Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and operations, includes forward-looking statements that involve risks and uncertainties. You should review the sections of this Annual Report on Form 10-K captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Management’s Focus
For the year ended December 31, 2024, management’s focus was on:
• completing alignment with customers and delivering on our commitments;
• stabilizing and de-risking operations;
• improving teamwork to overcome challenges and achieve goals; and
• strengthening Spirit financially
For the year ending December 31, 2025, management’s focus is on:
• quality, safety, and compliance
• operational execution required to deliver on our commitments to customers
• improve efficiency resulting in cost reductions; and
• executing on strategic transactions
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Global Economic Conditions
Global economic conditions impact our results of operations. Our business operations depend on, among other things, sufficient OEM orders (without suspension) from airlines and the financial resources of airlines, our suppliers, other companies and individuals.
Energy, freight, raw material and other costs have been impacted by, and may continue to be impacted by, the war in Ukraine. Prolonged global inflationary pressures have also impacted these costs in addition to increased interest costs and labor costs. In certain situations, we have the ability to recover certain abnormal inflationary impacts through contractual agreements with our customers; however, we anticipate that we will experience reduced levels of profitability related to inflationary impacts until such time as the rate of inflation subsides to normal historical levels. Our associated estimates of such costs, where applicable, use the most recent information available. The economic impact of inflation, together with the impact of increases in interest rates and actions taken to attempt to reduce inflation, may have a significant effect on the global economy, air travel, our supply chain and our customers, and, as a result, on our business.
In addition, Russia’s invasion of Ukraine, the resultant sanctions and other measures imposed by the U.S. and other governments, and other related impacts have resulted in economic and political uncertainty and risks. In response to the Russian invasion of Ukraine, and the associated U.S. sanctions, the Company suspended all sanctioned activities relating to Russia, primarily consisting of sales and service activities. The suspended activities’ impacts to prospective revenues, net income, net assets, cash flow from operations, and the Company’s Consolidated Financial Position are not material. Continuation or significant expansion of economic disruption or escalation of the conflict, or other geopolitical events of a similar nature, such as the conflict in the Middle East, could have a material adverse effect on orders from our customers, the public’s ability or willingness to continue to travel, the availability and timeliness of certain elements of parts procured from our supply chain, and/or our results of operations.
We expect that our operating environment will continue to remain dynamic and evolve in 2025. We continue to monitor and evaluate related risks and uncertainties relating to macroeconomic conditions, including the items discussed in Item 1A. “Risk Factors” in this Annual Report on Form 10-K.
Agreement and Plan of Merger with The Boeing Company
On June 30, 2024, Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Boeing Company (“Boeing”) and Sphere Acquisition Corp., a wholly owned subsidiary of Boeing (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into Holdings (the “Merger”), with Holdings surviving the Merger and becoming a wholly owned subsidiary of Boeing.
On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Holdings Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Holdings Common Stock owned by Boeing, Merger Sub, any other wholly owned subsidiary of Boeing, Holdings, or any wholly owned subsidiary of Holdings, in each case, not held on behalf of third parties) will be automatically cancelled and cease to exist and will be converted into the right to receive a number of shares of Holdings Common Stock, of the par value of $5 each, of Boeing (“Boeing Common Stock”) equal to (a) if the volume-weighted average price per share of Boeing Common Stock on the New York Stock Exchange for the 15 consecutive trading days ending on and including the second full trading day prior to the Effective Time (the “Boeing Stock Price”), is greater than $149.00 but less than $206.94, the quotient obtained by dividing $37.25 by the Boeing Stock Price, rounded to four decimal places or (b) if the Boeing Stock Price is greater than or equal to $206.94, 0.1800 or (c) if the Boeing Stock Price is equal to or less than $149.00, 0.2500 (such number of shares of Boeing Common Stock, the “Per Share Merger Consideration”).
Under the terms of the Merger Agreement, the closing of the Merger is subject to various conditions, including: (a) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Holdings Common Stock entitled to vote thereon (the “Holdings Stockholder Approval”); (b) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the receipt of other specified regulatory approvals (collectively, including the expiration or termination of any such waiting periods, the “Regulatory Approvals”); (c) the absence of any law or order issued by a governmental entity prohibiting the consummation of the Merger; (d) the approval for listing on the New York Stock Exchange of, and the effectiveness of a registration statement on Form S‑4 relating to, the shares of Boeing Common Stock to be issued in the Merger; (e) solely with respect to the obligations of Boeing and Merger Sub to effect the closing of the Merger, (1) the accuracy (subject to materiality qualifiers in certain cases) of the representations and warranties of Holdings contained in the Merger Agreement, (2) Holdings having performed in all material respects the obligations required to be performed by it under the Merger Agreement at or prior to the of the Merger, (3)
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the Regulatory Approvals having been obtained without the imposition of a Burdensome Condition (as defined in the Merger Agreement), (4) the absence of a Material Adverse Effect (as defined in the Merger Agreement) or any event that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect since the date of the Merger Agreement and (5) Holdings having completed the divestiture of certain portions of the Company’s business related to the performance by the Company of its obligations under supply contracts with Airbus SE and its affiliates (the “Spirit Airbus Business”); and (f) solely with respect to the obligation of Holdings to effect the closing of the Merger, (1) the accuracy (subject to materiality qualifiers in certain cases) of the representations and warranties of Boeing and Merger Sub contained in the Merger Agreement, (2) each of Boeing and Merger Sub having performed in all material respects the obligations required to be performed by it under the Merger Agreement at or prior to the closing of the Merger and (3) the absence of a Parent Material Effect (as defined in the Merger Agreement) or any event that would reasonably be expected to have, individually or in the aggregate, a Parent Material Effect since the date of the Merger Agreement.
The Merger Agreement includes customary representations, warranties and covenants of Holdings, Boeing and Merger Sub, including covenants restricting Holdings from soliciting alternative acquisition proposals, governing the conduct of the Company’s business during the period between the date of the Merger Agreement and completion of the Merger and relating to the parties’ efforts to consummate the Merger as promptly as reasonably practicable. The Merger Agreement includes provisions to facilitate the disposition by the Company to Airbus SE and its affiliates (“Airbus”) of the Spirit Airbus Business, as contemplated by a term sheet between Spirit and Airbus SE (the “Airbus Term Sheet”) described below under the sub-heading Airbus Term Sheet . The Merger Agreement also includes provisions, which are consistent with provisions in the Airbus Term Sheet, to facilitate the potential sale, subject to certain Boeing consent rights, by the Company to other third parties of specified assets and businesses, some of which include or comprise parts of the Spirit Airbus Business. Such specified assets and businesses include, among others, the Company’s operations in Belfast, Northern Ireland (other than the operations that are part of the Spirit Airbus Business) and Subang, Malaysia, certain of the Company’s operations in Prestwick, Scotland and the Company’s Fiber Materials, Inc. business.
The Merger Agreement includes termination provisions under which either Holdings or Boeing may terminate the Merger Agreement in various circumstances, including if the Merger has not been consummated by March 31, 2025, subject to three automatic three-month extensions if on each such date all of the closing conditions except those relating to regulatory approvals or the disposition of the Spirit Airbus Business have been satisfied or waived (such date, as so extended (if applicable), the “Outside Date”). Upon termination of the Merger Agreement in specified circumstances, Boeing would be required to pay to Holdings a termination fee of $300.0 million reduced (but not to less than zero) by the aggregate then-outstanding amount of cash advances to be repaid by the Company to Boeing, whether or not then due and payable, pursuant to the applicable agreements governing cash advances by Boeing to the Company.
Subject to satisfaction of the closing conditions in the Merger Agreement, the closing of the Merger is expected to occur in mid-2025.
In connection with the proposed merger, Spirit and Boeing have each received a request for additional information (“second request”) from the Federal Trade Commission as part of the regulatory review process under the HSR Act. The second request extends the waiting period imposed by the HSR Act until 30 days after Spirit and Boeing have substantially complied with the requests or the waiting period is terminated sooner by the Federal Trade Commission.
Other than transaction expenses associated with the Merger of $66.0 million for the year ended December 31, 2024, recorded within Selling, general and administrative expense in our Consolidated Statements of Operations, the Merger Agreement did not affect the Company’s consolidated financial statements for the year ended December 31, 2024.
Airbus Term Sheet
Spirit and Airbus entered into the Airbus Term Sheet on June 30, 2024. The Airbus Term Sheet is a binding term sheet under which the parties have agreed to negotiate in good faith definitive agreements (the “Definitive Agreements”), including a purchase agreement, providing for the acquisition by Airbus or its affiliates of the Spirit Airbus Business on the terms set forth in the Airbus Term Sheet with the goal of permitting Boeing and Holdings to consummate the Merger prior to the Outside Date. The Airbus Term Sheet provides that the execution of the Definitive Agreements will be subject to and conditioned upon the completion to the satisfaction of Airbus of its due diligence. The Airbus Term Sheet contemplates that specified portions of the Spirit Airbus Business, such as the portion of the Spirit Airbus Business in Prestwick, Scotland (the “Airbus Prestwick Business”), may, instead of being acquired by Airbus or its affiliates, be acquired by one or more third parties.
Under the transaction terms set forth in the Airbus Term Sheet, Airbus would acquire from Spirit and its subsidiaries the Spirit Airbus Business, excluding any portions thereof to be acquired by third parties, and cash in the amount of $559.0 million
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(subject to downward adjustment if the acquisition by Airbus includes the Airbus Prestwick Business) for nominal consideration of one dollar, subject to working capital and other purchase price adjustments and additional adjustments, to be agreed between the parties prior to execution and delivery of the Definitive Agreements, to reflect the fair market value of specified assets of the Spirit Airbus Business to the extent they are to be acquired by Airbus rather than third parties.
The transaction terms set forth in the Airbus Term Sheet include provisions for, among other things, the payment in full by Spirit to Airbus of any loans, advance payments, similar arrangements and undisputed liquidated damages owing from Spirit to Airbus (the “Outstanding Amounts”) as of the closing of the transactions contemplated by the Airbus Term Sheet (the “Airbus Transactions,” and such closing, the “Airbus Closing”), with any disputed liquidated damages to be resolved and paid in accordance with a mutually agreed dispute resolution process; transitional arrangements with respect to specified real estate; obtaining third-party consents; segregation of Spirit’s business conducted primarily for the benefit of Airbus from the remainder of Spirit’s business and treatment of vendor and supply contracts, employees, intellectual property, pensions and unfunded employee liabilities in connection with the separation of those portions of Spirit’s business; mutual indemnification and releases; inclusion in the Definitive Agreements of customary representations, warranties and covenants; and transitional and other arrangements to be entered into by the parties at the Airbus .
Under the transaction terms set forth in the Airbus Term Sheet, the Airbus Closing would be conditioned upon the receipt of applicable governmental and regulatory consents, approvals and clearances; the absence of any order, legal prohibition or injunction preventing the consummation of the Airbus Transactions; compliance by the parties with their pre-closing covenants in all material respects; payment in full of the Outstanding Amounts; the closing under the Merger Agreement occurring substantially concurrently with the Airbus Transactions; there being no material adverse change after the date of the Definitive Agreements and before the Airbus Closing in the business operations to be acquired by Airbus at the Airbus Closing; and Spirit’s implementation in all material respects of technical measures and policies to protect confidential data of Airbus.
