Summary of SPIRIT AEROSYSTEMS HOLDINGS, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following section may include "forward-looking statements." Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "intend," "estimate," "believe," "project," "continue," "plan," "forecast," or other similar words. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.
Recent Events
On October 9, 2009, engineers represented by the Society of Professional Engineering Employees in Aerospace - Wichita Engineering Unit (SPEEA) at Spirit AeroSystems approved a new contract effective through December 1, 2012.
On September 30, 2009, Spirit completed an offering of $300.0 million aggregate principal amount of its 71/2% Senior Notes due 2017. The Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act. A portion of the net proceeds of the offering of the Notes was used to repay $200.0 million in borrowings under Spirit's existing senior secured revolving credit facility with the remaining net proceeds to be used for general corporate purposes and to pay fees and expenses incurred in connection with the offering.
On August 25, 2009, Ulrich (Rick) Schmidt, our Executive Vice President and Chief Financial Officer, notified us of his decision to retire. His last working day with us was Friday, October 2, 2009, and he will remain employed by us through early December of 2009. Philip D. Anderson, our Treasurer and Vice President, Investor Relations, assumed the additional role of Interim Chief Financial Officer, effective October 3, 2009, pending a search for Mr. Schmidt's replacement.
On July 9, 2009, Textron Inc., the parent company of Cessna Aircraft Company, filed a Current Report on Form 8-K with the Securities and Exchange Commission ("SEC") stating that it had formally cancelled further development of the Cessna Citation Columbus business jet. Spirit had been selected as the supplier for the fuselage and empennage on the Cessna Citation Columbus in February 2008. In the second quarter of 2009, we recorded a $10.9 million charge to reflect the estimated impact of this termination. Spirit has submitted termination claims to Cessna seeking recovery of costs incurred. Overview
We are the largest independent non-OEM (OEM refers to aircraft original equipment manufacturer) aircraft parts designer and manufacturer of commercial aerostructures in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial, military and business jet aircraft. We derive our revenues primarily through long-term supply agreements with Boeing and requirements contracts with Airbus. For the three months ended October 1, 2009, we generated net revenues of $1,053.8 million and net income of $87.3 million and for the nine months ended October 1, 2009, we generated net revenues of $3,000.8 million and net income of $141.7 million.
We are organized into three principal reporting segments: (1) Fuselage Systems, which includes the forward, mid and rear fuselage sections,
(2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which includes facilities in Tulsa and McAlester, Oklahoma, Prestwick, Scotland and Subang, Malaysia that manufacture wings, wing components, flight control surfaces and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 50%, 25%, 24% and 1%, respectively, of our net revenues for the three months ended October 1, 2009. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 50%, 26%, 24% and less than 1%, respectively, of our net revenues for the nine months ended October 1, 2009.

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

                                          2009 Outlook           2008 Actuals
       Revenues                         $4.1-$4.2 billion        $3.8 billion
       Earnings per share, diluted    $1.45-$1.55 per share     $1.91 per share
       Effective tax rate                              ~30 %             30.9 %
       Cash flow from operations                                 $211 million
       Capital expenditures                (See below)           $236 million
       Capital reimbursement                                     $116 million

Our 2009 outlook is based on the following assumptions:
• Our revenue guidance for the full-year 2009 has been updated to reflect movement of certain forecasted non-recurring contract settlements out of 2009. Revenues are now expected to be between $4.1 and $4.2 billion based on Boeing's 2009 delivery guidance of 480-485 aircraft; anticipated B787 deliveries consistent with our expectations following Boeing's announcement of the revised B787 schedule on August 27, 2009; 2009 expected Airbus deliveries of approximately 483 aircraft; internal Spirit forecasts for non-OEM production activity and non-Boeing and Airbus customers; and foreign exchange rates consistent with fourth quarter 2008 levels.

