributable to Boeing.
The Company’s second largest customer (Airbus) accounted for approximately 16%, 16%, and 16% of the revenues for the periods ended December 31, 2019, 2018, and 2017, respectively. Approximately 41%, 48%, and 38% of the Company's accounts receivable balance at December 31, 2019, 2018, and 2017, respectively, was attributable to Airbus.
Employees
As of December 31, 2019, the Company had approximately 18,200 employees: 15,900 located in the Company's four U.S. facilities, 1,100 located at the U.K. facility, 1,100 located in the Malaysia facility, and 100 located in the France facility.
The numbers reflected for December 31, 2019, do not reflect the work force actions the Company took beginning in January 2020 related to B737 MAX production.
Approximately 89% of the Company’s U.S. employees are represented by five unions and approximately 64% of the Company’s U.K. employees are represented by one union. Approximately 1% of the Company's US employees are represented by an International Brotherhood of Electrical Workers (IBEW) collective bargaining agreement that will expire within one year and approximately 62% of US employees are represented by the International Association of Machinists and Aerospace Workers (IAM) collective bargaining agreement. On January 18, 2020 the Wichita IAM collective bargaining agreement was extended to June 24, 2023. French employees are represented by CFTC (“Confédération Française des Travailleurs Chrétiens or French Confederation of Christian Workers”) and FO (“Force Ouvrière or Labor Force”). None of the Malaysia employees are currently represented by a union.
25. Supplemental Balance Sheet Information
Accrued expenses and other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Accrued expenses
|
|
|
|
Accrued wages and bonuses
|
$
|
35.2
|
|
|
$
|
48.3
|
|
Accrued fringe benefits
|
125.5
|
|
|
125.0
|
|
Accrued interest
|
3.5
|
|
|
3.5
|
|
Workers' compensation
|
8.7
|
|
|
8.3
|
|
Property and sales tax
|
24.1
|
|
|
25.2
|
|
Warranty/extraordinary rework reserve — current
|
0.5
|
|
|
1.3
|
|
Other
|
42.7
|
|
|
101.5
|
|
Total
|
$
|
240.2
|
|
|
$
|
313.1
|
|
Other liabilities
|
|
|
|
Warranty/extraordinary rework reserve — non-current
|
64.3
|
|
|
103.6
|
|
Customer cost recovery
|
—
|
|
|
2.4
|
|
Other
|
31.5
|
|
|
28.8
|
|
Total
|
$
|
95.8
|
|
|
$
|
134.8
|
|
26. Segment and Geographical Information
The Company operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Revenue from Boeing represents a substantial portion of our revenues in all segments. Wing Systems also includes significant revenues from Airbus. Approximately 95% of the Company's net revenues for the twelve months ended December 31, 2019 came from the Company's two largest customers, Boeing and Airbus. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas. The Company's primary profitability measure to review a segment’s operating
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
performance is segment operating income before corporate selling, general and administrative expenses, research and development and unallocated cost of sales.
Corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to the Company's operating segments and are not allocated in measuring the operating segments’ profitability and performance and net profit margins. Research and development includes research and development efforts that benefit the Company as a whole and are not unique to a specific segment. Unallocated cost of sales includes general costs not directly attributable to segment operations, such as warranty, early retirement and other incentives. All of these items are not specifically related to the Company’s operating segments and are not utilized in measuring the operating segments’ profitability and performance.
The Company’s Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and overhaul (“MRO”) services. The Fuselage Systems segment manufactures products at the Company's facilities in Wichita, Kansas; Tulsa and McAlester, Oklahoma; San Antonio, Texas; Kinston, North Carolina; and Subang, Malaysia. The Fuselage Systems segment also includes an assembly plant for the A350 XWB aircraft in Saint-Nazaire, France.
The Company’s Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers) and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services. The Propulsion Systems segment manufactures products at the Company's facility in Wichita, Kansas; and San Antonio, Texas.
The Company’s Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces) as well as other miscellaneous structural parts primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place at the Company’s facilities in Tulsa and McAlester, Oklahoma; San Antonio, Texas; Kinston, North Carolina; Prestwick, Scotland; and Subang, Malaysia.
The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from net profit margin as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below.
While some working capital accounts are maintained on a segment basis, much of the Company’s assets are not managed or maintained on a segment basis. Property, plant and equipment, including tooling, is used in the design and production of products for each of the segments and, therefore, is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets, and deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to any particular segment. Raw materials and certain component parts are used in aerostructure production across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.
The following table shows segment revenues and operating income for the twelve months ended December 31, 2019, 2018 and 2017:
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2019
|
|
Twelve Months Ended December 31, 2018
|
|
Twelve Months Ended December 31, 2017
|
Segment Revenues
|
|
|
|
|
|
Fuselage Systems
|
$
|
4,206.2
|
|
|
$
|
4,000.8
|
|
|
$
|
3,730.8
|
|
Propulsion Systems
|
2,057.8
|
|
|
1,702.5
|
|
|
1,666.2
|
|
Wing Systems
|
1,588.3
|
|
|
1,513.0
|
|
|
1,578.8
|
|
All Other
|
10.8
|
|
|
5.7
|
|
|
7.2
|
|
|
$
|
7,863.1
|
|
|
$
|
7,222.0
|
|
|
$
|
6,983.0
|
|
Segment Operating Income (1, 2)
|
|
|
|
|
|
Fuselage Systems
|
$
|
440.8
|
|
|
$
|
576.1
|
|
|
$
|
329.6
|
|
Propulsion Systems
|
404.6
|
|
|
283.5
|
|
|
267.7
|
|
Wing Systems
|
216.0
|
|
|
226.4
|
|
|
205.1
|
|
All Other
|
3.4
|
|
|
0.3
|
|
|
2.0
|
|
|
1,064.8
|
|
|
1,086.3
|
|
|
804.4
|
|
Corporate SG&A (2)
|
(261.4
|
)
|
|
(210.4
|
)
|
|
(204.7
|
)
|
Unallocated impact of severe weather event
|
—
|
|
|
10.0
|
|
|
(19.9
|
)
|
Research and development
|
(54.5
|
)
|
|
(42.5
|
)
|
|
(31.2
|
)
|
Unallocated cost of sales(3)
|
11.9
|
|
|
(0.2
|
)
|
|
(16.7
|
)
|
Total operating income
|
$
|
760.8
|
|
|
$
|
843.2
|
|
|
$
|
531.9
|
|
_______________________________________
|
|
(1)
|
Inclusive of forward losses, changes in estimate on loss programs and cumulative catch-up adjustments. These changes in estimates for the periods ended December 31, 2019, 2018, and 2017 are further detailed in Note 5, Changes in Estimates.