The Airbus Term Sheet provides that no binding agreement has been made with respect to the French aspects of the Airbus Transactions (“Airbus French Transactions”). Prior to the Company and Airbus entering into definitive agreements that are applicable to the Airbus French Transactions, Spirit and Airbus have agreed to comply with their respective information and consultation obligations with applicable employees and employee representatives. The Airbus Term Sheet also provides that the parties will complete necessary labor consultations and obtain necessary approvals from applicable unions and works councils in various jurisdictions, as may be legally required.
Assets Held for Sale
On November 17, 2024, the Company entered into a definitive agreement to sell our Fiber Materials, Inc. (“FMI”) business, a fully owned subsidiary of Spirit AeroSystems, Inc., for $165.0 million, subject to customary purchase price adjustments and closing conditions as set forth in the definitive agreement. The transaction closed on January 13, 2025. For additional information, see Note 30 Acquisitions and Dispositions.
B737 Program
The B737 MAX program is a critical program to the Company. For the twelve months ended December 31, 2024, 2023, and 2022 approximately 39%, 45%, and 45% of our net revenues, respectively, were generated from sales of components to Boeing for the B737 aircraft, as compared to 53% for the twelve months ended December 31, 2019, which was the most recent period to exclude impacts from the MAX grounding and the global pandemic crises. While we have entered into long-term supply agreements with Boeing to continue to provide components for the B737 for the life of the aircraft program, including commercial and military P-8 derivatives, Boeing does not have any obligation to purchase components from us for any replacement for the B737 that is not a commercial derivative model as defined by the Special Business Provisions and the General Terms Agreement (collectively, the “Sustaining Agreement”) between Spirit and Boeing. The Sustaining Agreement is a requirements contract and Boeing can reduce the purchase volume at any time.
In March 2019, the B737 MAX fleet was grounded in the U.S. and internationally following the 2018 and 2019 accidents involving two B737 MAX aircraft. In November 2020, the FAA issued an order rescinding the grounding of the B737 MAX and published an Airworthiness Directive specifying design changes to be made before the aircraft returned to service. Boeing’s deliveries of the B737 MAX resumed in the fourth quarter of 2020. Since November 2020, regulators from Brazil, Canada, China, the EU, U.K., India, and other countries have taken similar actions to unground the B737 MAX and permit return to service. During the twelve months ended December 31, 2024, Boeing continued to announce orders for the B737 MAX.
We expect that the B737 MAX and other narrowbody production rates will recover to pre-pandemic levels before widebody production rates. For additional information, see Item 1A, “Risk Factors”.
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The 737 MAX 7 and MAX 10 models are currently going through Federal Aviation Administration (“FAA”) certification activities. In December 2022, an extension for certification of these two models to December 31, 2024 was granted when the U.S. Congress passed the Fiscal Year 2023 Omnibus Appropriations Bill. In early 2024, Boeing communicated that it has pledged to develop new engine inlets for the B737 MAX to rectify overheating issues observed with the current engine inlets when the anti-ice system is activated under specific conditions. Boeing anticipates this activity will be completed in approximately one year. If Boeing is unable to achieve certification of these models or the entry into service is inconsistent with current assumptions, future revenues, earnings and cash flows are likely to be adversely impacted.
The B737 MAX 9 derivative fleet was temporarily grounded by the FAA while certain safety inspections were completed and to allow the FAA time to review any required maintenance actions following the January 5, 2024 in-flight incident on a B737 MAX 9 aircraft flown by Alaska Airlines. The B737 MAX 9 fleet returned to service on January 26, 2024 after mandatory inspections were completed. We are participating in investigations relating to this incident. For additional information, see Note 23 Commitments, Contingencies and Guarantees.
Certain changes made to the production and delivery process implemented by Boeing have had an immediate impact to our results of operations and cash flows. On March 2, 2024, Boeing announced they would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work. A new product verification process has been implemented by Boeing at our factory in Wichita, KS.
B787 Program
During the year ended December 31, 2022, our estimates for further production rate decreases and build schedule changes, supply chain costs, and other costs, including costs of rework, drove additional forward loss charges of $93.5 million. During the year ended December 31, 2023, our estimates related to the impact of the IAM agreement, additional labor and supply chain cost growth drove additional forward loss charges of $93.0 million recognized through the quarter ended September 29, 2023. On October 12, 2023, we executed a Memorandum of Agreement with Boeing (the “2023 MOA”), where among other items, we established recurring shipset price increases effective for line unit 1164 through line unit 1605 with a mutual goal of concluding good faith pricing negotiations, other interests and considerations 12 months prior to the delivery of line unit 1605. As a result, we reversed previously recognized forward loss charges of $205.6 million and also reversed a previously recognized material right obligation of $154.6 million in the quarter ended December 31, 2023. During the year ended December 31, 2024, our updated estimates drove an additional $483.3 million of forward loss primarily related to schedule changes, additional labor and supply chain cost growth. Additional production rate changes, changes in cost assessments, , labor work , supply chain cost changes, or changes to the scope of quality issues and any associated rework, could result in an incremental provision.
Airbus Programs
During the year ended December 31, 2022, the A350 program recorded additional forward loss charges of $105.7 million driven by estimated quality-related costs, non-recurring engineering and tooling costs, and additional labor, freight, and other cost requirements driven by parts shortages, production and quality issues, and customer production rate changes. The A350 program recorded additional forward loss charges of $121.3 million for the year ended December 31, 2023, driven by labor and production cost growth, higher supply chain costs and schedule revisions. For the year ended December 31, 2024, our updated estimates drove $359.2 million of incremental estimated forward loss on the A350 program, driven primarily by a change in strategic pricing conversations with our customer, Airbus, incremental orders Airbus secured, and the impact of factory performance and supply chain cost growth.
During the year ended December 31, 2022, the A220 wing program recorded forward loss charges of $25 million primarily related to the bankruptcy of a supplier and associated failure to deliver key parts on the program. The A220 program recorded additional forward losses of $164.8 million for the year ended December 31, 2023, primarily related to higher production, labor and supply chain costs. During the year ended December 31, 2024, our updated estimates drove $328.8 million of incremental estimated forward loss on the A220 program, driven by a change in strategic pricing conversations with our customer, Airbus, incremental orders Airbus secured, schedule changes, and increased production and supply chain costs.
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Critical Accounting Estimates
The preparation of the Company’s financial statements in accordance with accounting principles generally accepted in the U.S. (“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. On an ongoing basis, we evaluate our estimates, including those related to inventory, revenue, income taxes, financing obligations, warranties, pensions and other post-retirement benefits, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management believes that the quality and reasonableness of our most critical accounting policies enable the fair presentation of our financial position and results of operations. However, the sensitivity of financial statements to these methods, assumptions, and estimates could create materially different results under different conditions or using different assumptions. We believe application of these policies requires difficult, subjective, and complex judgments to estimate the effect of inherent uncertainties. This section should be read in conjunction with Note 4 to the Consolidated Financial Statements, Summary of Significant Accounting Policies .
Revenues and Profit Recognition
Revenue is recognized using the principles of ASC 606 (“ASC 606”), Revenue from contracts with customers. Revenue is recognized when, or as, control of promised products or services transfers to a customer, and the amount recognized reflects the consideration that the Company expects to receive in exchange for those products or services. See Note 4 to the Consolidated Financial Statements, Summary of Significant Accounting Policies , for a further description of revenue recognition under ASC 606. In determining our profits and losses in accordance with this method, we are required to make significant judgments regarding our future costs, variable elements of revenue, the standalone selling price, and other variables. We continually review and update our assumptions based on market trends and our most recent experience. If we make material changes to our assumptions, we may have positive or negative cumulative catch-up adjustments related to revenues previously recognized, and in some cases, we may adjust forward loss reserves. When we experience abnormal production costs such as excess capacity costs the Company expenses the excess costs in the period incurred and reports as segment costs of goods sold. These excess costs (actual and estimated future costs) are excluded from the estimates at completion of our accounting contracts with customers. For a broader description of the various types of risks we face related to new and maturing programs, see Item 1A. “Risk Factors”.
Business Combinations and Goodwill
We account for business combinations in accordance with ASC Topic 805, Business Combinations. Transaction costs related to business combinations are expensed as incurred. Assets acquired and liabilities assumed are measured and recognized based on their estimated fair values at the acquisition date, any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired is recorded as goodwill. For material acquisitions, we have engaged independent advisory consultants to assist us with determining the fair value of assets acquired, including goodwill, and liabilities assumed based on established business valuation methodologies. Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. In some cases, the Company used discounted cash flow analyses, which were based on our best estimate of future sales, earnings and cash flows after considering such factors as general market conditions, customer budgets, existing firm and future orders, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield materially different results. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, the business combination is recorded and disclosed on a preliminary basis. Subsequent to the acquisition date, and not later than one year from the acquisition date, adjustments to the initial preliminary recognized amounts are recorded to the extent new information is obtained about the measurement of assets and liabilities that existed as of the date of the acquisition.
The Company assesses goodwill for impairment annually as of the first day of the fourth quarter or more frequently if events or circumstances indicate that the fair value of a reporting unit that includes goodwill may be lower than its carrying value. We test goodwill for impairment by performing a qualitative assessment or quantitative test at the reporting unit level. In performing a qualitative assessment, we evaluate company-specific, market and industry, economic, and other relevant factors that may impact the fair value of our reporting units or the carrying value of the net assets of the respective reporting unit. If we determine that it is more likely than not that the carrying value of the net assets is more than the fair value of the respective reporting unit, then a quantitative test is performed, unless we exercise our option to bypass the qualitative assessment and proceed directly to performing the quantitative goodwill impairment test. Where the quantitative test is used, we compare the carrying value of net assets to the estimated fair value of the respective reporting unit. If the fair value is determined to be less
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than carrying value, a goodwill impairment loss is recognized for the amount that the carrying amount of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.
As of September 27, 2024 the balance of goodwill was $631.1 million. The goodwill primarily represents the purchase price in excess of the fair value of the net assets acquired and liabilities assumed in connection with the acquisition of Fiber Materials Inc. (“FMI”) in the first quarter of 2020, the completion of the acquisition of the outstanding equity of Short Brothers plc (“Shorts”) and Bombardier Aerospace North Africa SAS (“BANA”), and substantially all the assets of the maintenance, repair and overhaul business in Dallas, Texas (collectively, the “Bombardier Acquired Businesses”), along with the assumption of certain liabilities of Shorts and BANA (the “Bombardier Acquisition”) in the fourth quarter of 2020 and the acquisition of the assets of Applied Aerodynamics, Inc. during the three months ended July 1, 2021. There was no impairment of goodwill for the years ended December 31, 2024 or December 31, 2023. For the year ended December 31, 2024, in accordance with our annual assessment policy, we exercised our option to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test as of the beginning of the fourth quarter. Management concluded through the quantitative assessment that the fair value of each of our reporting units substantially exceeded the respective carrying value for each reporting unit, and therefore, no impairment existed as of the annual assessment date during the fourth quarter of 2024.