• We expect our 2009 fully diluted earnings per share guidance to be between $1.45 and $1.55 per share after the increase in interest expense and fees associated with the recently issued senior unsecured notes.

• We expect our 2009 cash flow from operations less capital expenditures, net of customer reimbursements, to be no more than a ($150) million use of cash in the aggregate, with capital expenditures of approximately $225 million.

• The guidance assumes the settlement of certain outstanding non-recurring contract payments associated with our development programs. To the extent these forecasted payments are not received during the fourth quarter of 2009, they will represent a shift in revenues, earnings and cash flows from 2009 to 2010.

Results of Operations

                                    Three Months           Three Months                                 Nine Months            Nine Months
                                       Ended                  Ended               Percentage               Ended                  Ended               Percentage
                                     October 1,           September 25,          Change from            October 1,            September 25,          Change from
                                        2009                   2008               Prior Year               2009                    2008               Prior Year
                                                                                          ($ in millions)
Net revenues                       $      1,053.8         $      1,027.2               3%             $       3,000.8         $      3,125.7              (4%)
Operating costs and expenses
Cost of sales                               878.3                  864.3               2%                     2,637.2                2,596.1               2%
Selling, general and
administrative                               30.5                   39.0              (22%)                     103.6                  119.0              (13%)
Research and development                     14.0                   12.7               10%                       41.6                   33.1               26%

Total operating costs and
expenses                                    922.8                  916.0               1%                     2,782.4                2,748.2               1%
Operating income                            131.0                  111.2               18%                      218.4                  377.5              (42%)
Interest expense and
financing fee amortization                  (10.2 )                (9.9)               3%                       (29.1 )                (29.5 )            (1%)
Interest income                               1.6                    4.4              (64%)                       6.2                   15.1              (59%)
Other income (loss), net                     (0.5 )                 (0.7 )            (29%)                       5.2                    0.9              478%

Income before income taxes
and equity in net loss of
affiliate                                   121.9                  105.0               16%                      200.7                  364.0              (45%)
Income tax provision                        (34.4 )                (31.0 )             11%                      (58.8 )               (118.4 )            (50%)

Income before equity in net
loss of affiliate                            87.5                   74.0               18%                      141.9                  245.6              (42%)
Equity in net loss of
affiliate                                    (0.2 )                    -              N.A.                       (0.2 )                    -              N.A.

Net income                         $         87.3         $         74.0               18%            $         141.7         $        245.6              (42%)

For purposes of measuring production or ship set deliveries for Boeing aircraft in a given period, the term "ship set" refers to sets of structural fuselage components produced or delivered for one aircraft in such period. For purposes of measuring production or ship set

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deliveries for Airbus aircraft in a given period, the term "ship set" refers to all structural aircraft components produced or delivered for one aircraft in such period. Other components which are part of the same aircraft ship sets could be produced or shipped in earlier or later accounting periods than the components used to measure production or ship set deliveries, which may result in slight variations in production or delivery quantities of the various ship set components in any given period.
Comparative ship set deliveries by model are as follows:

                                                    Three Months           Three Months Ended            Nine Months             Nine Months Ended
                                                  Ended October 1,            September 25,            Ended October 1,            September 25,
Model                                                   2009                      2008                       2009                      2008
B737                                                           93                       87                         263                      275
B747                                                            3                        4                           7                       15
B767                                                            3                        3                           9                        9
B777                                                           21                       18                          63                       60
B787                                                            2                        1                           6                        3

Total Boeing                                                  122                      113                         348                      362
A320 Family                                                    94                       90                         300                      280
A330/340                                                       28                       23                          77                       68
A380                                                            5                        4                           7                       10

Total Airbus                                                  127                      117                         384                      358
Hawker 800 Series                                               6                       24                          37                       63

Total                                                         255                      254                         769                      783