|
|
|
(2)
|
Prior period information has been reclassified as a result of the Company's adoption of ASU 2017-07 on a retrospective basis in 2018. In accordance with the adoption of this guidance, prior year amounts related to the components of net periodic pension and postretirement benefit cost other than service costs have been reclassified from cost of sales and selling, general, and administrative expense to other (expense) income within the consolidated statement of operation for all periods presented. Accordingly, expenses of $18.1, $7.4, and $7.3 attributable to the Fuselage Systems segment, Propulsion Systems segment, and Wing Systems segment, respectively, were reclassified into segment operating income for the twelve months ended December 31, 2017.
|
|
|
(3)
|
For 2019, includes $13.9 related to warranty reserves. For 2018, includes charges of $1.1 related to warranty reserves. For 2017, includes charges of $1.8 and $12.7, related to warranty reserves and charges for excess purchases and purchase commitments, respectively.
|
Most of the Company’s revenue is obtained from sales inside the U.S. However the Company does generate international sales, primarily from sales to Airbus. The following chart illustrates the split between domestic and foreign revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
|
Year Ended December 31, 2017
|
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
|
$
|
6,566.3
|
|
|
84
|
%
|
|
$
|
5,967.1
|
|
|
83
|
%
|
|
$
|
5,722.9
|
|
|
82
|
%
|
International
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
771.9
|
|
|
10
|
%
|
|
763.3
|
|
|
10
|
%
|
|
740.9
|
|
|
11
|
%
|
Other
|
524.9
|
|
|
6
|
%
|
|
491.6
|
|
|
7
|
%
|
|
519.2
|
|
|
7
|
%
|
Total International
|
1,296.8
|
|
|
16
|
%
|
|
1,254.9
|
|
|
17
|
%
|
|
1,260.1
|
|
|
18
|
%
|
Total Revenues
|
$
|
7,863.1
|
|
|
100
|
%
|
|
$
|
7,222.0
|
|
|
100
|
%
|
|
$
|
6,983.0
|
|
|
100
|
%
|
_______________________________________
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
(1)
|
Net Revenues are attributable to countries based on destination where goods are delivered.
|
Most of the Company’s long-lived assets are located within the U.S. Approximately 5% of the Company's long-lived assets based on book value are located in the U.K. with approximately another 3% of the Company's total long-lived assets located in countries outside the U.S. and the U.K. The following chart illustrates the split between domestic and foreign assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
|
Year Ended December 31, 2017
|
Asset Location
|
Total
Long-Lived Assets
|
|
Percent of
Total
Long-Lived Assets
|
|
Total
Long-Lived Assets
|
|
Percent of
Total
Long-Lived Assets
|
|
Total
Long-Lived Assets
|
|
Percent of
Total
Long-Lived Assets
|
United States
|
$
|
2,079.4
|
|
|
92
|
%
|
|
$
|
2,003.9
|
|
|
92
|
%
|
|
$
|
1,939.0
|
|
|
92
|
%
|
International
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
112.4
|
|
|
5
|
%
|
|
82.1
|
|
|
4
|
%
|
|
82.5
|
|
|
4
|
%
|
Other
|
79.9
|
|
|
3
|
%
|
|
81.6
|
|
|
4
|
%
|
|
83.8
|
|
|
4
|
%
|
Total International
|
192.3
|
|
|
8
|
%
|
|
163.7
|
|
|
8
|
%
|
|
166.3
|
|
|
8
|
%
|
Total Long-Lived Assets
|
$
|
2,271.7
|
|
|
100
|
%
|
|
$
|
2,167.6
|
|
|
100
|
%
|
|
$
|
2,105.3
|
|
|
100
|
%
|
27. Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
December 31,
2019(1)
|
|
September 26,
2019(2)
|
|
June 27,
2019(3)
|
|
March 28,
2019(4)
|
Net revenues
|
$
|
1,959.3
|
|
|
$
|
1,919.9
|
|
|
$
|
2,016.1
|
|
|
$
|
1,967.8
|
|
Gross profit
|
$
|
202.0
|
|
|
$
|
272.3
|
|
|
$
|
292.9
|
|
|
$
|
309.5
|
|
Operating income
|
$
|
95.7
|
|
|
$
|
206.1
|
|
|
$
|
226.0
|
|
|
$
|
233.0
|
|
Net income
|
$
|
67.7
|
|
|
$
|
131.3
|
|
|
$
|
168.0
|
|
|
$
|
163.1
|
|
Earnings per share, basic
|
$
|
0.65
|
|
|
$
|
1.27
|
|
|
$
|
1.62
|
|
|
$
|
1.57
|
|
Earnings per share, diluted
|
$
|
0.65
|
|
|
$
|
1.26
|
|
|
$
|
1.61
|
|
|
$
|
1.55
|
|
Dividends declared per common share
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
December 31,
2018(5)
|
|
September 27,
2018(6)
|
|
June 28,
2018(7)
|
|
March 29,
2018(8)
|
Net revenues
|
$
|
1,835.3
|
|
|
$
|
1,813.7
|
|
|
$
|
1,836.9
|
|
|
$
|
1,736.1
|
|
Gross profit
|
$
|
300.7
|
|
|
$
|
270.6
|
|
|
$
|
289.7
|
|
|
$
|
225.1
|
|
Operating income
|
$
|
243.6
|
|
|
$
|
222.5
|
|
|
$
|
217.6
|
|
|
$
|
159.5
|
|
Net income
|
$
|
177.6
|
|
|
$
|
168.8
|
|
|
$
|
145.2
|
|
|
$
|
125.4
|
|
Earnings per share, basic
|
$
|
1.70
|
|
|
$
|
1.61
|
|
|
$
|
1.32
|
|
|
$
|
1.11
|
|
Earnings per share, diluted
|
$
|
1.68
|
|
|
$
|
1.59
|
|
|
$
|
1.31
|
|
|
$
|
1.10
|
|
Dividends declared per common share
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.10
|
|
______________________________________
|
|
(1)
|
Fourth quarter 2019 earnings include the impact of net unfavorable changes in estimate of $55.2.