The quantitative goodwill impairment test requires significant use of judgment and assumptions, such as the identification of reporting units, the assignment of assets and liabilities to reporting units, and the determination of fair value of the reporting units. We applied what we believe to be the appropriate valuation methodology for our reporting units to determine the respective fair values, which included a combination of an income approach, derived from discounted cash flows, and a market approach, using the guideline public company method. The principal assumptions utilized in the income approach included management’s estimated pro forma financial information, including management’s best and most current estimates of the timing and level of production volumes and estimated future margins, long-term growth rates and discount rate. The principal assumptions utilized in the market approach included management’s pro forma financial information and selected market multiples. We believe the assumptions and estimates made were reasonable and appropriate. The assumptions were based on our most recent experience, our contractual backlog, and market trends, including projected long-term inflation rate, GDP growth for the U.S. and the long-term growth expectations of the aerospace industry. Margin assumptions include management’s best and most current estimates of the potential impacts of continued cost pressures related to labor, inflation and supply chain challenges that have been realized in year 2024, as noted in the Global Economic Conditions section above. We determined the discount rate for each of our reporting units using a weighted average cost of capital adjusted for risk factors including risk associated with 737 MAX production growth assumptions, and other industry-specific, market-based and economic factors. Based on the results of our assessment, management believes that the amount of excess fair value over the carrying value of each of our reporting units is sufficient to remain through a range of scenarios that are considered by management to be reasonably likely to occur, however, the variability of the factors used in our assessment depends on a number of conditions, and actual results and forecasts of revenue growth and margins for our reporting units may be impacted by industry, market and business risks and uncertainties including those identified in Item 1A. “Risk Factors”. If such factors impact our ability to forecasted revenue growth rates and margins, the fair value of one or more of our reporting units could decrease, which, if significant, may result in an .
Pension
Many of our employees have earned benefits under the defined benefit pension plans. Effective as of December 31, 2005, we had one qualified plan and 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. Effective October 1, 2021, the Company spun off a portion of the existing Pension Value Plan (“PVP A”), called PVP B. As part of the PVP B plan termination process, a lump sum offering was provided during 2021 for PVP B participants and the final asset distribution was completed in the first quarter of 2022.
Additionally, in the twelve months ended December 31, 2022 the Company adopted and communicated to participants a plan to terminate the PVP A. During the twelve months ended December 31, 2022, the PVP A plan was amended, providing for an enhancement to benefits the Company is providing to certain U.S. employees in conjunction with the plan termination. The estimated liability impact of this plan amendment, $ 0.0 million, was recognized immediately as a non-cash, pre-tax non-operating charge for amortization of prior service costs. The Company recognized additional non-cash, pre-tax non-operating accounting charges of $ 34.7 million related to the plan termination, primarily reflecting the accounting for bulk lump-sum payments made in the fourth quarter of 2022, which resulted in a settlement charge related to the accelerated recognition of the
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actuarial losses for the PVP A plan that were previously included in the Accumulated other comprehensive loss line item in the Stockholders’ Equity section of the Company’s Balance Sheet.
In the fourth quarter of 2023, the Company applied final settlement accounting to the PVP A. During 2023, the Company received excess plan asset reversion of $188.5 million of cash from PVP A. This transaction was accounted for as a negative contribution, and is included on the Pension plans employer contributions line item on the Consolidated Statements of Cash Flows for the year ended December 31, 2023. Excise tax of $37.7 million related to the reversion of excess plan assets was separately recorded to the Other expense, net line item on the Consolidated Statements of Operations for the year ended December 31, 2023. See also Note 24 Other Expense, net to our consolidated financial statements included in Item 8 of this Annual Report for more information. At December 31, 2023 and 2022, an excess pension plan asset reversion of $61.1 million and $71.1 million is recorded on the Restricted plan assets line item on the Company’s Consolidated Balance Sheets. Restricted plan assets are expected to be reduced over five years as they are distributed to employees under a qualified benefit program.
In 2006, as part of the acquisition of BAE Aerostructures, the Company established a U.K. defined benefit pension plan for those employees based in Prestwick that had pension benefits remaining in BAE Systems’ pension plan. Effective December 31, 2013, this Prestwick pension plan was closed and benefits were frozen and thereafter subject only to statutory pension revaluation.
On October 30, 2020, as part of the Bombardier Acquisition, the Company acquired two further defined benefit plans for current and former employees at the Belfast location. As of December 31, 2021, the Company had concluded its consultation and communication with employee and Trade Union representatives on the closure of the largest of the defined benefit plans acquired as part of the Bombardier Acquisition, the Shorts Pension (as defined below). The outcome is that the Shorts Pension was amended and closed to the future accrual of benefits for all employees who are members of the plan, effective December 10, 2021. From December 11, 2021, affected employees will build up future retirement savings in a new defined contribution scheme. For the twelve months ended December 31, 2021, the impact of the closure of the Shorts Pension resulted in a curtailment gain of $ 61.0 million. The remaining plan is closed to new hires and the future accrual of benefits, as the final employees accruing service in the plan left Company employment. See Note 18, Pension and Other Post-Retirement Benefits for more information. In accordance with legislation, each of the U.K. plans and their assets are managed by independent trustee companies.
Accounting guidance requires an annual measurement of our projected obligation and plan assets. These measurements are based upon several assumptions, including the discount rate and the expected long-term rate of asset return. Future changes in assumptions or differences between actual and expected outcomes can significantly affect our future annual expense, projected benefit obligation and shareholders’ equity. The projected benefit obligation and net periodic pension cost are sensitive to discount rates. The projected benefit obligation would decrease by $54.5 million or increase by $58.0 million if the discount rate increased or decreased by 25 basis points. The 2023 net periodic pension cost would increase by $1.0 million or decrease by $1.1 million if the discount rate increased or decreased by 25 basis points at each applicable measurement date. Additionally, net periodic pension cost is also sensitive to changes in the expected long-term rate of asset return. A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2023 net periodic pension cost by $3.7 million.
For additional information, see Item 1A. “Risk Factors”. We could be required to make future contributions to our defined benefit pension and post-retirement benefit plans as a result of adverse changes in interest rates and the capital markets. Adverse changes in the securities markets or interest rates, changes in actuarial assumptions, and legislative or other regulatory actions could substantially increase the costs of these plans and could result in a requirement to contribute additional funds to the plans.
Income Taxes
Income taxes are accounted for in accordance with Financial Accounting Standards Board (“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.
Deferred tax assets are periodically evaluated to determine their recoverability and whether or not a valuation allowance is necessary. 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
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and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
This assessment is completed on a taxing jurisdiction and entity filing basis. Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company’s prior earnings history including the forward losses previously recognized in the U.S. and U.K., management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. and U.K. deferred tax assets at December 31, 2020. This determination was made as the Company entered into a U.S. cumulative loss position during the first half of 2021, as prior period positive earnings fall outside of the three-year measurement period. Additionally, all entities of the U.K. operations are in cumulative loss positions after the inclusion of 2023, 2022, and 2021 losses. Once a company anticipates or enters a cumulative three-year loss position, there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized.
We record income tax provision or benefit based on the pre-tax income earned or net 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 21 to the Consolidated Financial Statements, Income Taxes , for further discussion.
Results of Operations
The following table sets forth, for the periods indicated, certain of our operating data:
Twelve Months Ended
December 31, 2024 (1)
December 31, 2023 (1)(2)
December 31, 2022 (2)
($ in millions)
Net revenues
Cost of sales
Gross loss
Selling, general and administrative
Restructuring costs
Research and development
Other operating expense
Operating loss
Interest expense and financing fee amortization
Other expense, net
Loss before income taxes and equity in net income (loss) of affiliates
Income tax benefit (provision)
Loss before equity in net income (loss) of affiliates
Equity in net income (loss) of affiliates
Net loss
Less noncontrolling interest in earnings of subsidiary
Net loss attributable to common shareholders
(1) See “Twelve Months Ended December 31, 2024 as Compared to Twelve Months Ended December 31, 2023” for detailed discussion of operating data.
(2) See “Twelve Months Ended December 31, 2023 as Compared to Twelve Months Ended December 31, 2022” for detailed discussion of operating data.
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Comparative shipset deliveries by model are as follows:
Twelve Months Ended
Model
December 31,
December 31,
December 31,
Total Boeing
A320 Family
Total Airbus
Total Business/Regional Jets
Total
(1) Beginning in 2022, A220 deliveries reflect the number of wing end item deliveries instead of pylon end item deliveries, as previously reported.
For purposes of measuring production or shipset deliveries for Boeing aircraft in a given period, the term “shipset” refers to sets of structural fuselage components produced or delivered for one aircraft in such period. For purposes of measuring production or shipset deliveries for Airbus A220 aircraft in a given period, the term “shipset” refers to sets of structural wing components produced or delivered for one aircraft in such period. For purposes of measuring production or shipset deliveries for all other Airbus and Business/Regional Jet aircraft in a given period, the term “shipset” refers to all structural aircraft components produced or delivered for one aircraft in such period. Other components that are part of the same aircraft shipsets could be produced or shipped in earlier or later accounting periods than the components used to measure production or shipset deliveries, which may result in slight variations in production or delivery quantities of the various shipset components in any given period.
Net revenues by prime customer are as follows:
Twelve Months Ended
Prime Customer
December 31,
December 31,
December 31,
($ in millions)
Boeing
Airbus
Other
Total net revenues
Changes in Estimates
During the twelve months ended December 31, 2024, we recognized unfavorable change in estimates of $1,428.6 million, including forward loss charges of $1,366.2 million and unfavorable cumulative catch-up adjustments of $62.4 million. The forward loss charges were primarily driven by current production performance, and supply chain cost growth on the A350 and A220 programs, additional labor and supply chain cost growth on the B787 program, increased costs related to factory performance on the B767 program and supply chain cost estimates on the KC-135 program. Unfavorable cumulative catch-up adjustments were primarily driven by increased production costs associated with changes implemented by Boeing in March 2024 to introduce a new product verification process in Wichita, KS on the B737 program. These were partially offset by favorable cumulative catch-up adjustment in Defense & Space. This change in business process for the B737 units has delayed
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delivery acceptances and caused a buildup of undelivered units in Wichita, KS. Additionally, we are maintaining a higher cost profile for a planned rate increase that has now been delayed because of the production rate limitations on the B737 program.
During the twelve months ended December 31, 2023, we recognized unfavorable changes in estimates of $320.9 million, including forward loss charges of $470.3 million and unfavorable cumulative catch-up adjustments of $56.2 million, partially offset by a reversal of forward loss charges of ($205.6) million on the B787 resulting from the execution of the Memorandum of Agreement signed on October 12, 2023 with Boeing (the “2023 MOA”), resulting in a net $264.7 million of forward loss charges in 2023. The forward loss charges were primarily driven by labor and production cost growth, higher supply chain costs, and schedule revisions on the A350 program and additional labor, the impact of the IAM agreement and supply chain cost growth on the B787 program, increased factory performance and supply chain costs on the B767, higher production, labor and supply chain costs on the A220 program, and production costs incurred including the impact of the IAM agreement on the Sikorsky CH-53K program. Unfavorable cumulative catch-up adjustments were primarily recognized on the B737 MAX and A320 programs. The Boeing B737 MAX program unfavorable cumulative catch-up adjustment reflects increased supply chain, raw material, factory performance and other costs on the program including the impact of the IAM union negotiations. The A320 program cumulative catch-up adjustment was driven by production cost experienced due to operational and supply chain , and foreign currency movements.
During the twelve months ended December 31, 2022, we recognized unfavorable changes in estimates of $278.0 million primarily driven by the impact of reduced production volumes on the B787 and A350 programs and the corresponding amount of fixed overhead absorption applied to lower deliveries, engineering analysis and estimated costs of rework on the B787 program, estimated quality improvement costs on the A350 program, and cost performance on the B767 program.
