•	Revenue of $2.0 billion

•	Earnings per share (EPS) of $0.65; Adjusted EPS* of $0.79

•	Cash from operations of $204 million; Adjusted free cash flow* of $102 million

•	Announcement by Boeing to decrease 787 production rate to 10 aircraft per month resulted in $34 million forward loss due to fixed cost absorption

•	Revenue of $7.9 billion

•	EPS of $5.06; Adjusted EPS* of $5.54

•	Cash from operations of $923 million; Adjusted free cash flow* of $723 million

•	Third and fourth quarter announcements by Boeing to decrease 787 production rates resulted in total forward losses of $67 million due to fixed cost absorption

•	Reached MOA with Boeing for 2020 737 MAX production; extended 737 contract to 2033

•	Amended Credit Agreement to provide covenant relief through Q1 2021

•	Secured $375 million short-term delayed draw term loan to provide additional liquidity

•	Closed acquisition of FMI, a leader in 3D woven carbon-carbon material for hypersonics

•	Extended IAM union contract for 9,000 workers for three years

•	Reduced quarterly cash dividend due to 737 MAX production

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Table 4.  Segment Reporting (unaudited)
		4th Quarter											Twelve Months
($ in millions)		2019				2018				Change			2019				2018				Change
Segment Revenues
Fuselage Systems			$1,034.5				$1,017.4			1.7	%			$4,206.2				$4,000.8			5.1	%
Propulsion Systems		532.3				442.9				20.2	%		2,057.8				1,702.5				20.9	%
Wing Systems		390.9				374.4				4.4	%		1,588.3				1,513.0				5.0	%
All Other		1.6				0.6				**			10.8				5.7				89.5	%
Total Segment Revenues			$1,959.3				$1,835.3			6.8	%			$7,863.1				$7,222.0			8.9	%
Segment Earnings from Operations
Fuselage Systems			$60.3				$158.4			(61.9	%)			$440.8				$576.1			(23.5	%)
Propulsion Systems		99.7				79.6				25.3	%		404.6				283.5				42.7	%
Wing Systems		38.9				60.3				(35.5	%)		216.0				226.4				(4.6	%)
All Other		0.9				—				**			3.4				0.3				**
Total Segment Operating Earnings			$199.8				$298.3			(33.0	%)			$1,064.8				$1,086.3			(2.0	%)
Unallocated Expense
SG&A			($87.8	)			($55.9	)		(57.1	%)			($261.4	)			($210.4	)		(24.2	%)
Impact of Severe Weather Event		—				10.0				**			—				10.0				**
Research & Development		(18.5		)		(11.2		)		(65.2	%)		(54.5		)		(42.5		)		(28.2	%)
Cost of Sales		2.2				2.4				(8.3	%)		11.9				(0.2		)		**
Total Earnings from Operations			$95.7				$243.6			(60.7	%)			$760.8				$843.2			(9.8	%)
Segment Operating Earnings as % of Revenues
Fuselage Systems		5.8		%		15.6		%		(980) BPS			10.5		%		14.4		%		(390) BPS
Propulsion Systems		18.7		%		18.0		%		70 BPS			19.7		%		16.7		%		300 BPS
Wing Systems		10.0		%		16.1		%		(610) BPS			13.6		%		15.0		%		(140) BPS
All Other		56.3		%		—				**			31.5		%		5.3		%		**
Total Segment Operating Earnings as % of Revenues		10.2		%		16.3		%		(610) BPS			13.5		%		15.0		%		(150) BPS
Total Operating Earnings as % of Revenues		4.9		%		13.3		%		(840) BPS			9.7		%		11.7		%		(200) BPS

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1)	the timing and conditions surrounding the return to service of the B737 MAX, the B737 MAX production rates under the 2020 MOA and other agreements with Boeing, future demand for the aircraft, and any residual impacts of the grounding on production rates for the aircraft;

2)	our reliance on Boeing for a significant portion of our revenues;

3)	our ability to continue to grow our business and execute our growth strategy including our ability to enter into profitable supply arrangements with additional customers;

4)	the business condition and liquidity of Boeing and Airbus and their ability to satisfy their contractual obligations to the Company;