|
|
|
(2)
|
Third quarter 2019 earnings include the impact of net unfavorable changes in estimate of $41.8.
|
|
|
(3)
|
Second quarter 2019 earnings include the impact of net unfavorable changes in estimate of $10.9.
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
|
|
(4)
|
First quarter 2019 earnings include the impact of net favorable changes in estimate of $0.5.
|
|
|
(5)
|
Fourth quarter 2018 earnings include the impact of net favorable changes in estimate of $3.5.
|
|
|
(6)
|
Third quarter 2018 earnings include the impact of net unfavorable changes in estimate of $13.5.
|
|
|
(7)
|
Second quarter 2018 earnings include the impact of net favorable changes in estimate of $24.9.
|
|
|
(8)
|
First quarter 2018 earnings include the impact of net unfavorable changes in estimate of $22.6.
|
28. Acquisitions
Asco
On May 1, 2018, the Company and its wholly-owned subsidiary Spirit AeroSystems Belgium Holdings BVBA (“Spirit Belgium”) entered into a definitive agreement (as amended, the “Asco Purchase Agreement”) with certain private sellers pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of S.R.I.F. N.V., the parent company of Asco Industries N.V. (“Asco”), a leading supplier of high lift wing structures, mechanical assemblies and major functional components to major OEMs and Tier I suppliers in the global commercial aerospace and military markets subject to certain customary closing adjustments, including foreign currency adjustments (the “Asco Acquisition”). The Asco Purchase Agreement is subject to customary closing conditions, including regulatory approvals. On October 28, 2019, the Company and Spirit Belgium entered into an agreement to amend and restate (the “Asco Amendment”) the Asco Purchase Agreement. The Asco Amendment incorporates amendments to the Purchase Agreement agreed among the Parties to date, and reduces the purchase price for the Asco Acquisition from $604 to $420. In addition, the Asco Amendment reduces the Sellers’ indemnification obligations under the Asco Purchase Agreement to $80 (except with respect to damages resulting or arising from the termination of certain commercial agreements), and removes the closing condition precedent that a “Material Adverse Change” in Asco’s business has not occurred since May 1, 2018.
On January 29, 2020, Asco and Spirit entered into an amendment to the Asco Purchase Agreement extending the date upon which the Asco Purchase Agreement will automatically terminate in the event that conditions to the Asco Acquisition are not satisfied or waived is extended from April 4, 2020, to October 1, 2020. In addition, the Amendment changed the closing date for the Acquisition to the last business day of the month that all conditions precedent are satisfied or waived (provided certain notice requirements are met) or as the parties agree.
Acquisition-related expenses were $12.7 for the twelve months ended December 31, 2019 and are included in selling, general and administrative costs on the condensed and consolidated statements of operations.
Bombardier
On October 31, 2019, Spirit and Spirit AeroSystems Global Holdings Limited (“Spirit UK”), wholly owned subsidiaries of the Company, entered into a definitive agreement (the “Bombardier Purchase Agreement”) with Bombardier Inc., Bombardier Aerospace UK Limited, Bombardier Finance Inc. and Bombardier Services Corporation (collectively, the “Bombardier Sellers”) pursuant to which, subject to the satisfaction or waiver of certain conditions, Spirit UK will acquire the outstanding equity of Short Brothers plc (“Shorts”) and Bombardier Aerospace North Africa SAS, and Spirit will acquire substantially all the assets of the maintenance, repair and overhaul business in Dallas, Texas (collectively, the “Bombardier Acquired Business”) for cash consideration of $500 (the “Bombardier Acquisition”).
The Company agreed to procure payment of a special contribution of £100 million (approximately $130) to the Shorts pension scheme after closing and has reached a tentative agreement to delay payment of the special contribution to 2021.
The Bombardier Acquisition, which is expected to close in the first half of 2020, is subject to certain consents, regulatory approvals and customary closing conditions. Closing conditions include, but are not limited to, (i) the absence of certain legal impediments to the consummation of the Bombardier Acquisition, (ii) the receipt of specified third party consents and approvals, including consents from Airbus SE and its subsidiaries, (iii) the receipt of applicable regulatory approvals, and (iv) the absence of a material adverse change to the Bombardier Acquired Business. The Purchase Agreement contains customary representations, warranties and covenants among the parties, including, among others, certain covenants by the Sellers regarding the operation of the Bombardier Acquired Business during the interim period between the execution of the Purchase Agreement and the consummation of the Bombardier Acquisition. The Bombardier Acquisition is not conditioned upon the Company’s receipt of debt financing.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Acquisition-related expenses were $19.6 for the twelve months ended December 31, 2019 and are included in selling, general and administrative costs on the condensed and consolidated statements of operations.