Results of Operations for the Three Months Ended October 1, 2009 and September 25, 2008
Net Revenues. Net revenues for the three months ended October 1, 2009 were $1,053.8 million, an increase of $26.6 million, compared with net revenues of $1,027.2 million for the same period in the prior year. The increase in net revenues is primarily attributable to a return to full rate production in 2009, as compared to the reduced production in 2008 caused by strike of Boeing employees represented by the International Association of Machinists and Aerospace Workers (the "Boeing IAM Strike") that commenced in September 2008, resulting in a $29.5 million increase in net revenues, increased development program net revenues of $34.0 million and increased ship set deliveries of the B787 and B777 as compared to the same period in the prior year. The revenue increase was partially offset by fewer B747 ship set deliveries as a result of the transition to the B747-8 model, fewer Hawker 850XP deliveries, and by a $20.0 million decrease in the value of net revenues from Spirit Europe as a result of the strengthening of the dollar. Deliveries to Boeing increased by 8% to 122 ship sets during the third quarter of 2009 compared to 113 ship sets delivered for the same period in the prior year, as unit deliveries to Boeing were at pre-strike levels in the third quarter of 2009. Approximately 97% of Spirit's net revenue for the third quarter of 2009 came from our two largest customers, Boeing and Airbus.
Cost of Sales. Cost of sales as a percentage of net revenues was 83% for the three months ended October 1, 2009, as compared to 84% for the same period in the prior year. During the third quarter of 2009, Spirit updated its contract profitability estimates resulting in a favorable cumulative catch-up adjustment of $1.5 million, as compared to a $12.5 million unfavorable cumulative catch-up adjustment recognized during the third quarter of 2008, which was largely the result of the Boeing IAM Strike in late 2008.
Selling, General and Administrative. SG&A as a percentage of net revenues was 3% for the three months ended October 1, 2009, as compared to 4% for the same period in the prior year, primarily driven by reduced spending and lower stock compensation expense. During the third quarter of 2009, we recognized $0.6 million in stock compensation expense, as compared to $4.0 million during the third quarter of 2008.
Research and Development. R&D costs as a percentage of net revenues was 1% for each of the three month periods ended October 1, 2009 and September 25, 2008. R&D costs increased $1.3 million, or 10%, primarily due to an increase in R&D spending on new programs in the third quarter of 2009 compared to the same period in the prior year.
Operating Income. Operating income for the three months ended October 1, 2009 was $131.0 million, an increase of $19.8 million, or 18%, as compared to operating income of $111.2 million for the same period in the prior year. The 2009 operating income reflects increased ship set deliveries and the effects of a $1.5 million favorable cumulative catch-up adjustment, as compared to the $12.5 million unfavorable cumulative catch-up adjustment recorded for the same period in 2008. Improved operating income also reflects lower SG&A costs for the quarter as compared to the same period in the prior year.

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Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the third quarter of 2009 includes $8.3 million of interest and fees paid or accrued in connection with long-term debt and $1.9 million in amortization of deferred financing costs, as compared to $8.6 million of interest and fees paid or accrued in connection with long-term debt and $1.3 million in amortization of deferred financing costs for the same period in the prior year. The decrease in interest and fees paid or accrued in connection with long-term debt in the third quarter of 2009 was primarily driven by lower LIBOR rates on the floating portion of our Term B loan, partially offset by an increase in interest expense on the drawn portion of the revolver. The increase in deferred financing costs in the third quarter of 2009 was a result of increased amortized costs associated with the amendment and restatement of our senior credit facility.
Interest Income. Interest income for the third quarter of 2009 consisted of $1.3 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $0.3 million of interest income, as compared to $3.7 million of accretion and $0.7 million in interest income for the same period in the prior year. The combined decrease of $2.8 million, as compared to the three months ended September 25, 2008, was primarily due to lower accretion income as a result of a lower outstanding balance on the discounted long-term receivable and lower interest rates on interest bearing accounts.
Provision for Income Taxes. The income tax provision for the third quarter of 2009 consisted of $34.9 million for federal income taxes, ($0.7) million for state taxes and $0.2 million for foreign taxes. The income tax provision for the third quarter of 2008 consisted of $31.1 million for federal income taxes and ($0.1) million for foreign taxes. The 28.2% effective income tax rate for the three months ended October 1, 2009 differs from the 29.5% effective income tax rate for the same period in the prior year, primarily due to the reinstatement of the U.S. Research and Experimentation Credit ("R&E Tax Credit") on October 3, 2008.
Segments. The following table shows comparable segment operating income before unallocated corporate expenses for the three months ended October 1, 2009 compared to the three months ended September 25, 2008:

                                         Three Months Ended       Three Months Ended
                                          October 1, 2009         September 25, 2008
                                                       ($ in millions)
 Segment Revenues
 Fuselage Systems                       $              525.9     $              484.8
 Propulsion Systems                                    266.2                    291.5
 Wing Systems                                          257.3                    246.8
 All Other                                               4.4                      4.1

                                        $            1,053.8     $            1,027.2

 Segment Operating Income
 Fuselage Systems                       $               95.2     $               73.5
 Propulsion Systems                                     35.3                     47.1
 Wing Systems                                           26.6                     26.9
 All Other                                               1.0                        -

                                                       158.1                    147.5
 Unallocated corporate SG&A                            (26.7 )                  (35.6 )
 Unallocated research and development                   (0.4 )                   (0.7 )

 Total operating income                 $              131.0     $              111.2

Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 50%, 25%, 24% and 1% respectively, of our net revenues for the three months ended October 1, 2009. Net revenues attributable to Airbus are recorded in the Wing Systems segment.
Fuselage Systems. Fuselage Systems segment net revenues for the third quarter of 2009 were $525.9 million, an increase of $41.1 million, or 9%, as compared to the same period in the prior year. The higher net revenues were primarily driven by an increase in ship set deliveries to Boeing and an increase in development program revenues, partially offset by fewer B747 ship set deliveries as a result of the transition to the B747-8 model. Fuselage Systems posted segment operating margins of 18% for the third quarter of 2009, up from 15% for the same period of 2008, as a favorable cumulative catch-up adjustment of $4.0 million was realized during the third quarter of 2009, primarily driven by favorable cost trends, as compared to a $10.7 million unfavorable cumulative catch-up adjustment realized in the same period in the prior year, largely driven by anticipated impacts of the Boeing IAM Strike.
Propulsion Systems. Propulsion Systems segment net revenues for the third quarter of 2009 were $266.2 million, a decrease of $25.3 million, or 9%, as compared to the same period in the prior year. The lower net revenues were primarily driven by a decrease in