5)	demand for our products and services and the effect of economic and geopolitical conditions in the industries and markets in which we operate in the U.S. and globally;

6)	the certainty of our backlog, including the ability of customers to cancel or delay orders prior to shipment;

7)	our ability to accurately estimate and manage performance, cost, margins, and revenue under our contracts, and the potential for additional forward losses on new and maturing programs;

8)	our ability and our suppliers’ ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft;

9)	competitive conditions in the markets in which we operate, including in-sourcing by commercial aerospace original equipment manufacturers;

10)	our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing, Airbus and other customers;

11)

the success and timely execution of key milestones, such as the receipt of necessary regulatory approvals and satisfaction of closing conditions, in our announced acquisitions of Asco and select Bombardier assets, and our ability to effectively assess, manage, close, and integrate such acquisitions along with others that we pursue, and generate synergies and other cost savings therefrom, while avoiding unexpected costs, charges, expenses, and adverse changes to business relationships and business disruptions;

12)	the possibility that our cash flows may not be adequate for our additional capital needs;

13)	our ability to avoid or recover from cyber-based or other security attacks and other operations disruptions;

14)	legislative or regulatory actions, both domestic and foreign, impacting our operations;

15)	the effect of changes in tax laws and the Company's ability to accurately calculate and estimate the effect of such changes;

16)	any reduction in our credit ratings;

17)	our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components;

18)	our ability to recruit and retain a critical mass of highly skilled employees;

19)	our relationships with the unions representing many of our employees, including our ability to avoid labor disputes and work stoppages with respect to our union employees;

20)	spending by the U.S. and other governments on defense;

21)	pension plan assumptions and future contributions;

22)	the effectiveness of our internal control over financial reporting; and any difficulties or delays that could affect the Company's ability to effectively implement the remediation plan, in whole or in part, to address the material weakness identified in the Company's internal control over financial reporting, as described in Item 9A. "Controls and Procedures";

23)	the outcome or impact of ongoing or future litigation, claims, and regulatory actions, including our exposure to potential product liability and warranty claims;

24)	our ability to continue selling certain receivables through our supplier financing programs;

25)	our ability to access capital markets to fund our liquidity needs, and the costs and terms of any additional financing;

26)	any regulatory or legal action arising from the review of our accounting processes; and

27)	the risks of doing business internationally, including fluctuations in foreign currency exchange rates, impositions of tariffs or embargoes, trade restrictions, compliance with foreign laws, and domestic and foreign government policies.

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Spirit Shipset Deliveries

(one shipset equals one aircraft)

 

			4th Quarter						Twelve Months
			2019			2018			2019			2018
	B737		153			148			606			605
	B747		1			2			6			6
	B767		8			7			33			30
	B777		12			12			56			44
	B787		42			35			166			143
	Total Boeing		216			204			867			828
	A220(1)		14			6			40			12
	A320 Family		172			169			682			657
	A330		8			16			35			62
	A350		30			27			111			98
	A380		—			2			1			6
	Total Airbus		224			220			869			835
	Business/Regional Jet(1)		12			15			55			71
	Total		452			439			1,791			1,734
	(1) Airbus acquired majority ownership in the C-Series program (subsequently renamed to the A220 program) in July 2018; all C-Series deliveries prior to Q3 2018 are included in Business/Regional Jet and all subsequent A220 deliveries are included in A220.

 