Twelve Months Ended December 31, 2024 as Compared to Twelve Months Ended December 31, 2023
Net Revenues. Net revenues for the twelve months ended December 31, 2024 were $6,316.6 million, an increase of $268.7 million, or 4.4%, compared with net revenues of $6,047.9 million, for the prior year. The increase in revenue was primarily driven by increased Commercial segment production on the B777, A350, and A320 programs. The remaining increase was primarily due to greater Defense segment revenues on classified programs and CH-53K and greater Aftermarket sales. These increases were partially offset by decreases in revenue on the B737, B767, B787, and business jet programs in the Commercial segment and decreased P-8 and KC-46 Tanker sales in the Defense segment. The B787 revenues were lower as compared to prior year despite higher current year deliveries due to the reversal in 2023 of a previously recognized material right obligation of $154.6 million as a result of the 2023 MOA with Boeing. Additionally, we recognized non-recurring revenues on the FLRAA program associated with Spirit’s closeout of the program. Approximately 80% of the Company’s net revenues in 2024 came from our two largest customers, Boeing and Airbus.
Deliveries to Boeing decreased 81 shipsets to 376 shipsets during the twelve months ended December 31, 2024, compared to 457 shipsets delivered in the prior year. The decrease was primarily driven by 88 fewer B737 MAX deliveries resulting from delivery delays caused by increased quality and final inspection measures undertaken by Boeing partially offset by higher deliveries on twin aisle programs, particularly the B787 program, which included 19 more deliveries. Deliveries to Airbus increased to 825 shipsets during the twelve months ended December 31, 2024, compared to 725 shipsets delivered in the prior year. The increase of 100 shipset was primarily driven by 75 more deliveries on the A320 program along with increases on every Airbus program. Production deliveries of business/regional jet wing and wing components decreased to 231 shipsets during the twelve months ended December 31, 2024, compared to 236 shipsets delivered in the prior year.
Gross Profit (Loss). Gross loss for the twelve months ended December 31, 2024 was ($1,372.4) million, as compared to a gross profit of $206.2 million for the same period in the prior year, a decrease in gross profit of $1,578.6 million. The decrease in gross profit was primarily driven by Commercial segment results, which included a reduction in gross profit on the lower B737 MAX production revenue and greater forward loss charges on the B787, B767, A350 and A220 programs. Additionally, 2024 results exclude the favorable adjustments related to the 2023 MOA that included forward loss reversals of $205.6 million and material right obligation liability reversal of $154.6 million that increased margin in 2023. The Commercial segment also includes margin deterioration on the B777 and A320 programs. Increased gross profit in the Defense segment was driven by the impact of additional revenues from higher activity on development programs, higher production on the Sikorsky CH-53K and progress on classified programs partially offset by forward losses recorded on the KC-46 Tanker and KC-135 programs, and decreased deliveries of P-8 units under the Boeing B737 program. Lower profit in our Aftermarket segment was driven by the increased spares sales which have lower margins. The variance in profit from the prior year period also includes the impact of higher excess capacity costs in both the Commercial and Defense segments. In the twelve months ended December 31, 2024, we recognized $196.5 million of excess capacity production costs driven by production schedule changes on B737 MAX and A220 programs, and $0.7 million of costs, compared to prior year excess capacity cost of $184.1 million, $8.3 million related to the temporary production pause during the strike and related contract negotiation of employees represented by
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the International Association of Machinists and Aerospace Workers (“IAM”), and $7.2 million of restructuring costs. In the twelve months ended December 31, 2024, we recognized $62.4 million of unfavorable cum ulative catch-up adjustments related to periods prior to the twelve months ended December 31, 2024, and $1,366.2 million of net forward loss charges. In the twelve months ended December 31, 2023, we recorded $56.2 million of unfavorable cumulative catch-up adjustments related to periods prior to the twelve months ended December 31, 2023, and $264.7 million of net forward loss charges.
SG&A and Researc h and Development. SG&A expense was $83.6 million higher for the twelve months ended December 31, 2024, compared to the same period in the prior year, primarily due to increased purchased services for merger related activities of $66.0 million and certain employee retention-related expenditures outlined in the Merger Agreement of $21.5 million. Research and development expense for the twelve months ended December 31, 2024 was $2.1 million higher as compared to the same period in the prior year.
Restructuring Costs. Restructuring costs were $6.5 million lower for the twelve months ended December 31, 2024, compared to the same period in the prior year. The variance is primarily driven by the results of the voluntary separation program activity in the prior year.
Operating Loss. Operating loss for the twelve months ended December 31, 2024 was $1,786.1 million, an increase in loss of $1,651.9 million, compared to operating loss of $134.2 million for the prior year. The increased loss was primarily driven by higher unfavorable changes in estimates in the current year and increased SG&A expenses related to the merger.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2024 increased by $34.8 million as compared to the prior year. Current year interest expense and financing fee amortization included $325.9 million of interest and fees paid or accrued in connection with long-term debt and $19.9 million in amortization of deferred financing costs and original issue discount compared to $279.6 million of interest and fees paid or accrued in connection with long-term debt and $11.6 million in amortization of deferred financing costs and original issue discount for the prior year. Additionally, a loss on extinguishment of debt of $17.3 million was recorded in twelve months ended December 31, 2023 related to the extinguishment of the 2025 Notes. The increase in interest expense for the current year was driven by the higher interest rate on the Second Lien 2030 Notes compared to the refinanced Second Lien 2025 Notes, the addition of the Exchangeable Senior Notes, and the addition of the Bridge Credit Agreement.
Other Expense, net. Other expense for the twelve months ended December 31, 2024 was $2.0 million, compared to other expense of $140.4 million for the same period in the prior year. The $138.4 million decrease in other expense primarily reflects net foreign exchange gains of $9.6 million in the current year, compared to a loss of $13.9 million in the prior year, excise tax of $0.3 million in the current year related to a pension plan net assets reversion (see Note 18 Pension and Other Post-Retirement Benefits ), as compared to $37.7 million of excise taxes in the prior year also related to a reversion, loss on sale of receivables of $48.0 million in the current year as compared to $52.4 million of loss in the prior year, and net pension related income in the current year of $15.3 million compared to net pension related expense of $52.0 million in the prior year. The respective pension income/expense values are separately driven by special accounting impacts related to pension plan termination activities that were respectively undertaken in each period. See also Note 18 Pension and Other Post-Retirement Benefits .
Ben efit (Provision) for Income Taxes. The income tax benefit for the twelve months ended December 31, 2024, was $2.4 million compared to an expense of $22.5 million for the prior year. The 2024 effective tax rate was 0.1% as compared to (3.8%) for 2023. The difference in the effective tax rate recorded for 2024 as compared to 2023 is due to tax expense previously stranded in OCI that was recognized in 2023 due to the termination of the pension.
Merger Agreement. Other than transaction expenses associated with the Merger of $66.0 million recorded within Selling, general and administrative expense in our Consolidated Statements of Operations, the Merger Agreement did not affect the Company’s consolidated financial statements for the year ended December 31, 2024.
Segments. The following tables show segment revenues, segment gross profit and segment operating income for the twelve months ended December 31, 2024 and 2023:
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Twelve Months Ended December 31, 2024
Commercial
Defense & Space
Aftermarket
Corporate and Other
Consolidated
($ in millions)
Net revenues
Cost of sales
Excess capacity costs
Segment gross (loss) profit
Restructuring costs
Segment operating (loss) income (1)
Selling, general and administrative
Research and development
Operating (loss) income
Interest expense and financing fee amortization
Other expense, net
(Loss) income before income taxes and equity in net income of affiliates
Twelve Months Ended December 31, 2023
Commercial
Defense & Space
Aftermarket
Corporate and Other
Consolidated
($ in millions)
Net revenues
Cost of sales
Excess capacity costs
Segment gross profit
Restructuring costs
Other operating (expense) income (2)
Segment operating income (1)
Selling, general and administrative
Research and development
Operating income (loss)
Interest expense and financing fee amortization
Other expense, net
Income (loss) before income taxes and equity in net loss of affiliates
(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, 2024 and 2023 are further detailed in Note 6, Changes in Estimates .
(2) The twelve months ended December 31, 2023 includes charges of $8.1 million and $0.2 million related to the temporary production pause for the Commercial and Defense & Space Segments, respectively, and ($2.4) million of benefit related to related to the settlement of a contingent consideration obligation related to a prior year acquisition for the Aftermarket Segment.
The Commercial, Defense & Space, and Aftermarket segments represented approximately 78%, 15%, and 7%, respectively, of our net revenues for the twelve months ended December 31, 2024. The Commercial, Defense & Space, and Aftermarket segments represented approximately 81%, 13%, and 6%, respectively, of our net revenues for the twelve months ended December 31, 2023.
Commercial Segment. Commercial segment net revenues for the twelve months ended December 31, 2024 were $4,927.4 million, an increase of $42.4 million, or 0.9%, compared to the same period in the prior year. The increase in revenue was primarily due to increased production on the B777, A350 and A320 programs in the current year period, partially offset by decreases in revenue on the B737, B767, B787 and Business Jet programs. The B787 revenues were lower as compared to prior year despite higher current year deliveries due to the reversal in 2023 of a previously recognized material right obligation of $154.6 million as a result of the 2023 MOA with Boeing. Commercial segment operating margins were (31%) for the twelve
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months ended December 31, 2024, compared to 1% for the same period in the prior year. The decrease in margin, compared to the same period in the prior year, was driven by higher unfavorable changes in estimates recorded in the current period as the prior period included the reversal of $205.6 million of forward losses on the B787 as a result of the 2023 MOA. Higher excess capacity costs and the relative impact of greater forward losses on the A350, A220, RB3070, and B787 programs, and margin deterioration on the A320 program also drove the year-over-year deterioration. The twelve months ended December 31, 2024 include excess capacity production costs of $186.5 million related to temporary B737 MAX, and A220 production schedule changes, and $0.7 million related to restructuring costs. The twelve months ended December 31, 2023 include excess capacity production costs of $177.3 million related to temporary B737 MAX, A320 and A220 production schedule changes, $8.1 million related to the temporary production pause, and restructuring costs of $6.3 million. In 2024, the segment recorded unfavorable cumulative catch-up adjustments of $83.5 million and $1,328.9 million of net forward charges. cumulative catch-up adjustments were primarily recognized on the B737 MAX and B777 programs, reflective of increased supply chain, raw material, factory performance and other costs on the program. The 2024 forward charges were primarily driven by current production performance, and supply chain cost growth on the A350 and A220 programs, a dditional labor and supply chain cost growth on the B787 program, and increased costs related to factory performance on the B767 program. cumulative catch-up adjustments were primarily recognized on the B737 MAX program, reflective of increased production costs associated with changes implemented by Boeing in March 2024 to introduce a new product verification process in Wichita, KS on the B737 program. In comparison, during 2023, the segment recorded cumulative catch-up adjustments of $45.6 million and $234.0 million of net forward charges. The 2023 forward charges were primarily driven by labor and production cost growth, higher supply chain costs, and schedule revisions on the A350 program and additional labor, the impact of the IAM agreement and supply chain cost growth on the B787 program, increased factory performance and supply chain costs on the B767, and higher production, labor and supply chain costs on the A220 program. The A320 program cumulative catch-up adjustment was driven by production cost experienced due to operational and supply chain , and foreign currency movements.