29. Condensed Consolidating Financial Information
The Floating Rate Notes, 2023 Notes, 2026 Notes, and 2028 Notes (collectively, the "Notes") are fully and unconditionally guaranteed on a senior unsecured basis by Holdings. No subsidiaries are guarantors to any of the Notes.
The following condensed consolidating financial information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the Securities Act, presents the condensed consolidating financial information separately for:
|
|
(i)
|
Holdings, as the parent company and parent guarantor of the Notes as further detailed in Note 16, Debt;
|
|
|
(ii)
|
Spirit, as the subsidiary issuer of the Notes;
|
|
|
(iii)
|
The Company’s subsidiaries, (the “Non-Guarantor Subsidiaries”), on a combined basis;
|
|
|
(iv)
|
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Holdings and the Non-Guarantor Subsidiaries, (b) eliminate the investments in the Company’s subsidiaries, and (c) record consolidating entries; and
|
|
|
(v)
|
Holdings and its subsidiaries on a consolidated basis.
|
Condensed Consolidating Statements of Operations and Comprehensive Income
For the Twelve Months Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Net revenues
|
$
|
—
|
|
|
$
|
7,116.7
|
|
|
$
|
1,420.5
|
|
|
$
|
(674.1
|
)
|
|
$
|
7,863.1
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
6,197.0
|
|
|
1,263.5
|
|
|
(674.1
|
)
|
|
6,786.4
|
|
Selling, general and administrative
|
18.1
|
|
|
223.3
|
|
|
20.0
|
|
|
—
|
|
|
261.4
|
|
Impact of severe weather event
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Research and development
|
—
|
|
|
47.0
|
|
|
7.5
|
|
|
—
|
|
|
54.5
|
|
Total operating costs and expenses
|
18.1
|
|
|
6,467.3
|
|
|
1,291.0
|
|
|
(674.1
|
)
|
|
7,102.3
|
|
Operating income (loss)
|
(18.1
|
)
|
|
649.4
|
|
|
129.5
|
|
|
—
|
|
|
760.8
|
|
Interest expense and financing fee amortization
|
—
|
|
|
(91.6
|
)
|
|
(3.9
|
)
|
|
3.6
|
|
|
(91.9
|
)
|
Other (expense) income, net
|
—
|
|
|
0.5
|
|
|
(2.7
|
)
|
|
(3.6
|
)
|
|
(5.8
|
)
|
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries
|
(18.1
|
)
|
|
558.3
|
|
|
122.9
|
|
|
—
|
|
|
663.1
|
|
Income tax benefit (provision)
|
3.9
|
|
|
(120.2
|
)
|
|
(16.5
|
)
|
|
—
|
|
|
(132.8
|
)
|
Income (loss) before equity in net income of affiliates and subsidiaries
|
(14.2
|
)
|
|
438.1
|
|
|
106.4
|
|
|
—
|
|
|
530.3
|
|
Equity in net income of affiliates
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
0.2
|
|
|
(0.2
|
)
|
Equity in net income of subsidiaries
|
544.5
|
|
|
106.4
|
|
|
—
|
|
|
(650.9
|
)
|
|
—
|
|
Net income
|
530.1
|
|
|
544.5
|
|
|
106.2
|
|
|
(650.7
|
)
|
|
530.1
|
|
Other comprehensive income
|
95.7
|
|
|
95.7
|
|
|
24.5
|
|
|
(120.2
|
)
|
|
95.7
|
|
Comprehensive income
|
$
|
625.8
|
|
|
$
|
640.2
|
|
|
$
|
130.7
|
|
|
$
|
(770.9
|
)
|
|
$
|
625.8
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Operations and Comprehensive Income
For the Twelve Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Net revenues
|
$
|
—
|
|
|
$
|
6,487.3
|
|
|
$
|
1,361.2
|
|
|
$
|
(626.5
|
)
|
|
$
|
7,222.0
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
5,541.4
|
|
|
1,221.0
|
|
|
(626.5
|
)
|
|
6,135.9
|
|
Selling, general and administrative
|
10.4
|
|
|
182.6
|
|
|
17.4
|
|
|
—
|
|
|
210.4
|
|
Impact of severe weather event
|
—
|
|
|
(10.0
|
)
|
|
—
|
|
|
—
|
|
|
(10.0
|
)
|
Research and development
|
—
|
|
|
37.5
|
|
|
5.0
|
|
|
—
|
|
|
42.5
|
|
Total operating costs and expenses
|
10.4
|
|
|
5,751.5
|
|
|
1,243.4
|
|
|
(626.5
|
)
|
|
6,378.8
|
|
Operating income (loss)
|
(10.4
|
)
|
|
735.8
|
|
|
117.8
|
|
|
—
|
|
|
843.2
|
|
Interest expense and financing fee amortization
|
—
|
|
|
(79.7
|
)
|
|
(5.2
|
)
|
|
4.9
|
|
|
(80.0
|
)
|
Other (expense) income, net
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|
(4.9
|
)
|
|
(7.0
|
)
|
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries
|
(10.4
|
)
|
|
656.1
|
|
|
110.5
|
|
|
—
|
|
|
756.2
|
|
Income tax benefit (provision)
|
1.9
|
|
|
(122.3
|
)
|
|
(19.4
|
)
|
|
—
|
|
|
(139.8
|
)
|
Income (loss) before equity in net income of affiliates and subsidiaries
|
(8.5
|
)
|
|
533.8
|
|
|
91.1
|
|
|
—
|
|
|
616.4
|
|
Equity in net income of affiliates
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
0.6
|
|
Equity in net income of subsidiaries
|
624.9