* Non-GAAP financial measure, see Appendix for reconciliation

9

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 

		For the Three Months Ended								For the Twelve Months Ended
		December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
	($ in millions, except per share data)
Revenue			$1,959.3				$1,835.3				$7,863.1				$7,222.0
Operating costs and expenses:
Cost of sales		1,757.3				1,534.6				6,786.4				6,135.9
Selling, general and administrative		87.8				55.9				261.4				210.4
Impact of severe weather event		—				(10.0		)		—				(10.0		)
Research and development		18.5				11.2				54.5				42.5
Total operating costs and expenses		1,863.6				1,591.7				7,102.3				6,378.8
Operating income		95.7				243.6				760.8				843.2
Interest expense and financing fee amortization		(25.8		)		(19.7		)		(91.9		)		(80.0		)
Other income (expense), net		6.1				(6.2		)		(5.8		)		(7.0		)
Income before income taxes and equity in net income of affiliates		76.0				217.7				663.1				756.2
Income tax provision		(8.1		)		(40.1		)		(132.8		)		(139.8		)
Income before equity in net income of affiliates		67.9				177.6				530.3				616.4
Equity in net income of affiliates		(0.2		)		—				(0.2		)		0.6
Net income			$67.7				$177.6				$530.1				$617.0
Earnings per share
Basic			$0.65				$1.70				$5.11				$5.71
Shares		103.5				104.5				103.6				108.0
Diluted			$0.65				$1.68				$5.06				$5.65
Shares		104.6				105.6				104.7				109.1
Dividends declared per common share			$0.12				$0.12				$0.48				$0.46

* Non-GAAP financial measure, see Appendix for reconciliation

10

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

		December 31, 2019				December 31, 2018
		($ in millions)
Assets
Cash and cash equivalents			$2,350.5				$773.6
Restricted cash		0.3				0.3
Accounts receivable, net		546.4				545.1
Contract assets, short-term		528.3				469.4
Inventory, net		1,118.8				1,012.6
Other current assets		98.7				48.3
Total current assets		4,643.0				2,849.3
Property, plant and equipment, net		2,271.7				2,167.6
Right of use assets		48.9				—
Contract assets, long-term		6.4				54.1
Pension assets		449.1				326.7
Deferred income taxes		106.5				205.0
Other assets		80.4				83.2
Total assets			$7,606.0				$5,685.9
Liabilities
Accounts payable			$1,058.3				$902.6
Accrued expenses		240.2				313.1
Profit sharing		84.5				68.3
Current portion of long-term debt		50.2				31.4
Operating lease liabilities, short-term		6.0				—
Advance payments, short-term		21.6				2.2
Contract liabilities, short-term		158.3				157.9
Forward loss provision, short-term		83.9				12.4
Deferred revenue and other deferred credits, short-term		14.8				20.0
Deferred grant income liability - current		3.6				16.0
Other current liabilities		39.3				58.2
Total current liabilities		1,760.7				1,582.1
Long-term debt		2,984.1				1,864.0
Operating lease liabilities, long-term		43.0				—
Advance payments, long-term		333.3				231.9
Pension/OPEB obligation		35.7				34.6
Contract liabilities, long-term		356.3				369.8
Forward loss provision, long-term		163.5				170.6
Deferred revenue and other deferred credits, long-term		34.4				31.2
Deferred grant income liability - non-current		29.0				28.0
Deferred income taxes		8.3				0.8
Other non-current liabilities		95.8				134.8
Stockholders' Equity
Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued		—				—
Common Stock, Class A par value $0.01, 200,000,000 shares authorized, 104,882,379 and 105,461,817 shares issued and outstanding, respectively		1.1				1.1
Additional paid-in capital		1,125.0				1,100.9
Accumulated other comprehensive loss		(109.2		)		(196.6		)
Retained earnings		3,201.3				2,713.2
Treasury stock, at cost (41,523,470 and 40,719,438 shares, respectively)		(2,456.8		)		(2,381.0		)
Total stockholders’ equity		1,761.4				1,237.6
Noncontrolling interest		0.5				0.5
Total equity		1,761.9				1,238.1
Total liabilities and equity			$7,606.0				$5,685.9

* Non-GAAP financial measure, see Appendix for reconciliation

11

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Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

