You should read the following discussion of our financial condition and results of operations in conjunction with the audited consolidated financial statements, the notes to the audited consolidated financial statements and the "Selected Consolidated Financial Information and Other Data" appearing elsewhere in this Annual Report. This section includes "forward-looking statements." Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "intend," "estimate," "believe," "project," "continue," "plan," "forecast," or other similar words. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown, including, but not limited to, those described in the "Risk Factors" section of this Annual Report. See also "Cautionary Statement Regarding Forward-Looking Statements." Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.

Recent Events

On February 20, 2013, engineers of the Society of Professional Engineering Employees in Aerospace (SPEEA) union at Boeing approved a new contract. However, the technical employees represented by SPEEA rejected Boeing's contract offer and authorized a strike. While this does not mean the employees are on strike, if a strike were to occur at Boeing, work slow-downs could impact Spirit. We do not anticipate a significant impact to our business at this time.

On February 19, 2013, Hawker Beechcraft emerged from bankruptcy as Beechcraft Corporation. As detailed in our discussions on accounts receivable, we currently have a receivable from Hawker Beechcraft which is fully reserved against.

Following the Company's public announcement in October of 2012 that it recognized $590.4 million of forward losses in the third quarter of 2012, a number of law firms published advertisements seeking plaintiffs for a lawsuit related to those losses. On February 6, 2013, one of those law firms filed a shareholder derivative suit on behalf of a Spirit Holdings investor against the directors and certain officers of Spirit Holdings, alleging that the defendants breached their fiduciary duties to Spirit Holdings in connection with the timing of the recognition of those forward losses. Although Spirit Holdings is named as a nominal defendant in the action, no recovery is sought from Spirit Holdings. The Company believes that the suit is baseless, and intends to vigorously defend against it.

In October 2012, Spirit was advised by the Staff of the Securities and Exchange Commission that they are conducting an inquiry that the Company believes to be focused on the timing of forward losses recognized in the third quarter of 2012. The Company is fully cooperating with the inquiry. The Company cannot predict or determine whether any proceeding may be instituted as a result of the inquiry or the outcome of any proceeding that may be instituted.

On December 18, 2012, Spirit AeroSystems celebrated the completion of the 100th Boeing B787 composite forward fuselage section. This section will be shipped to Boeing's final assembly facility in Charleston, South Carolina in early 2013.

On November 19, 2012, Spirit AeroSystems announced that its President and Chief Executive Officer, Jeffrey L. Turner had advised the Board of his intention to retire in early 2013, after the Board has had an opportunity to conduct a search for and hire a new CEO. Mr. Turner will continue to serve as President and CEO until his successor takes office.

The Board convened a special CEO search committee comprised of Spirit Board members Robert Johnson, Tawfiq Popatia, Francis Raborn, Paul Fulchino and Ronald Kadish to begin the CEO search process, targeting qualified internal and external candidates.

Overview

We are one of the largest independent non-OEM (original equipment manufacturer) aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the twelve months ended December 31, 2012, we generated net revenues of $5,397.7 million and net income of $34.8 million.

We are organized into three principal reporting segments: (1) Fuselage Systems, which includes forward, mid and rear fuselage sections, (2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which includes wings, wing components, flight control surfaces and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina, with an assembly plant in Saint-Nazaire, France for the A350 XWB program. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas. The Wing Systems segment manufactures products at our facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Subang, Malaysia; and Kinston, North Carolina. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 48%, 26%, 26% and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2012.

Market Trends

The financial health of the commercial airline industry has a direct and significant effect on our commercial aircraft programs. The global industry's revenue grew in 2010 and 2011, and is forecast to continue growing in 2012 and 2013, after significant contraction in 2008 and 2009. One key driver of the commercial aircraft market is airline passenger and cargo traffic trends. Principal factors influencing traffic are economic growth and political stability. A significant downturn in global or regional economic stability, or exogenous shocks such as terrorism or a pandemic, could suppress traffic and negatively affect demand for our key customers' products.

Demand for commercial aerostructures is highly correlated to demand for new aircraft. Boeing and Airbus have experienced a combined backlog growth of almost 2,200 units since December of 2009. The year-end 2012 combined backlog was 9,055 aircraft. High backlog levels are expected to continue to drive increasing production and delivery forecasts in the near to mid-term from both Boeing and Airbus. The following table sets forth the historical deliveries of Boeing and Airbus for 2007 through 2012 and delivery expectations for 2013.

                      2007    2008    2009    2010     2011      2012        2013(1)
             Boeing     441     375     481     462       477       601         635-645
             Airbus     453     483     498     510       534       588             600

             Total      894     858     979     972     1,011     1,189     1,235-1,245


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   º (1)

Inventory continues to grow in terms of absolute dollars and remains stable as a percentage of total assets. Inventory as a percentage of total assets was 45%, 52% and 49% at December 31, 2012, 2011 and 2010, respectively. This overall trend in inventory is driven primarily by our contractually required

investments in new programs, which include the Boeing B747-8, B787, Gulfstream G280 and G650, Airbus A350 XWB, Sikorsky CH-53K and Rolls-Royce BR725 programs. The contracts for these new programs accounted for a decrease in inventory from 2011 to 2012 of $179.2 million, which is net of forward loss charges of $11.5 million, $184.0 million, $118.8 million, $162.5 million, $8.9 million and $151.0 million recorded in 2012 on our B747-8, B787, G280, G650, A350 XWB and Rolls-Royce BR725 contracts, respectively. Excluding the forward loss charges, these programs would have increased inventory by $196.3 million from 2011 to 2012. The increases in inventory for new programs in the last few years are a result of the application of the percentage-of-completion method of contract accounting with regard to inventory and revenue recognition. Under this method, investments in new contracts, including contractual pre-production costs and recurring production costs in excess of the projected average cost to manufacture all units in the contract block, initially accumulate in inventory for the related contract. Once production has reached a point where the cost to produce a ship set falls below such projected average cost, the inventory balance for such program will begin to decrease. As many of our new programs are either in the pre-production phase or the early stages of recurring production, we expect that inventory balances will continue to increase in 2013. Deferred inventory costs are evaluated for recoverability through their inclusion in the total costs used in the calculation of each contract's estimated profit margin. When the estimated total contract costs exceed total estimated contract revenues, an inventory reserve is established.