Defense & Space Segment. Defense & Space segment net revenues for the twelve months ended December 31, 2024 were $975.2 million, an increase of $186.2 million, or 23.6%, compared to the same period in the prior year. The increase in revenue was primarily due to increased CH-53K and classified program revenues, partially offset by decreases in Boeing P-8 and KC-46 Tanker program production. Defense & Space segment operating margins were 10% for the twelve months ended December 31, 2024, compared to 6% for the same period in the prior year. The increase in margin was driven by the impact of additional revenues from higher activity on development programs, higher production on the Sikorsky CH-53K and progress on classified programs partially offset by forward losses recorded on the KC-46 Tanker and KC-135 programs, and decreased revenue on P-8 units under the Boeing B737 program, the contracts for which include units produced for the Boeing P-8 program that are accounted for in the Defense & Space segment. Additionally, we recognized non-recurring revenues on the FLRAA program associated with Spirit’s closeout of the program. The twelve months ended December 31, 2024 includes excess capacity production costs of $10.0 million related to the temporary B737 production schedule changes. The year ended December 31, 2023 includes excess capacity production costs of $6.8 million related to the temporary B737 production schedule changes. In 2024, the segment recorded favorable cumulative catch-up adjustments of $21.1 million and $37.3 million of net forward charges. In comparison, during 2023, the segment recorded cumulative catch-up adjustments of $10.6 million and $30.7 million of net forward charges.
Aftermarket Segment. Aftermarket segment net revenues for the twelve months ended December 31, 2024 were $414.0 million, an increase of $40.1 million, or 10.7%, compared to the same period in the prior year, reflecting an increase in spare part sales. Aftermarket segment operating margins were 13% for the twelve months ended December 31, 2024, compared to 22% for the same period in the prior year reflecting the impact of the increased spares sales which have lower margins and largely flat MRO revenues year-over-year.
Twelve Months Ended December 31, 2023 as Compared to Twelve Months Ended December 31, 2022
Net Revenues. Net revenues for the twelve months ended December 31, 2023 were $6,047.9 million, an increase of $1,018.3 million, or 20.2%, compared with net revenues of $5,029.6 million for the prior year. The increase in revenue was primarily driven by increased Commercial segment production on the B737 MAX program. The remaining increase was primarily due to greater Commercial segment revenues on B787, business jet and B777 programs, partially offset by a decrease in revenue on the B747 program, increased Defense Segment Boeing P-8 production and classified program revenue, and greater Aftermarket segment sales. Approximately 83% of the Company’s net revenues in 2023 came from our two largest customers, Boeing and Airbus.
Deliveries to Boeing increased 98 shipsets to 457 shipsets during the twelve months ended December 31, 2023, compared to 359 shipsets delivered in the prior year. The increase was primarily driven by 75 more B737 MAX deliveries and higher deliveries on twin aisle programs, particularly the B787 program, which included 16 more deliveries. Deliveries to Airbus
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decreased to 725 shipsets during the twelve months ended December 31, 2023, compared to 726 shipsets delivered in the prior year. The decrease of 1 shipset was primarily driven by 18 fewer deliveries on the A320 program, offset by increased shipset deliveries on A220, A330, and A350 programs. Production deliveries of business/regional jet wing and wing components increased to 236 shipsets during the twelve months ended December 31, 2023, compared to 212 shipsets delivered in the prior year.
Gross Profit (Loss). Gross profit for the twelve months ended December 31, 2023 was $206.2 million, as compared to a gross profit of $48.6 million for the same period in the prior year, an increase in profit of $157.6 million The increase in profit was primarily driven by Commercial segment results, which included gross profit on the increased B737 MAX production revenue and the favorable adjustments related to the 2023 MOA that included forward loss reversals of $205.6 million and material right obligation liability reversal of $154.6 million. The Commercial segment also includes greater gross profit on the increased B777 sales partially offset by greater forward loss charges on the A220 and A350 programs and margin deterioration on the A320 program. Decreased gross profit in the Defense segment was driven by the impact of forward loss charges recognized on the Sikorsky CH-53K and KC-46 Tanker programs, partially offset by increased profit recognized on the increased Boeing P-8 production revenue. Greater profit in our Aftermarket segment was driven by the increased sales. The variance in profit from the prior year period also includes the impact of higher excess capacity costs. In the twelve months ended December 31, 2023, we recognized $184.1 million of excess capacity production costs driven by production schedule changes on B737 MAX, A220 and A320 programs, $8.3 million related to the temporary production pause during the strike and related contract negotiation of employees represented by the IAM, and $7.2 million of costs, compared to prior year excess capacity costs of $157.3 million, the impact of the $29.1 million charge in relation to the of activities related to customers in Russia, costs related to COVID-19 workforce adjustments of $9.6 million, and ($29.7) million of and other costs, including partial offset related to the recognition of the Aviation Manufacturing Jobs Protection Program (“AMJPP”) award. In the twelve months ended December 31, 2023, we recognized $56.2 million of cumulative catch-up adjustments related to periods prior to the twelve months ended December 31, 2023, and $264.7 million of net forward charges. In the twelve months ended December 31, 2022, we recorded $27.7 million of cumulative catch-up adjustments related to periods prior to the twelve months ended December 31, 2022, and $250.3 million of net forward charges.
SG&A and Research and Development. SG&A expense was $2.7 million higher for the twelve months ended December 31, 2023, as compared to the same period in the prior year, driven by increases in headcount, purchased services, incentives, and travel. Research and development expense for the twelve months ended December 31, 2023 was $5.0 million lower as compared to the same period in the prior year.
Restructuring Costs. Restructuring costs were $7.0 million higher for the twelve months ended December 31, 2023, compared to the same period in the prior year. The variance is primarily driven by the results of the voluntary separation program activity during the twelve months ended December 31, 2023.
Operating Loss. Operating loss for the twelve months ended December 31, 2023 was $134.2 million, an improvement of $147.0 million, compared to operating loss of $281.2 million for the prior year. The improvement was primarily driven by the favorable adjustments resulting from the 2023 MOA partially offset by higher SG&A and restructuring expenses.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2023 increased by $74.6 million as compared to the prior year. I nterest expense and financing fee amortization for the twelve months ended December 31, 2023 included $279.6 million of interest and fees paid or accrued in connection with long-term debt and $11.6 million in amortization o f deferred financing costs and original issue discount, compared to $209.5 million of interest and fees paid or accrued in connection with long-term debt and $ 7.4 million in amortization of deferred financing costs and original issue discount for the prior year. Additionally, a loss on extinguishment of debt of $17.3 million was recorded during the twelve months ended December 31, 2023 related to the extinguishment of the 2025 Notes, as compared to a loss on extinguishment of debt of $7.2 million in the prior year related to the extinguishment of the prior credit agreement.
Other Expense, net. Other expense for the twelve months ended December 31, 2023 was $140.4 million, compared to other expense of $14.1 million for the same period in the prior year. The $126.3 million increase in other expense primarily reflects net foreign currency exchange loss of $13.9 million in 2023, versus a net gain of $21.6 million in 2022, excise tax of $37.7 million in 2023 related to a pension plan net assets reversion (see Note 18 Pension and Other Post-Retirement Benefits ), as compared to $6.8 million of excise taxes in 2022 also related to a reversion, loss on sale of receivables of $52.4 million in 2023 compared to a loss of $23.4 million in 2022, and net pension related expense of $52.0 million in 2023 versus net pension related expense of $30.2 million in 2022. The respective pension expense values were separately driven by special accounting impacts related to pension plan termination activities that were respectively undertaken in each period. See also Note 18
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Pension and Other Post-Retirement Benefits . To a lesser extent, the increase in other expense also reflects the effect of a gain in 2022 of $20.7 million on the settlement of a repayable investment agreement between the Company and the U.K.’s Department for Business, Energy and Industrial Strategy (the “BEIS”) (see Note 24 Other Expense, net ).
Benefit (Provision) for Income Taxes. The income tax expense for the twelve months ended December 31, 2023, was $22.5 million compared to income tax expense of $5.2 million for the prior year. The 2023 effective tax rate was (3.8%) as compared to (1.0%) for 2022. The difference in the effective tax rate recorded for 2023 as compared to 2022 is due to tax expense previously stranded in OCI that was recognized in 2023 due to the termination of the pension.
Segments. The following tables show segment revenues and operating income for the twelve months ended December 31, 2023 and 2022:
Twelve Months Ended December 31, 2023
Commercial
Defense & Space
Aftermarket
Corporate and Other
Consolidated
($ in millions)
Net revenues
Cost of sales
Excess capacity costs
Segment gross profit
Restructuring costs
Other operating (expense) income (2)
Segment operating income (1)
Selling, general and administrative
Research and development
Operating income (loss)
Interest expense and financing fee amortization
Other expense, net
Income (loss) before income taxes and equity in net loss of affiliates
Twelve Months Ended December 31, 2022
Commercial
Defense & Space
Aftermarket
Corporate and Other
Consolidated
($ in millions)
Net revenues
Cost of sales
Excess capacity costs
Other segment items (3)
Segment gross (loss) profit
Restructuring costs
Segment operating (loss) income (1)
Selling, general and administrative
Research and development
Operating (loss) income
Interest expense and financing fee amortization
Other expense, net
(Loss) income before income taxes and equity in net loss of affiliates
(1) Inclusive of forward losses, changes in estimates on loss programs and cumulative catch-up adjustments. These changes in estimates for the periods ended December 31, 2023 and 2022 are further detailed in Note 6, Changes in Estimates .
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(2) The twelve months ended December 31, 2023 includes charges of $8.1 million and $0.2 million related to the temporary production pause for the Commercial and Defense & Space Segments, respectively, and ($2.4) million of benefit related to the settlement of a contingent consideration obligation related to a prior year acquisition for the Aftermarket Segment.
(3) The twelve months ended December 31, 2022 includes charges of $9.6 million for workforce adjustments as a result of the COVID-19 production pause for the Commercial Segment, net of U.S. employee retention credit and U.K. government subsidies, $24.7 million and $4.4 million in relation to the suspension of activities in Russia for the Commercial and Aftermarket Segments, respectively, and net offsets of ($25.7) million, ($2.3) million, and ($1.9) million for the Commercial, Defense & Space, and Aftermarket Segments, respectively, related to the AMJPP and other costs.
The Commercial, Defense & Space, and Aftermarket segments represented approximately 81%, 13%, and 6%, respectively, of our net revenues for the twelve months ended December 31, 2023. The Commercial, Defense & Space, and Aftermarket segments represented approximately 81%, 13%, and 6%, respectively, of our net revenues for the twelve months ended December 31, 2022.