|
|
|
91.0
|
|
|
—
|
|
|
(715.9
|
)
|
|
—
|
|
Net income
|
617.0
|
|
|
624.8
|
|
|
91.7
|
|
|
(716.5
|
)
|
|
617.0
|
|
Other comprehensive loss
|
(68.1
|
)
|
|
(68.1
|
)
|
|
(26.3
|
)
|
|
94.4
|
|
|
(68.1
|
)
|
Comprehensive income
|
$
|
548.9
|
|
|
$
|
556.7
|
|
|
$
|
65.4
|
|
|
$
|
(622.1
|
)
|
|
$
|
548.9
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Operations and Comprehensive Loss
For the Twelve Months Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Net revenues
|
$
|
—
|
|
|
$
|
6,236.4
|
|
|
$
|
1,362.3
|
|
|
$
|
(615.7
|
)
|
|
$
|
6,983.0
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
5,592.2
|
|
|
1,218.8
|
|
|
(615.7
|
)
|
|
6,195.3
|
|
Selling, general and administrative
|
12.4
|
|
|
177.5
|
|
|
14.8
|
|
|
—
|
|
|
204.7
|
|
Impact of severe weather event
|
—
|
|
|
19.9
|
|
|
—
|
|
|
—
|
|
|
19.9
|
|
Research and development
|
—
|
|
|
27.8
|
|
|
3.4
|
|
|
—
|
|
|
31.2
|
|
Total operating costs and expenses
|
12.4
|
|
|
5,817.4
|
|
|
1,237.0
|
|
|
(615.7
|
)
|
|
6,451.1
|
|
Operating income (loss)
|
(12.4
|
)
|
|
419.0
|
|
|
125.3
|
|
|
—
|
|
|
531.9
|
|
Interest expense and financing fee amortization
|
—
|
|
|
(41.6
|
)
|
|
(5.7
|
)
|
|
5.6
|
|
|
(41.7
|
)
|
Other income (expense), net
|
—
|
|
|
49.6
|
|
|
0.4
|
|
|
(5.6
|
)
|
|
44.4
|
|
Income (loss) before income taxes and equity in net income of affiliates and subsidiaries
|
(12.4
|
)
|
|
427.0
|
|
|
120.0
|
|
|
—
|
|
|
534.6
|
|
Income tax benefit (provision)
|
4.7
|
|
|
(161.7
|
)
|
|
(23.0
|
)
|
|
|
|
|
(180.0
|
)
|
Income (loss) before equity in net income of affiliates and subsidiaries
|
(7.7
|
)
|
|
265.3
|
|
|
97.0
|
|
|
—
|
|
|
354.6
|
|
Equity in net income of affiliates
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
(0.3
|
)
|
|
0.3
|
|
Equity in net income of subsidiaries
|
362.3
|
|
|
97.0
|
|
|
—
|
|
|
(459.3
|
)
|
|
—
|
|
Net income
|
354.9
|
|
|
362.3
|
|
|
97.3
|
|
|
(459.6
|
)
|
|
354.9
|
|
Other comprehensive income
|
58.4
|
|
|
58.4
|
|
|
42.2
|
|
|
(100.6
|
)
|
|
58.4
|
|
Comprehensive income
|
$
|
413.3
|
|
|
$
|
420.7
|
|
|
$
|
139.5
|
|
|
$
|
(560.2
|
)
|
|
$
|
413.3
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Balance Sheet
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
2,193.3
|
|
|
$
|
157.2
|
|
|
$
|
—
|
|
|
$
|
2,350.5
|
|
Restricted cash
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Accounts receivable, net
|
—
|
|
|
565.4
|
|
|
301.2
|
|
|
(320.2
|
)
|
|
546.4
|
|
Inventory, net
|
—
|
|
|
786.8
|
|
|
332.0
|
|
|
—
|
|
|
1,118.8
|
|
Contract assets, short-term
|
—
|
|
|
458.8
|
|
|
69.5
|
|
|
—
|
|
|
528.3
|
|
Other current assets
|
—
|
|
|
93.5
|
|
|
5.2
|
|
|
—
|
|
|
98.7
|
|
Total current assets
|
—
|
|
|
4,098.1
|
|
|
865.1
|
|
|
(320.2
|
)
|
|
4,643.0
|
|
Property, plant and equipment, net
|
—
|
|
|
1,773.0
|
|
|
498.7
|
|
|
—
|
|
|
2,271.7
|
|
Right of use assets
|
—
|
|
|
41.2
|
|
|
7.7
|
|
|
—
|
|
|
48.9
|
|
Contract assets, long-term
|
—
|
|
|
6.4
|
|
|
—
|
|
|
—
|
|
|
6.4
|
|
Pension assets
|
—
|
|
|
424.2
|
|
|
24.9
|
|
|
—
|
|
|
449.1
|
|
Investment in subsidiary
|
1,761.9
|
|
|
838.4
|
|
|
—
|
|
|
(2,600.3
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
106.3
|
|
|
0.2
|
|
|
—
|
|
|
106.5
|
|
Other assets
|
—
|
|
|
148.8
|
|
|
118.4
|
|
|
(186.8
|
)
|
|
80.4
|
|
Total assets
|
$
|
1,761.9
|
|
|
$
|
7,436.4
|
|
|
$
|
1,515.0
|
|
|
$
|
(3,107.3
|
)
|
|
$
|
7,606.0
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
977.1
|
|
|
$
|
401.4
|
|
|
$
|
(320.2
|
)
|
|
$
|
1,058.3
|
|
Accrued expenses
|
—
|
|
|
210.0
|
|
|
30.2
|
|
|
—
|
|
|
240.2
|
|
Profit sharing
|
—
|
|
|
76.9
|
|
|
7.6
|
|
|
—
|
|
|
84.5
|
|
Current portion of long-term debt
|
—
|
|
|
48.4
|
|
|
1.8
|
|
|
—
|
|
|
50.2
|
|
Operating lease liabilities, short-term
|
—
|
|
|
5.3
|
|
|
0.7
|
|
|
—
|
|
|
6.0
|
|
Advance payments, short-term
|
—
|
|
|
21.6
|
|
|
—
|
|
|
—
|
|
|
21.6
|
|
Contract liabilities, short-term
|
—
|
|
|
158.3
|
|
|
—
|
|
|
—
|
|
|
158.3
|
|
Forward loss provision, short-term
|
—
|
|
|
83.9
|
|
|
—
|
|
|
—
|
|
|
83.9
|
|
Deferred revenue and other deferred credits, short-term
|
—
|
|
|
14.5
|
|
|
0.3
|
|
|
—
|
|
|
14.8
|
|
Deferred grant income liability — current
|
—
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
Other current liabilities
|
—
|
|
|
29.3
|
|
|
10.0
|
|