		For the Twelve Months Ended
		December 31, 2019				December 31, 2018
Operating activities		($ in millions)
Net income			$530.1				$617.0
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense		251.6				230.6
Amortization expense		0.1				0.4
Amortization of deferred financing fees		3.5				17.9
Accretion of customer supply agreement		4.3				4.1
Employee stock compensation expense		36.1				27.4
Loss (gain) from derivative instruments		8.1				(7.2		)
Loss (gain) from foreign currency transactions		1.6				(0.3		)
Loss on impairment and disposition of assets		4.9				1.8
Deferred taxes		86.1				(38.0		)
Pension and other post-retirement benefits, net		(20.0		)		(33.4		)
Grant liability amortization		(16.2		)		(21.6		)
Equity in net income of affiliates		0.2				(0.6		)
Forward loss provision		40.7				(170.9		)
Changes in assets and liabilities
Accounts receivable, net		12.8				(47.9		)
Contract assets		(5.2		)		(8.5		)
Inventory, net		(95.4		)		(61.3		)
Accounts payable and accrued liabilities		34.6				244.5
Profit sharing/deferred compensation		16.0				(40.9		)
Advance payments		120.8				(98.3		)
Income taxes receivable/payable		(59.6		)		(28.4		)
Contract liabilities		(13.0		)		208.3
Deferred revenue and other deferred credits		6.2				16.9
Other		(25.6		)		(41.7		)
Net cash provided by operating activities			$922.7				$769.9
Investing activities
Purchase of property, plant and equipment		(232.2		)		(271.2		)
Equity in net assets of affiliates		(7.9		)		—
Proceeds from sale of assets		0.2				3.4
Net cash used in investing activities			($239.9	)			($267.8	)
Financing activities
Proceeds from issuance of debt		250.0				—
Proceeds from issuance of bonds		—				1,300.0
Proceeds from revolving credit facility		900.0				—
Payments on revolving credit facility		(100.0		)		—
Principal payments of debt		(13.4		)		(6.7		)
Payments on term loan		(16.6		)		(256.3		)
Payments on bonds		—				(300.0		)
Taxes paid related to net share settlement awards		(12.9		)		(15.6		)
Proceeds from issuance of ESPP stock		2.6				2.1
Debt issuance and financing costs		—				(23.2		)
Purchase of treasury stock		(75.8		)		(805.8		)
Dividends paid		(50.4		)		(48.0		)
Other		0.9				—
Net cash provided by (used in) financing activities			$884.4				($153.5	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		5.9				—
Net increase in cash, cash equivalents, and restricted cash			$1,573.1				$348.6
Cash, cash equivalents, and restricted cash, beginning of the period		794.1				445.5
Cash, cash equivalents, and restricted cash, end of the period			$2,367.2				$794.1

Reconciliation of Cash and Cash Equivalents and Restricted Cash:		December 31, 2019				December 31, 2018
Cash and cash equivalents, beginning of the period			$773.6				$423.3
Restricted cash, short-term, beginning of the period		0.3				2.2
Restricted cash, long-term, beginning of the period		20.2				20.0
Cash, cash equivalents, and restricted cash, beginning of the period			$794.1				$445.5
Cash and cash equivalents, end of the period			$2,350.5				$773.6
Restricted cash, short-term, end of the period		0.3				0.3
Restricted cash, long-term, end of the period		16.4				20.2
Cash, cash equivalents, and restricted cash, end of the period			$2,367.2				$794.1

* Non-GAAP financial measure, see Appendix for reconciliation

12

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Appendix

In addition to reporting our financial information using U.S. Generally Accepted Accounting Principles (GAAP), management believes that certain non-GAAP measures (which are indicated by * in this report) provide investors with important perspectives into the company’s ongoing business performance. The non-GAAP measures we use in this report are (i) adjusted diluted earnings per share, (ii) free cash flow, and (iii) adjusted free cash flow, which are described further below. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define and calculate the measures differently than we do, limiting the usefulness of the measures for comparison with other companies.

Adjusted Diluted Earnings Per Share. To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes various items that are not considered to be directly related to our operating performance. Management uses Adjusted EPS as a measure of business performance and we believe this information is useful in providing period-to-period comparisons of our results. The most comparable GAAP measure is diluted earnings per share.

Free Cash Flow. Free Cash Flow is defined as GAAP cash from operating activities (generally referred to herein as “cash from operations”), less capital expenditures for property, plant and equipment. Management believes Free Cash Flow provides investors with an important perspective on the cash available for stockholders, debt repayments including capital leases, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free Cash Flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures. The most comparable GAAP measure is cash provided by operating activities. Management uses Free Cash Flow as a measure to assess both business performance and overall liquidity.