Commercial Segment. Commercial segment net revenues for the twelve months ended December 31, 2023 were $4,885.0 million, an increase of $816.6 million, or 20.1%, compared to the same period in the prior year. The increase in revenue was primarily due to increased production on the B737 MAX program during the twelve months ended December 31, 2023. Additionally, revenues benefited from the reversal of the previously recognized material right obligation associated with the B787 program as a result of the 2023 MOA. The remaining increase compared to the prior year’s revenue included greater Commercial segment revenues on the B787, A320, business jet, B777 and A350 programs, partially offset by a decrease in revenue on the A220 and B747 programs. Commercial segment operating margins were 1% for the twelve months ended December 31, 2023, compared to (2%) for the same period in the prior year. The increase in margin, compared to the same period in the prior year, was driven by the reversal of $205.6 million of forward losses on the B787 as a result of the 2023 MOA as well as the incremental margin impact of the greater volume of B737 program sales, partially offset by higher excess capacity costs and the relative impact of greater forward losses on the A350 program, and margin deterioration on the A320, RB3070, and Bombardier business jet programs. The twelve months ended December 31, 2023 includes excess capacity production costs of $177.3 million related to temporary B737 MAX, A320 and A220 production schedule changes, $8.1 million related to the temporary production pause, and $6.3 million of costs. The twelve months ended December 31, 2022 includes the impact of $24.7 million of the total charge, mentioned above, related to the of activities in Russia, excess capacity production costs of $149.5 million related to the temporary B737 MAX and A220 production schedule changes, $9.6 million of temporary workforce adjustments as a result of the COVID-19 production pause, net of a U.S. employee retention credit and U.K. government subsidies, $0.2 million of costs, and a net partial offset of ($25.7) million, including offset of costs related to partial recognition of the AMJPP grant, net of other costs. In 2023, the segment recorded cumulative catch-up adjustments of $45.6 million and $234.0 million of net forward charges. The forward charges were primarily driven by labor and production cost growth, higher supply chain costs, and schedule revisions on the A350 program and additional labor, the impact of the IAM agreement and supply chain cost growth on the B787 program, increased factory performance and supply chain costs on the B767, and higher production, labor and supply chain costs on the A220 program. cumulative catch-up adjustments were primarily recognized on the B737 MAX and A320 programs, reflective of increased supply chain, raw material, factory performance and other costs on the program including the impact of the IAM union negotiations on the Boeing B737 MAX program. The A320 program cumulative catch-up adjustment was driven by production cost experienced due to operational and supply chain , and foreign currency movements. In comparison, during 2022, the segment recorded cumulative catch-up adjustments of $30.1 million and $243.9 million of net forward charges primarily driven by the impact of reduced production volumes on the B787 and A350 programs and the corresponding amount of fixed overhead absorption applied to lower deliveries, engineering analysis and estimated costs of rework on the B787 program, estimated quality costs on the A350 program, and cost performance on the B767 program.
Defense & Space Segment. Defense & Space segment net revenues for the twelve months ended December 31, 2023 were $789.0 million, an increase of $139.2 million, or 21.4%, compared to the same period in the prior year. The increase in revenue was primarily due to increased Boeing P-8 and KC-46 Tanker program production, increased classified program revenues, and increased CH-53K revenue. Defense & Space segment operating margins were 6% for the twelve months ended December 31, 2023, compared to 11% for the same period in the prior year. The decrease in margin was driven by the forward losses recorded on the CH-53K program, partially offset by higher profit margins on classified program revenues and lower excess capacity costs. The twelve months ended December 31, 2023 includes excess capacity production costs of $6.8 million related to the temporary B737 production schedule changes, $0.2 million related to the temporary production pause, and $0.9 million of restructuring costs. The year ended December 31, 2022 includes excess capacity production costs of $7.8 million related to the temporary B737 production schedule changes and a $2.3 million offset of costs related to the AMJPP. In 2023, the segment recorded unfavorable cumulative catch-up adjustments of $10.6 million and $30.7 million of net forward loss charges. In comparison, during 2022, the segment recorded favorable cumulative catch-up adjustments of $2.4 million and $6.4 million of net forward charges.
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Aftermarket Segment. Aftermarket segment net revenues for the twelve months ended December 31, 2023 were $373.9 million, an increase of $62.5 million, or 20.1%, compared to the same period in the prior year, reflecting greater spare part sales and increased maintenance, repair, and overhaul (“MRO”) sales activity. Aftermarket segment operating margins were 22% for the twelve months ended December 31, 2023, compared to 19% for the same period in the prior year. The twelve months ended December 31, 2023 includes an offset of $2.4 million of benefit related to the settlement of a contingent consideration obligation related to a prior year acquisition. The twelve months ended December 31, 2022 includes $4.4 million of the total charge, mentioned above, in relation to the suspension of activities in Russia and $1.9 million of offset to costs related to the AMJPP.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our principal sources of liquidity are operating cash flows from continuing operations and borrowings to finance our business operations. Our operating cash flows from continuing operations have been adversely impacted by, among other things, the B737 MAX grounding, the COVID-19 pandemic, production rate changes for the B737 MAX program and other programs, the impact of inflation on labor and supply chain costs, supply chain disruptions, and labor shortages affecting our business. We expect those adverse impacts to continue for 2025 and beyond. For purposes of assessing our liquidity needs in this section, we have assumed that Boeing would not further reduce the B737 MAX production rate and that other customers generally would not further reduce their production rates. For risks that may affect that assumption, see Item 1A “Risk Factors.”
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) on a going concern basis, which assumes the Company will be able to continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists. We have incurred net losses of $2,139.8 million, $616.2 million, and $545.7 million for the twelve months ended December 31, 2024, 2023, and 2022, respectively, and cash used in operating activities of $1,120.9 million, $225.8 million, and $394.6 million for the same periods, respectively. As of December 31, 2024 , our debt balance was $4,394.2 million, including $424.5 million of debt classified as short-term. As of December 31, 2024, we had $537.0 million of cash and cash equivalents on our Consolidated Balance Sheet, which reflects a decrease of $286.5 million from the cash and cash equivalents balance of $823.5 million as of December 31, 2023 . The Company will require additional liquidity to continue its operations over the next 12 months.
Further, certain changes made to the production and delivery process implemented by Boeing have had an immediate impact on our results of operations and cash flows. On March 2, 2024, Boeing announced they would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work. As a result, we have experienced higher levels of inventory and contract assets and lower operational cash flows due to the inability to physically ship and invoice end items to Boeing in a timeframe aligned with production activities. Additionally, during late 2023 we were preparing our production line to accommodate an expected increase in production rates for 2024 and beyond. Boeing’s ability to increase production rates is governed by the FAA, and the production rates which were anticipated are now limited. During the twelve months ended December 31, 2024, the Company continued to experience delays and realized higher than anticipated costs with respect to these production and delivery processes, and anticipates that some level of higher costs will continue in the future.
On April 18, 2024, we entered into a Memorandum of Agreement (“MOA”) with Boeing, where Boeing advanced $425.0 million to us to support our liquidity. This MOA was amended on June 20, 2024, to increase the advance by an additional $40.0 million and to revise certain repayment amounts and extend near-term repayment dates. As of the date of this filing, we have repaid $40.0 million of the MOA advances; however, the other amounts remain outstanding. In January 2025, we executed an amendment to the MOA which rescheduled the timing of the repayments to span from April 2026 to September 2026. While we made consistent progress in the expected amount of time required to execute the new production and delivery processes highlighted above in the twelve months ended December 31, 2024, we experienced continued delay in delivering the expected number of units to Boeing. Additionally, we experienced higher costs than anticipated to execute the processes identified above and anticipates that some level of higher costs will continue in the future.
On October 18, 2024, we announced a 21-day furlough, effective October 27, 2024, for approximately 700 employees working on the B767 and B777 programs in response to the strike by Boeing employees as we have reached maximum storage capacity on the B767 and B777 programs. Our ability to align our costs, including both internal and supply chain related spending, to react to unexpected changes in customer-determined production rates has and will likely continue to have a material impact on our results of operations and cash flows. Our liquidity has been impacted by higher levels of inventory and contract assets, lower operational cash flows due to a decrease in expected deliveries to Boeing, higher factory costs to maintain rate readiness (attributed to product quality verification process enhancements, including moving such processes from Renton,
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Washington, to Wichita, Kansas), Boeing no longer allowing for traveled work on the B737 fuselage to its factories, the strike by Boeing employees, and the limitations on Boeing increasing production rates. Based upon expected production volumes and deliveries, per the January 2025 amendment to the MOA, the terms of this advance require installments be repaid through September 2026.
Additionally, we were in negotiations with Airbus related to pricing adjustments on the A220 and A350 programs during 2023 and continuing into 2024 with a goal of completing those negotiations in early 2024. As a result of the announcement on March 1, 2024, that we were engaged in discussions with Boeing about a possible acquisition of the Company by Boeing, there was a shift in the strategic discussions with Airbus relevant to pricing adjustments on the A220 and A350 programs, most recently with a focus toward customer advances and other accommodations.
These developments in 2024 resulted in a significant reduction in projected revenue and operating cash flows over the next twelve months. Additionally, although the advances received in 2024 have provided essential operational liquidity, there can be no assurance that we will be able to obtain additional advances from our customers, repay current advances on the specified due dates, renegotiate the due date or otherwise obtain additional liquidity as needed under acceptable terms or at all. We will need to obtain additional funding to sustain operations, as we expect to continue generating operating losses for the foreseeable future. Accordingly, substantial doubt about the Company’s ability to continue as a going concern exists.
Management has developed a plan designed to improve liquidity in response to the developments highlighted above. These plans are dependent upon many factors, including, among other things, the outcomes of discussions related to the timing or amounts of repayment for certain customer advances, the timing and expected proceeds received from certain divestitures, the expected timing and outcome of the transactions contemplated by the Merger Agreement and the Airbus Term Sheet, and achieving anticipated B737 deliveries. Management is also evaluating additional strategies intended to improve liquidity to support operations, including, but not limited to, additional customer advances and restructuring of operations in an effort to increase efficiency and decrease expenses, which may include layoffs or additional furloughs. However, there can be no assurance that these plans or strategies will sufficiently improve our liquidity needs or that we will otherwise realize the anticipated benefits. For additional information, please see Part I, Item 1A. Risk Factors, “ We have incurred significant operating in the last few years and have identified conditions or events that raise substantial about our ability to continue as a going ” in this Annual Report on Form 10-K.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Merger Agreement
On June 30, 2024, we entered into the Merger Agreement. The Merger Agreement contains customary covenants by us regarding the conduct of our business prior to the closing of the Merger. In addition, pursuant to the Merger Agreement, we have agreed, subject to certain exceptions, not to take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including incurring indebtedness (other than under existing credit facilities or to replace certain existing indebtedness maturing in 2025) or materially amending the terms of existing indebtedness, issuing equity, and disposing of significant assets. We do not believe that the restrictions in the Merger Agreement will prevent us from meeting our debt obligations, ongoing costs of operations, working capital needs or capital expenditure requirements.
Customer Advances
Advances on the A350 Program . During the quarters ended June 29, 2023 and September 28, 2023, we received two equal advance payments from Airbus of $50.0 million each under an agreement between Airbus S.A.S. and Spirit AeroSystems (Europe) Limited ( “ Spirit Europe ” ) signed on June 23, 2023 (the “ A350 Agreement ” ). The A350 Agreement provided for up to $100.0 million of advances that are required to be repaid along with a nominal fee to Airbus by way of offset against the purchase price of A350 FLE shipset deliveries in 2025. To the extent actual deliveries in 2025 are insufficient to offset the advance amount, any amount not offset against deliveries will be due and payable to Airbus per the terms of the Airbus Term Sheet. Related to the A350 Agreement, Spirit Europe has pledged certain program assets including work in process inventories and raw materials at Spirit’s Scotland facility in an amount sufficient to cover the advances. Based on the specific terms and conditions within the A350 Agreement, the $100.0 million of receipts was included within operating cash flows during the twelve months ended December 31, 2023. As the Airbus advance will be repaid through offset against shipset deliveries, those repayments will effectively reduce operating cash flow in 2025. See Note 14 Advance Payments to our consolidated financial statements included in Item 8 of this Annual Report for more information.