We are currently performing work on several new programs, which are in various stages of development. Several of these programs entered flight testing in 2011, including the Gulfstream G280 and Gulfstream G650, which includes the Rolls-Royce BR725. The G280 and G650 aircraft received FAA Type Certification during the third quarter of 2012, with both programs making deliveries to the final customer by the end of 2012. The Boeing B787-8 and Boeing B747-8 have each received FAA and JAA certifications, as well as EASA certification for entry into service, and each of these Boeing programs has made aircraft deliveries to the final customer. We have delivered revenue-generating production units on all of these programs. In January 2013, the FAA and other civil aviation authorities ordered the grounding of all B787-8 aircraft in the commercial airline fleet and caused a suspension of deliveries until a determination and corrective action is in place for lithium ion battery failures. We have delivered six revenue-generating test articles on the Sikorsky CH-53K helicopter program, and we expect to deliver the final test article by the end of the first quarter of 2013.

We continue to support the development of the A350 XWB program through a wing contract and a fuselage contract, both of which are segmented into a non-recurring design engineering phase and recurring production phase. Our A350 XWB wing non-recurring contract continued to experience increasing engineering change costs resulting in the additional forward loss recorded in the third quarter of 2012. While we have now substantially completed the engineering and design for the first model, we still have yet to design the next derivative model which is a major element of the non-recurring contracts for both the fuselage and wing contracts. Unexpected delays in the completion of the design engineering, significant changes to the design as a result of test or other requirements changes, or delays in delivery schedule could result in additional forward losses on the non-recurring wing and fuselage elements of the program and additional cost pressure on the recurring elements of this program. While we are currently projecting the wing and fuselage recurring production contracts to be profitable, there is still a substantial amount of risk similar to what we have experienced on other development programs. Particularly, our ability to manage risks related to supply chain contracting, supplier performance, execution of cost reduction strategies, hiring and retaining skilled production and management personnel, quality and manufacturing execution and program schedule delays among other risks, will determine the ultimate performance of these programs.

Our A350 XWB Section 15 assembly has experienced various production delays and performance-related issues mostly driven by engineering change to the aircraft design. Recently our government production approval at our St. Nazaire facility was suspended and we are working to have it restored. The suspension has not impacted our ability to perform under our A350 XWB contract. Airbus is assisting us to work through these issues and has provided additional resources to work alongside our personnel. While we have not incurred any specific charges for this assistance to date, there could be additional cost associated with this at some point in the future and those amounts could be significant depending on the work scope, duration of the assistance, and the allocation of responsibility.

As we move into higher production, our performance at the current contracted price depends on our being able to achieve production cost reductions as we gain production experience. Failure to reduce production costs as we have anticipated could result in the need to record additional forward losses on this program.

We do not yet have established pricing for the B787-9 or any future derivatives, though the B787 Supply Agreement provides for methodologies to negotiate pricing. Our ability to successfully negotiate fair and equitable prices for these models is a key factor in achieving the projected financial performance for this program.

On January 16, 2013, following two recent incidents with the B787 involving lithium ion battery failures, the FAA issued an emergency airworthiness directive to address a potential battery fire risk and to require airlines to temporarily cease operations, and caused Boeing to suspend deliveries, of the B787 aircraft. Following the FAA's directive, civil aviation authorities in several other jurisdictions took similar action to cover the fleets operating in their jurisdictions. As a result, all B787 aircraft are currently grounded while Boeing works to develop a corrective action plan. These events have not yet resulted in any production delays, but could lead to delivery delays in the future, or otherwise impact the future of the program. In addition, any corrective action which Boeing is required to take could lead to increased production costs, reduced efficiency of the aircraft and lower demand, which could lead to additional cost pressure.

During 2012, several key events occurred within some of our new programs which necessitated revisions to our contract estimates due to performance issues, cost overruns and cost reduction activities that have not materialized as quickly as we had expected. The Company has failed to achieve forecasted cost reductions on many of these programs and overran engineering design cost forecasts due to excessive re-design efforts. As a result of these and other events, for the twelve months ended December 31, 2012, we have recorded aggregate forward loss charges of $184.0 million on the Boeing B787, $162.5 million on the Gulfstream G650, $151.0 million on the Rolls-Royce BR725, $118.8 million on the Gulfstream G280, $8.9 million on the Airbus A350 XWB non-recurring wing and $11.5 million on the Boeing B747-8 program.

The Company's Tulsa facility has significant work content on three of the development programs (B787, G280, and G650). The multiple complex development programs at this facility have created various performance issues that have resulted in previous changes to our contract estimates on these development programs.

The performance issues at the Tulsa facility were magnified in the third quarter of 2012 when the Company implemented a recovery plan which would bring the Company current on the delivery schedule for its B787 wing components. The Company began implementing the recovery plan during late July 2012 which resulted in the addition of significant additional resources to meet delivery schedules. As the

Company was implementing the recovery plan, it became clear during the third quarter estimation process that the remediation would have a significant impact on the future cost curves due to significant amounts of additional headcount and disruption.