Adjusted Free Cash Flow. Management considers certain items that arise from time to time to be outside the ordinary course of our operations. Management believes that excluding these items provides a better understanding of the underlying trends in the company’s operating performance and allows more accurate comparisons of the company’s operating results to historical performance. Accordingly, Adjusted Free Cash Flow is defined as free cash flow less these special items. The most comparable GAAP measure is cash provided by operating activities. Management uses Adjusted Free Cash Flow as a measure to assess both business performance and overall liquidity.

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Adjusted EPS
	4th Quarter								Twelve Months
	2019				2018				2019				2018
GAAP Diluted Earnings Per Share		$0.65				$1.68				$5.06				$5.65
Costs Related to Planned Acquisitions	0.17			a	0.17			b	0.43			c	0.50			d
Q2 2019 Voluntary Retirement Program	(0.03		)	e	—				0.05			e	—
2018 Debt Financing Costs	—				—				—				0.11			f
Adjusted Diluted Earnings Per Share		$0.79				$1.85				$5.54				$6.26
Diluted Shares (in millions)	104.6				105.6				104.7				109.1
a Represents the three months ended Q4 2019 net EPS impact of $0.17 per share, which includes:
- Gains related to foreign currency fluctuation on Euro account of $(0.05) (included in Other income)
- Transaction costs of $0.22 (included in SG&A)
b Represents the three months ended Q4 2018 net EPS impact of $0.17 comprised of the following:
- Loss related to foreign currency forward contract of $0.11 (included in Other income)
- Transaction costs of $0.01 (included in SG&A)
- Interest expense on new debt related to Asco of $0.05 (included in Interest expense)
c Represents the twelve months ended Q4 2019 net EPS impact of $0.43 per share, which includes:
- Loss related to foreign currency forward contract of $0.13 (included in Other income)
- Loss related to foreign currency fluctuation on Euro account of $0.04 (included in Other income)
- Transaction costs of $0.26 (included in SG&A)
d Represents the twelve months ended Q4 2018 net EPS impact of $0.50 comprised of the following:
- Loss related to foreign currency forward contract of $0.27 (included in Other income)
- Transaction costs of $0.12 (included in SG&A)
- Interest expense on new debt related to Asco of $0.11 (included in Interest expense)
e Represents the three and twelve months ended Q4 2019 retirement incentive expenses resulting from the VRP offered during the second quarter of 2019 (included in Other income)
f Represents the twelve months ended Q4 2018 debt financing costs resulting from debt financing activity occuring in 2018 (included in Interest expense)

* Non-GAAP financial measure, see Appendix for reconciliation

13

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Free Cash Flow

($ in millions)

 

	4th Quarter								Twelve Months
	2019				2018				2019				2018
Cash from Operations		$204				$203				$923				$770
Capital Expenditures	(113		)		(100		)		(232		)		(271		)
Free Cash Flow		$91				$103				$691				$499
Costs related to planned acquisitions	11			a	42			b	32			c	66			d
Adjusted Free Cash Flow		$102				$145				$723				$565
a       Represents the three months ended Q4 2019 acquisition impact of $11 million comprised of:
- Cash loss from conversion of Asco funds account from Euro to USD of $6 million
- Transaction payments of $5 million
b       Represents the three months ended Q4 2018 Asco acquisition impact of $42 million comprised of:
- Cash paid on foreign currency forward contract of $27 million
- Transaction payments of $2 million
- Interest paid on proportion of new debt related to Asco of $13 million
c       Represents the twelve months ended Q4 2019 acquisition impact of $32 million comprised of:
- Cash paid on foreign currency forward contract of $11 million
- Transaction payments of $15 million
- Cash loss from conversion of Asco funds account from Euro to USD of $6 million
d       Represents the twelve months ended Q4 2018 Asco acquisition impact of $66 million comprised of:
- Cash paid on foreign currency forward contract of $41 million
- Transaction payments of $10 million
- Interest paid on proportion of new debt related to Asco of $15 million

* Non-GAAP financial measure, see Appendix for reconciliation

14