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Advances on the B787 Program. Boeing has made advance payments to Spirit under the B787 Supply Agreement that are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. As of December 31, 2024, the amount of advance payments received by us from Boeing under the B787 Supply Agreement and not yet repaid was approximately $164.3 million.
Other . The Advance payments, long-term line item on the Consolidated Balance Sheet for the period ended December 31, 2024 includes $18.9 related to payments received from an Aftermarket segment customer for contracted work that was impacted by the sanctions imposed by the U.S. and other governments on Russia following its invasion of Ukraine.
Customer Financing
As described in the Form 8-K filed by us on November 12, 2024, on November 8, 2024, we entered into an advance payments agreement with Boeing to provide up to $350.0 million of cash advances for the sole purpose of producing and maintaining readiness to produce products as defined in existing contracts at the rates required by Boeing. These advances were intended to address Spirit’s higher levels of inventory and contract assets, lower operational cash flows, decrease in expected deliveries to Boeing and higher factory costs to maintain rate readiness, attributed to product quality verification process enhancements (including moving such process from Renton, Washington, to Wichita, Kansas), the lingering effects of the recent strike by Boeing employees and limitations on Boeing increasing production rates. As of December 31, 2024, we had borrowed $200.0 million under this advance agreement.
The advance agreement requires Spirit to repay the advances to Boeing in accordance with the following payment schedule: 25% of the then-outstanding advances on each of April 30, 2026, June 30, 2026, and September 30, 2026, and the remaining balance of outstanding advances on December 31, 2026. The advances will bear an advance fee in an amount equal to 6.0% of the outstanding amount of the advances which will be paid on the fifteenth day of each calendar quarter, by capitalizing such fee and adding it to the outstanding amount of Advances thereunder.
As described in the Form 8-K filed by us on April 23, 2024, on April 18, 2024, we entered into the MOA with Boeing to provide $425.0 million of cash advances, based upon our maintaining a production rate that supports Boeing’s production demand in accordance with certain long-term supply agreements, all of which was received in the second quarter of 2024. Additionally, this MOA was amended on June 20, 2024 to provide an additional $40.0 million of cash advance which was received in the second quarter. The MOA was amended again on January 22, 2025 to reschedule the repayment dates and add additional provisions regarding an event of termination of the Merger Agreement.
Per the terms of the January 2025 amended MOA, repayments will be a total of $75.0 million on April 1, 2026, $75.0 million on May 1, 2026, $75.0 million on June 1, 2026, $75.0 million on July 1, 2026, $75.0 million on August 1, 2026 and $50.0 million on September 1, 2026. Our repayment obligation will be accelerated, and any outstanding amount advanced under the agreement will immediately become due and payable, in the event that (i) we fail to make any repayment in full on the applicable Repayment Date, (ii) we fail to submit a satisfactory written confirmation that we are able to and intend to make the required repayment thirty days prior to each Repayment Date, as required under the agreement, (iii) we repudiate any performance obligation under the agreement or certain of the our existing agreements with Boeing, (iv) there occurs, either as to Spirit, Spirit Holdings or any of their respective subsidiaries, any of the events of default (generally relating to insolvency, reorganization, liquidation or similar proceedings, or to business suspension, dissolution or winding-up) described in specified provisions of our existing agreements with Boeing, then all amounts of the from the MOA that remain outstanding to Boeing pursuant to the repayment provisions of the MOA as of such time will become immediately due and payable. Under the January 2025 amendment, in the event that the Merger Agreement is , the then outstanding under the MOA will become due and payable on April 1, 2026. These have been accounted for as financing cash flows. As of the date of this filing, we have repaid $40.0 million of the MOA .
In the third quarter of 2024 we received an advance payment from Airbus of $27.4 under a Memorandum of Agreement between Airbus S.A.S. and Spirit Europe, Shorts Brothers PLC and Spirit AeroSystems North Carolina, Inc (“Spirit NC”), for up to $50.0 million related to certain program related expenditures. The remaining $22.6 million was received on October 2, 2024. This memorandum of agreement was amended on October 6, 2024 to include an additional $12.0 million for specified expenditures. This amount was received on October 8, 2024. It was amended again on November 8, 2024 to increase the funding capacity by $57.0 million. On December 18, 2024, Spirit received $20.0 million of the additional capacity. Per the terms of the amended memorandum of agreement, these amounts will be assumed by Airbus upon close of the Airbus Transactions, or if earlier, repaid to Airbus on April 1, 2026.
During the quarter ended March 28, 2024, we received an advance payment from Airbus of $17.0 million under a term sheet agreement between Airbus Canada Limited Partnership (“Airbus Canada”) and Shorts Brothers PLC (our facilities located
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in Belfast, Northern Ireland), for short term funding for increased freight costs incurred in the period from January to March 2024. The full amount of the advance is to be repaid per the terms of the Airbus Term Sheet.
During the quarter ended June 29, 2023, we received cash advances of $180.0 million from Boeing related to a memorandum of agreement with Boeing executed on April 28, 2023. The most recent amendment to this agreement was on January 22, 2025. Per the terms of the most recent amended memorandum of agreement, equal payments of $45.0 million are due in October, November and December of 2026 with the final $45.0 million payment due in December 2027. Our repayment obligation will be accelerated, and any outstanding amount advanced under the agreement will immediately become due and payable, in the event that (i) we fail to make any repayment in full on the applicable Repayment Date, (ii) we fail to submit a satisfactory written confirmation that we are able to and intend to make the required repayment thirty days prior to each Repayment Date, as required under the agreement, or (iii) we repudiate any performance obligation under the agreement or certain of our existing agreements with Boeing. Boeing will have the right to set off any unpaid amount due and payable under the memorandum of agreement from any amount owed to Boeing under any other agreement between the parties. Under the January 2025 amendment, in the event that the Merger Agreement is , the then outstanding under this memorandum of agreement will become due and payable on April 1, 2026. As of December 31, 2024, $90.0 million is reflected in the Customer financing, short-term line while the remaining $90.0 million is reflected in the Customer financing, long-term line item on the Consolidated Balance Sheets. The short-term portion at December 31, 2024 is based on the repayment due date prior to the January 2025 amendment. Based on the specific terms and conditions within the final agreement, the $180.0 million receipt was shown as a financing cash flow during the twelve months ended December 31, 2023, while the future repayment of the Boeing will be reflected as usage of financing cash flow. See Note 25 Customer Financing to our consolidated financial statements included in Item 8 of this Annual Report for more information.
Operational Impacts of Alaska Airlines Incident
The B737 MAX 9 derivative fleet was temporarily grounded by the FAA while certain safety inspections were completed and to allow the FAA time to review any required maintenance actions following the January 5, 2024 in-flight incident on a B737 MAX 9 aircraft flown by Alaska Airlines. The B737 MAX 9 fleet returned to service on January 26, 2024 after mandatory inspections were completed. We are participating in investigations relating to this incident. As discussed in Item 1A. “Risk Factors” in our 2023 Form 10-K, we are currently unable to fully estimate what impact this incident, including any impacts of investigations, will have on our near or long-term financial position, results of operations and cash flows.
However, certain changes made to the production and delivery process implemented by Boeing have had an immediate impact to our results of operations and cash flows. On March 2, 2024, Boeing announced they would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work. A new product verification process has been implemented by Boeing at our factory in Wichita, KS. As a result, we have experienced higher levels of inventory and contract assets and lower operational cash flows due to the inability to physically ship and invoice end items to Boeing. Additionally, during late 2023 we began preparing our production line to accommodate an expected increase in production rates that has now been delayed due to the limitation on Boeing increasing its production rates. Our ability to align our factory costs, which include both internal and supply chain related spending to react to unexpected changes in customer-determined production rates, had a material impact on our results of operations and cash flows throughout 2024.
Credit Agreement
On October 5, 2020, Spirit entered into a term loan credit agreement (the “Credit Agreement”) providing for a $400.0 million senior secured term loan B credit facility with the lenders party thereto and Bank of America, N.A. (“BofA”), as administrative agent and collateral agent. On October 5, 2020 Spirit borrowed the full $400.0 million of initial term loans available under the Credit Agreement. The Credit Agreement also permits Spirit to request one or more incremental term facilities in an aggregate principal amount not to exceed (x) in the case of any incremental facility that is secured on a pari passu basis with the Credit Agreement, the greater of (a) $950.0 million and (b) such other amount, so long as on a pro forma basis after giving effect to the incurrence of such indebtedness and the use of proceeds thereof, the first lien secured net leverage ratio does not exceed 3.25 to 1.00; and (y) in the case of any incremental facility that is secured on a junior basis to the Credit Agreement, the greater of (a) $500.0 million and (b) such other amount, so long as on a pro forma basis after giving effect to the incurrence of such indebtedness and the use of proceeds thereof, the secured net leverage ratio does not exceed 5.00 to 1.00. On November 15, 2021, the Company entered into a first refinancing, incremental assumption and amendment agreement (the “November 2021 Amendment”) to the Credit Agreement. The November 2021 Amendment provides for, among other things, (i) the refinancing of the $397.0 million aggregate principal amount of term loans outstanding under the Credit Agreement immediately prior to the effectiveness of the November 2021 Amendment with term loans in an equal principal amount with a lower interest rate (the “Repriced Term Loans”) and (ii) an incremental term loan facility of $203.0 million in aggregate principal amount with the same terms as the Repriced Term Loans. On November 23, 2022, the Company entered into a second
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refinancing amendment (the “November 2022 Amendment”) to the Credit Agreement (the Credit Agreement, as amended by the November 2021 Amendment, the November 2022 Amendment, and the February 2025 Amendment (as defined below), the “Amended Credit Agreement”). The November 2022 Amendment provides for, among other things, the refinancing of the $594.0 million aggregate principal amount of term loans outstanding under the Credit Agreement immediately prior to the effectiveness of the November 2022 Amendment (the “Existing Term Loans”) with term loans in an equal principal amount with a later maturity date (the “New Term Loans”). The proceeds of the New Term Loans were used to refinance the Existing Term Loans. The New Term Loans will mature on January 15, 2027. The New Term Loans bear interest at a rate ranging between Term SOFR plus 4.25% and Term SOFR plus 4.50% (or, at Spirit’s option, between base rate plus 3.25% and base rate plus 3.50%, as applicable) with the margin varying based on Spirit’s first lien secured gross leverage ratio. The obligations under the Amended Credit Agreement are guaranteed by Holdings and Spirit AeroSystems North Carolina, Inc., a wholly-owned subsidiary of the Company (“Spirit NC”, and together with Holdings, the “Guarantors”), and each existing and future, direct and indirect, wholly-owned material domestic subsidiary of Spirit, subject to certain customary exceptions. The obligations are secured by a first-priority lien with respect to substantially all assets of Spirit and the Guarantors, subject to certain exceptions. On February 14, 2025, the Company entered into the Third Amendment to Term Loan Credit Agreement (the “February 2025 Amendment”) with BofA to remove the requirement that the audit opinion with respect to the Company’s annual financial statements for the fiscal year ending December 31, 2024 not be subject to a “going ” qualification.