|
—
|
|
|
39.3
|
|
Total current liabilities
|
—
|
|
|
1,625.3
|
|
|
455.6
|
|
|
(320.2
|
)
|
|
1,760.7
|
|
Long-term debt
|
—
|
|
|
2,974.7
|
|
|
95.6
|
|
|
(86.2
|
)
|
|
2,984.1
|
|
Operating lease liabilities, long-term
|
—
|
|
|
36.0
|
|
|
7.0
|
|
|
—
|
|
|
43.0
|
|
Advance payments, long-term
|
—
|
|
|
333.3
|
|
|
—
|
|
|
—
|
|
|
333.3
|
|
Pension/OPEB obligation
|
—
|
|
|
35.7
|
|
|
—
|
|
|
—
|
|
|
35.7
|
|
Contract liabilities, long-term
|
—
|
|
|
356.3
|
|
|
—
|
|
|
—
|
|
|
356.3
|
|
Forward loss provision, long-term
|
—
|
|
|
163.5
|
|
|
—
|
|
|
—
|
|
|
163.5
|
|
Deferred grant income liability — non-current
|
—
|
|
|
9.2
|
|
|
19.8
|
|
|
—
|
|
|
29.0
|
|
Deferred revenue and other deferred credits, long-term
|
—
|
|
|
30.4
|
|
|
4.0
|
|
|
—
|
|
|
34.4
|
|
Deferred income taxes
|
—
|
|
|
—
|
|
|
8.3
|
|
|
—
|
|
|
8.3
|
|
Other non-current liabilities
|
—
|
|
|
190.1
|
|
|
6.3
|
|
|
(100.6
|
)
|
|
95.8
|
|
Total equity
|
1,761.9
|
|
|
1,681.9
|
|
|
918.4
|
|
|
(2,600.3
|
)
|
|
1,761.9
|
|
Total liabilities and shareholders’ equity
|
$
|
1,761.9
|
|
|
$
|
7,436.4
|
|
|
$
|
1,515.0
|
|
|
$
|
(3,107.3
|
)
|
|
$
|
7,606.0
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Balance Sheet
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
705.0
|
|
|
$
|
68.6
|
|
|
$
|
—
|
|
|
$
|
773.6
|
|
Restricted cash
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
Accounts receivable, net
|
—
|
|
|
593.0
|
|
|
310.2
|
|
|
(358.1
|
)
|
|
545.1
|
|
Inventory, net
|
—
|
|
|
696.0
|
|
|
316.6
|
|
|
—
|
|
|
1,012.6
|
|
Contract assets, short-term
|
—
|
|
|
420.8
|
|
|
48.6
|
|
|
—
|
|
|
469.4
|
|
Other current assets
|
—
|
|
|
45.3
|
|
|
3.0
|
|
|
—
|
|
|
48.3
|
|
Total current assets
|
—
|
|
|
2,460.4
|
|
|
747.0
|
|
|
(358.1
|
)
|
|
2,849.3
|
|
Property, plant and equipment, net
|
—
|
|
|
1,670.8
|
|
|
496.8
|
|
|
—
|
|
|
2,167.6
|
|
Contract assets, long-term
|
—
|
|
|
54.1
|
|
|
—
|
|
|
—
|
|
|
54.1
|
|
Pension assets
|
—
|
|
|
307.0
|
|
|
19.7
|
|
|
—
|
|
|
326.7
|
|
Investment in subsidiary
|
1,238.0
|
|
|
699.0
|
|
|
—
|
|
|
(1,937.0
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
188.0
|
|
|
17.0
|
|
|
—
|
|
|
205.0
|
|
Other assets
|
—
|
|
|
169.1
|
|
|
110.5
|
|
|
(196.4
|
)
|
|
83.2
|
|
Total assets
|
$
|
1,238.0
|
|
|
$
|
5,548.4
|
|
|
$
|
1,391.0
|
|
|
$
|
(2,491.5
|
)
|
|
$
|
5,685.9
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
855.2
|
|
|
$
|
405.6
|
|
|
$
|
(358.2
|
)
|
|
$
|
902.6
|
|
Accrued expenses
|
—
|
|
|
276.7
|
|
|
36.3
|
|
|
0.1
|
|
|
313.1
|
|
Profit sharing
|
—
|
|
|
62.6
|
|
|
5.7
|
|
|
—
|
|
|
68.3
|
|
Current portion of long-term debt
|
—
|
|
|
30.5
|
|
|
0.9
|
|
|
—
|
|
|
31.4
|
|
Advance payments, short-term
|
—
|
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
Contract liabilities, short-term
|
—
|
|
|
157.3
|
|
|
0.6
|
|
|
—
|
|
|
157.9
|
|
Forward loss provision, short-term
|
—
|
|
|
12.4
|
|
|
—
|
|
|
—
|
|
|
12.4
|
|
Deferred revenue and other deferred credits, short-term
|
—
|
|
|
19.5
|
|
|
0.5
|
|
|
—
|
|
|
20.0
|
|
Deferred grant income liability — current
|
—
|
|
|
—
|
|
|
16.0
|
|
|
—
|
|
|
16.0
|
|
Other current liabilities
|
—
|
|
|
52.4
|
|
|
5.8
|
|
|
—
|
|
|
58.2
|
|
Total current liabilities
|
—
|
|
|
1,468.8
|
|
|
471.4
|
|
|
(358.1
|
)
|
|
1,582.1
|
|
Long-term debt
|
—
|
|
|
1,856.6
|
|
|
103.2
|
|
|
(95.8
|
)
|
|
1,864.0
|
|
Advance payments, long-term
|
—
|
|
|
231.9
|
|
|
—
|
|
|
—
|
|
|
231.9
|
|
Pension/OPEB obligation
|
—
|
|
|
34.6
|
|
|
—
|
|
|
—
|
|
|
34.6
|
|
Contract liabilities, long-term
|
—
|
|
|
369.8
|
|
|
—
|
|
|
—
|
|
|
369.8
|
|
Forward loss provision, long-term
|
—
|
|
|
170.6
|
|
|
—
|
|
|
—
|
|
|
170.6
|
|
Deferred grant income liability — non-current
|
—
|
|
|
5.9
|
|
|
22.1
|
|
|
—
|
|
|
28.0
|
|
Deferred revenue and other deferred credits, long-term
|
—
|
|
|
28.8
|
|
|
2.4
|
|
|
—
|
|
|
31.2
|
|
Deferred income taxes
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
Other non-current liabilities
|
—
|
|
|
223.3
|
|
|
12.1
|
|
|
(100.6
|
)
|
|
134.8
|
|
Total equity
|
1,238.0
|
|
|
1,158.1
|
|
|
779.0
|
|
|
(1,937.0
|
)
|
|
1,238.1
|
|
Total liabilities and shareholders’ equity
|
$
|
1,238.0
|
|
|
$
|
5,548.4
|
|
|
$
|
1,391.0
|
|
|
$
|
(2,491.5
|
)
|
|
$
|
5,685.9
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
733.3