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B747 ship set deliveries to Boeing and lower aftermarket sales compared to the same period in 2008. Propulsion Systems posted segment operating margins of 13% for the third quarter of 2009, down from 16% for the same period of 2008, as an unfavorable cumulative catch-up adjustment of $1.5 million was realized during the third quarter of 2009 as compared to a $0.4 million favorable cumulative catch-up adjustment realized in the same period in the prior year, primarily driven by higher material costs and decreased labor productivity on some of the Boeing programs.
Wing Systems. Wing Systems segment net revenues for the third quarter of 2009 were $257.3 million, an increase of $10.5 million, or 4%, as compared to the same period in the prior year. The higher net revenues were primarily driven by an increase in ship set deliveries to Airbus and Boeing, which more than offset fewer Hawker 850XP deliveries, partially offset by the strengthening of the dollar, which resulted in a $32.7 million decrease in the value of net revenues from Spirit Europe. Wing Systems posted segment operating margins of 10% for the third quarter of 2009, compared to 11% for the same period in the prior year. In addition, an unfavorable cumulative catch-up of $1.0 million was realized during the third quarter of 2009, as compared to $2.2 million of unfavorable cumulative catch-up adjustments realized for the same period in the prior year.
All Other. All Other net revenues consist of sundry sales of miscellaneous services, tooling contracts, and revenues from the Kansas Industrial Energy Supply Company, or KIESC. The increase in net revenues in the third quarter of 2009, compared to the same period in the prior year, was driven primarily by an increase in KIESC natural gas revenues.
Results of Operations for the Nine Months Ended October 1, 2009 and September 25, 2008
Net Revenues. Net revenues for the nine months ended October 1, 2009 were $3,000.8 million, a decrease of $124.9 million, or 4%, compared with net revenues of $3,125.7 million for the same period in the prior year. The decrease in net revenues is primarily attributable to the decrease in B737 deliveries, primarily due to the residual impact of the Boeing IAM Strike in the first half of 2009 and fewer B747 deliveries due to the transition to the B747-8 model, resulting in a $175.6 million decrease in net revenues, net of B747-8 non-recurring revenues, and a $89.2 million decrease in the value of net revenues from Spirit Europe as a result of the strengthening of the dollar. The decrease in net revenues was partially offset by increased ship set deliveries of the B787 as compared to the same period in the prior year, $38.6 million in volume-based pricing adjustments for the first five months of 2009, increased development program net revenues of $97.0 million, and a $36.2 million increase in net revenues from Airbus primarily as a result of higher deliveries in the first nine months of 2009 compared to the same period in 2008. Deliveries to Boeing decreased by 4% to 348 ship sets during the nine months ended October 1, 2009 compared to 362 ship sets delivered for the same period in the prior year, as unit deliveries to Boeing lagged behind pre-strike levels in the first two quarters of 2009. Deliveries to Airbus increased by 7% to 384 ship sets during the nine months ended October 1, 2009 compared to 358 ship sets delivered for the same period in the prior year. Approximately 96% of Spirit's net revenues for the nine months ended October 1, 2009 came from our two largest customers, Boeing and Airbus.
Cost of Sales. Cost of sales as a percentage of net revenues was 88% for the nine month period ended October 1, 2009, as compared to 83% for the same period in the prior year. The increase in cost of sales in the first nine months of 2009 was due to several unusual charges recorded in the second quarter, including a $93.0 million forward-loss charge for the Gulfstream G250 business jet program and the $10.9 million impact of the Cessna Citation Columbus termination. Also during the first nine months of 2009, Spirit updated its contract profitability estimates resulting in aggregate unfavorable cumulative catch-up adjustments of $37.7 million driven primarily by unfavorable performance within the Fuselage Systems and Propulsion Systems segments' current contract blocks, as compared to $3.6 million of unfavorable cumulative catch-up adjustments recorded in the first nine months of 2008.
Selling, General and Administrative. SG&A as a percentage of net revenues was 3% for the nine month period ended October 1, 2009, as compared to 4% for the same period in the prior year. SG&A expenses decreased $15.4 million, or 13%, primarily due to reduced spending and lower stock compensation expense. In the first nine months of 2009, we recognized $6.4 million in stock compensation expense, as compared to $11.3 million during the first nine months of 2008.
Research and Development. R&D costs as a percentage of net revenues were approximately 1% for each of the nine month periods ended October 1, 2009 and September 25, 2008. R&D costs increased $8.5 million, or 26%, primarily due to an increase in R&D spending on new programs in the first nine months of 2009 compared to the first nine months of 2008.
Operating Income. Operating income for the nine months ended October 1, 2009 was $218.4 million, a decrease of $159.1 million, or 42%, as compared to operating income of $377.5 million for the same period in the prior year. The decrease was driven by the recognition of several unusual charges recorded in the second quarter, including a $93.0 million forward-loss charge for the Gulfstream G250 business jet program, the $10.9 million impact of the Cessna Citation Columbus termination, and the realization of unfavorable cumulative catch-up adjustments totaling $37.7 million during the first nine months of 2009.

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Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the nine months ended October 1, 2009 includes . . .