|
|
|
$
|
189.4
|
|
|
|
|
|
$
|
922.7
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
—
|
|
|
(184.0
|
)
|
|
(48.2
|
)
|
|
|
|
(232.2
|
)
|
Other
|
—
|
|
|
0.2
|
|
|
(7.9
|
)
|
|
|
|
|
(7.7
|
)
|
Net cash used in investing activities
|
—
|
|
|
(183.8
|
)
|
|
(56.1
|
)
|
|
—
|
|
|
(239.9
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
—
|
|
|
250.0
|
|
|
—
|
|
|
—
|
|
|
250.0
|
|
Proceeds from revolving credit facility
|
|
|
900.0
|
|
|
|
|
|
|
900.0
|
|
Principal payments of debt
|
—
|
|
|
(12.5
|
)
|
|
(0.9
|
)
|
|
—
|
|
|
(13.4
|
)
|
Collection on (repayment of) intercompany debt
|
—
|
|
|
49.4
|
|
|
(49.4
|
)
|
|
—
|
|
|
—
|
|
Payments on term loan
|
—
|
|
|
(16.6
|
)
|
|
—
|
|
|
—
|
|
|
(16.6
|
)
|
Payments on revolving credit facility
|
|
|
(100.0
|
)
|
|
|
|
|
|
(100.0
|
)
|
Taxes paid related to net share settlement awards
|
—
|
|
|
(12.9
|
)
|
|
—
|
|
|
—
|
|
|
(12.9
|
)
|
Proceeds from issuance of ESPP stock
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
Proceeds (payments) from subsidiary for purchase of treasury stock
|
75.8
|
|
|
(75.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase of treasury stock
|
(75.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75.8
|
)
|
Proceeds (payments) from subsidiary for dividends paid
|
50.4
|
|
|
(50.1
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
Dividends paid
|
(50.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50.4
|
)
|
Other
|
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
Net cash provided by (used in) financing activities
|
—
|
|
|
935.0
|
|
|
(50.6
|
)
|
|
—
|
|
|
884.4
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
5.9
|
|
|
|
|
5.9
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period
|
—
|
|
—
|
|
1,484.5
|
|
|
88.6
|
|
|
—
|
|
|
1,573.1
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
—
|
|
|
725.5
|
|
|
68.6
|
|
|
—
|
|
|
794.1
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
—
|
|
|
|
$
|
2,210.0
|
|
|
$
|
157.2
|
|
|
$
|
—
|
|
|
$
|
2,367.2
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
643.1
|
|
|
$
|
126.8
|
|
|
$
|
—
|
|
|
$
|
769.9
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
—
|
|
|
(230.5
|
)
|
|
(40.7
|
)
|
|
|
|
|
(271.2
|
)
|
Proceeds from sale of assets
|
—
|
|
|
2.8
|
|
|
0.6
|
|
|
—
|
|
|
3.4
|
|
Other
|
—
|
|
|
(0.5
|
)
|
|
0.5
|
|
|
—
|
|
|
—
|
|
Net cash used in investing activities
|
—
|
|
|
(228.2
|
)
|
|
(39.6
|
)
|
|
—
|
|
|
(267.8
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
—
|
|
|
1,300.0
|
|
|
—
|
|
|
—
|
|
|
1,300.0
|
|
Principal payments of debt
|
—
|
|
|
(5.8
|
)
|
|
(0.9
|
)
|
|
—
|
|
|
(6.7
|
)
|
Collection on (repayment of) intercompany debt
|
—
|
|
|
75.9
|
|
|
(75.9
|
)
|
|
—
|
|
|
—
|
|
Payments on term loan
|
—
|
|
|
(256.3
|
)
|
|
—
|
|
|
—
|
|
|
(256.3
|
)
|
Payments on bonds
|
—
|
|
|
(300.0
|
)
|
|
—
|
|
|
—
|
|
|
(300.0
|
)
|
Debt issuance and financing costs
|
—
|
|
|
(23.2
|
)
|
|
—
|
|
|
—
|
|
|
(23.2
|
)
|
Taxes paid related to net share settlement awards
|
—
|
|
|
(15.6
|
)
|
|
—
|
|
|
—
|
|
|
(15.6
|
)
|
Proceeds from issuance of ESPP stock
|
—
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
Proceeds (payments) from subsidiary for purchase of treasury stock
|
805.8
|
|
|
(805.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase of treasury stock
|
(805.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(805.8
|
)
|
Proceeds (payments) from subsidiary for dividends paid
|
48.0
|
|
|
(48.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends paid
|
(48.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48.0
|
)
|
Net cash used in financing activities
|
—
|
|
|
(76.7
|
)
|
|
(76.8
|
)
|
|
—
|
|
|
(153.5
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash for the period
|
—
|
|
|
338.2
|
|
|
10.4
|
|
|
—
|
|
|
348.6
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
—
|
|
|
387.3
|
|
|
58.2
|
|
|
—
|
|
|
445.5
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
—
|
|
|
$
|
725.5
|
|
|
$
|
68.6
|
|
|
$
|
—
|
|
|
$
|
794.1
|
|
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings
|
|
Spirit
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
450.5
|
|
|
$
|
123.2
|
|
|
$
|
—
|
|
|
$
|
573.7
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
—
|
|
|
(241.4
|
)
|
|
(31.7
|
)
|
|
|
|
|
(273.1
|
)
|
Proceeds from sale of assets
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Other
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Net cash used in investing activities
|
—
|
|
|
(241.1
|
)
|
|
(31.7
|
)
|
|
—
|
|
|
(272.8
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Principal payments of debt
|
—
|
|
|
(1.2
|
)
|
|
(1.6
|
)
|
|
—
|
|
|
(2.8
|
)
|
Collection on (repayment of) intercompany debt
|
—
|
|
|
54.9
|
|
|
(54.9
|
)
|
|
—
|
|
|
—
|
|
Payments on term loan
|
—
|
|
|
(25.0
|
)
|
|
—
|
|
|
—
|
|
|
(25.0
|
)
|
Debt issuance and financing costs
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
Taxes paid related to net share settlement awards
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
Proceeds from financing under the New Markets Tax Credit Program
|
—
|
|
|
7.6
|
|
|
—
|
|
|
—
|
|
|
7.6
|
|
Proceeds (payments) from subsidiary for purchase of treasury stock
|
496.3
|
|
|
(496.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase of treasury stock
|
(496.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(496.3
|
)
|
Proceeds (payments) from subsidiary for dividends paid
|
47.1
|
|
|
(47.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends paid
|
(47.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47.1
|
)
|
Net cash used in financing activities
|
—
|
|
|
(522.2
|
)
|
|
(56.5
|
)
|
|
—
|
|
|
(578.7
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
5.6
|
|
|
—
|
|
|
5.6
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash for the period
|
—
|
|
|
(312.8
|
)
|
|
40.6
|
|
|
—
|
|
|
(272.2
|
)
|
Cash, cash equivalents, and restricted cash, beginning of period
|
—
|
|
|
700.1
|
|
|
17.6
|
|
|
—
|
|
|
717.7
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
—
|
|
|
$
|
387.3
|
|
|
$
|
58.2
|
|
|
$
|
—
|
|
|
$
|
445.5
|
|
30. Subsequent Events
2020 MOA
On February 6, 2020, Boeing and the Company entered into the 2020 MOA providing for the Company to deliver to Boeing 216 B737 MAX shipsets in 2020. The 2020 MOA provided that an advance payment that the Company received from Boeing in the amount of $123.0 during the third quarter of 2019 will be repaid by offset against the purchase price for year 2022 shipset deliveries. In addition, the 2020 MOA provided that Boeing will pay $225 to the Company in the first quarter of 2020, consisting of (i) $70 in support of the Company's inventory and production stabilization, of which $10 will be repaid by the Company in 2021, and (ii) $155 as an incremental pre-payment for costs and shipset deliveries over the next two years. The 2020 MOA also extended B737 MAX pricing terms through 2033 (previously, the pricing was through December 31, 2030). The parties will execute amendments to their underlying long-term contracts to incorporate the 2020 MOA on or before 60 calendar days following the B737 MAX U.S. Federal Aviation Administration ungrounding. The full text of the 2020 MOA will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the first quarter of 2020, subject to certain omissions of confidential portions.
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements — (Continued)
($, €, and RM in millions other than per share amounts)
The 2020 Amendment, 2020 DDTL and Supplemental Indenture
On February 24, 2020, the Company entered into the 2020 Amendment, the 2020 DDTL and the Supplemental Indenture. For additional information, please see Note 16, Debt.
FMI Acquisition
On January 10, 2020, the Company acquired Fiber Materials, Inc. (FMI) for $120. The fair value determination of the acquired assets and liabilities is in work as of the report date. FMI is based in Biddeford, Maine, and has more than 200 employees at two facilities. FMI's main operations focus on multidirectional reinforced composites that enable high-temperature applications such as thermal protection systems, re-entry vehicle nose tips, and rocket motor throats and nozzles. Acquiring FMI aligns with the Company’s strategic growth objectives to diversify its customer base and expand the current defense business. Operating results for this acquisition will be included in the Company’s Consolidated Statements of Operations from the date of acquisition and reflected in segment reporting in accordance with the nature of FMI’s individual contracts.