The Amended Credit Agreement contains usual and customary affirmative and negative covenants for facilities and transactions of this type and that, among other things, restrict the Company and its restricted subsidiaries’ ability to incur additional indebtedness, create liens, consolidate or merge, make acquisitions and other investments, guarantee obligations of third parties, make loans or advances, declare or pay certain dividends or distributions on the Company’s stock, redeem or repurchase shares of the Company’s stock, engage in transactions with affiliates and enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends or dispose of assets. These covenants are subject to a number of qualifications and limitations.
The Amended Credit Agreement provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving the Company and its material subsidiaries.
As a result of the modification and extinguishment of the Company’s prior credit agreement, the Company recognized a loss on extinguishment of $7.2 million, recorded to the Interest expense and financing fee amortization line item for the twelve months ended December 31, 2022, on the Company’s Consolidated Statement of Operations, of which $4.6 million is reflected within the Amortization of deferred financing fees line item in operating activities and $2.6 million is reflected within the Payment of debt extinguishment costs line item under financing activities on the Consolidated Statement of Cash Flows for the twelve months ended December 31, 2022. As of December 31, 2024, the outstanding balance of the Amended Credit Agreement was $580.6 million and the carrying value was $570.1 million.
Bridge Credit Agreement
On June 30, 2024, Spirit entered into a Delayed-Draw Bridge Credit Agreement (the “Bridge Credit Agreement”) with Morgan Stanley Senior Funding, Inc. (“MSSF”) as lender, as administrative agent and as collateral agent. The Bridge Credit Agreement provides for a senior secured delayed-draw bridge term loan facility in an aggregate principal amount of $350.0. On February 14, 2025, the Company entered into the First Amendment to Delayed-Draw Bridge Credit Agreement (the “Bridge Credit Agreement Amendment”) to the Bridge Credit Agreement (the Bridge Credit Agreement, as amended by the Bridge Credit Agreement Amendment, the “Amended Bridge Credit Agreement”) with MSSF to remove the requirement that the audit opinion with respect to the Company’s annual financial statements for the fiscal year ending December 31, 2024 not be subject to a “going ” qualification.
Subject to certain customary conditions, Spirit may borrow funds available under the Amended Bridge Credit Agreement, in up to three separate advances, until the earlier of the termination of the Merger Agreement and the Bridge Maturity Date (as defined below). Proceeds of loans under the Amended Bridge Credit Agreement will be used for general corporate purposes of Spirit and its subsidiaries, other than the repayment or redemption of other indebtedness. Commitments under the Amended Bridge Credit Agreement will be reduced to zero on the earliest of the date that Spirit provides notice that the Merger Agreement is terminated or it publicly announces the same, and the maturity date. The Amended Bridge Credit Agreement will mature, and all obligations thereunder will become due and payable, on the earlier of the date the Merger is consummated and March 31, 2025 ( the “Initial Outside Date”), subject to automatic extension for one additional three-month period if the Initial Outside Date is extended in accordance with the terms of the Merger Agreement (such earlier date, the “Bridge Maturity Date”).
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The principal amount of loans under the Amended Bridge Credit Agreement will bear interest at a rate per annum equal to the TLB Yield (as defined in the Bridge Credit Agreement) plus a margin of 0.50%. Spirit will pay to MSSF a duration fee equal to 0.125% of the aggregate amount of the loans and commitments under the Amended Bridge Credit Agreement every 60 days after the date of the Amended Bridge Credit Agreement.
The obligations under the Amended Bridge Credit Agreement are guaranteed on a senior secured basis by Holdings, Spirit NC, a wholly owned subsidiary of Spirit, and certain future, direct or indirect, wholly owned material domestic subsidiaries of Holdings (collectively, the “Guarantors”) and are secured by a first-priority lien with respect to substantially all assets of Spirit and the Guarantors, subject to certain exceptions.
The Amended Bridge Credit Agreement requires commitments thereunder to be reduced, and loans to be prepaid, with, (a) 100% of the net cash proceeds of certain non-ordinary course asset sales by Holdings or any of its subsidiaries (other than certain non-ordinary course divestitures contemplated by the Merger Agreement or the Airbus Term Sheet) and (b) 100% of the net cash proceeds of certain issuances, offerings or placements of indebtedness or equity interests by Holdings or any of its subsidiaries, in each case subject to certain exceptions set forth in the Amended Bridge Credit Agreement.
The Amended Bridge Credit Agreement contains customary affirmative and negative covenants that are typical for facilities and transactions of this type and nature and that, among other things, restrict Holdings and its restricted subsidiaries’ ability to incur additional indebtedness, create liens, consolidate or merge, make acquisitions and other investments, guarantee obligations of third parties, make loans or advances, declare or pay certain dividends or distributions on Holdings’ stock, redeem or repurchase shares of Holdings’ stock, engage in transactions with affiliates and enter into agreements restricting Holdings’ subsidiaries’ ability to pay dividends or dispose of assets. These covenants are subject to a number of qualifications and limitations set forth in the Amended Bridge Credit Agreement.
The Amended Bridge Credit Agreement also contains a securities demand provision under which, if Spirit has publicly announced the termination of the Merger Agreement and any loans under the Amended Bridge Credit Agreement remain outstanding on the date that is 10 business days after the date of such public announcement, then, upon MSSF’s request, Holdings and Spirit (as applicable) would be required, after a roadshow and marketing period customary for similar offerings, to issue permanent debt and/or equity securities and/or incur and borrow under credit facilities and/or bank financings, in each case, in an aggregate amount of up to $500.0 to repay all outstanding amounts under the Amended Bridge Credit Agreement and all related fees and expenses.
The Amended Bridge Credit Agreement provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving Spirit and its material subsidiaries.
On July 18, 2024, August 15, 2024, and September 12, 2024, Spirit borrowed $200.0 million, $100.0 million, and $50.0 million, respectively, under the Amended Bridge Credit Agreement.
As of December 31, 2024, the outstanding balance of the Amended Bridge Credit Agreement was $350.0 million and the carrying value was $347.9 million.
As of December 31, 2024 , the Company was in compliance with all covenants in the Amended Bridge Credit Agreement.
Exchangeable Notes
On November 13, 2023, Spirit entered into an Indenture (the “Exchangeable Notes Indenture”), by and among Spirit, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee, in connection with Spirit’s issuance of $230.0 million aggregate principal amount of its 3.250% Exchangeable Senior Notes due 2028 (the “Exchangeable Senior Notes”). The Exchangeable Senior Notes were issued and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Exchangeable Senior Notes are senior, unsecured obligations of Spirit and are fully and unconditionally guaranteed on a senior, unsecured basis by the Guarantors.
The Exchangeable Senior Notes mature on November 1, 2028, unless earlier exchanged, redeemed or repurchased, and bear interest at a rate of 3.250% per year payable semiannually in cash in arrears on May 1 and November 1 of each year. The first interest payment date was May 1, 2024.
The Exchangeable Senior Notes will be exchangeable at an initial exchange rate of 34.3053 shares of Spirit Holdings’ Class A common stock per $1,000 principal amount of Exchangeable Senior Notes (equivalent to an initial exchange price of
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approximately $29.15 per share of Class A common stock). At the initial exchange rate, the Senior Notes would be convertible into 7,890,219 shares of Spirit Holdings’ Class A common stock. The initial exchange rate is subject to adjustment, as provided in the Exchangeable Notes Indenture. Upon exchange of the Exchangeable Senior Notes, Spirit will pay and/or deliver cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at Spirit’s election, in respect of its exchange obligations for the Exchangeable Senior Notes. Prior to the close of business on the business day immediately preceding August 1, 2028, the Exchangeable Senior Notes will be exchangeable at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods described in the Exchangeable Notes Indenture. On or after August 1, 2028, until the close of business on the business day immediately preceding the maturity date, the Exchangeable Senior Notes will be exchangeable at the option of the noteholders at any time regardless of these conditions or periods.
Prior to November 6, 2026, Spirit may not redeem the Exchangeable Senior Notes. On or after November 6, 2026, Spirit may redeem for cash all or any portion (subject to certain limitations) of the Exchangeable Senior Notes, at its option, if the last reported sale price of the Spirit Holdings’ Class A common stock has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which Spirit provides the notice of redemption, at a redemption price equal to 100% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No “sinking fund” is provided for the Exchangeable Senior Notes.
Subject to certain conditions and exceptions, holders of the Exchangeable Senior Notes will have the right to require Spirit to repurchase all or a portion of their Exchangeable Senior Notes upon the occurrence of a fundamental change such as stockholder approval of a plan or proposal for the liquidation or dissolution of the Company, or the delisting of Spirit’s stock (see the Exchangeable Notes Indenture for a complete listing of events) at a repurchase price of 100% of their principal amount plus any accrued and unpaid interest. In connection with certain corporate events or if Spirit calls any Exchangeable Senior Notes for redemption, Spirit will, under certain circumstances, be required to increase the exchange rate for noteholders who elect to exchange their Exchangeable Senior Notes in connection with any such corporate event or exchange their Exchangeable Senior Notes called for redemption during the related redemption period.
With the exception of covenants restricting Spirit’s and the Guarantors’ ability to merge, consolidate or sell substantially all of their respective assets, the Indenture does not provide for restrictive covenants.
As of December 31, 2024, the outstanding balance of the Exchangeable Senior Notes was $230.0 million and the carrying value was $223.6 million.
Second Lien 2030 Notes
On November 21, 2023, Spirit entered into an Indenture (the “Second Lien 2030 Notes Indenture”), by and among Spirit, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent, in connection with Spirit’s offering of $1,200.0 million aggregate principal amount of its 9.75% Senior Secured Second Lien Notes due 2030 (the “Second Lien 2030 Notes”). The Second Lien 2030 Notes were issued and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions to non-U.S. persons pursuant to Regulation S under the Securities Act.
The Second Lien 2030 Notes mature on November 15, 2030 and bear interest at a rate of 9.75% per year payable semiannually in cash in arrears on May 15 and November 15 of each year. The first interest payment date was May 15, 2024. The Second Lien 2030 Notes are guaranteed by the Guarantors, and each existing and future, direct and indirect, wholly-owned material domestic subsidiary of the Company, subject to certain customary exceptions. The Second Lien 2030 Notes are secured by a second-priority lien with respect to substantially all assets of Spirit and the Guarantors, subject to certain exceptions.
The Second Lien 2030 Notes Indenture contains covenants that limit Spirit’s, the Company’s and the Company’s restricted subsidiaries’ ability, subject to certain exceptions and qualifications, to incur indebtedness secured by liens, enter into sale and leaseback transactions, make restricted payments and investments and enter into certain mergers or consolidations and transfer substantially all of the Company and its subsidiaries’ assets. These covenants are subject to a number of qualifications and limitations. In addition, the Second Lien 2030 Notes Indenture provides for customary events of default.
As of December 31, 2024, the outstanding balance of the Second Lien 2030 Notes was $1,200.0 million and the carrying value was $1,181.9 million.
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First Lien 2029 Notes
On November 23, 2022, Spirit entered into an Indenture (the “First Lien 2029 Notes Indenture”), by and among Spirit, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent, in connection with Spirit’s offering of $900 million aggregate principal amount of its 9.375% Senior Secured First Lien Notes due 2029 (the “First Lien 2029 Notes”). The First Lien 2029 Notes were issued and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions to non-U.S. persons pursuant to Regulation S under the Securities Act.
The First Lien 2029 Notes mature on November 30, 2029 and bear interest at a rate of 9.375% per year payable semiannually in cash in arrears on May 30 and November 30 of each year. The first interest payment date was May 30, 2023. The First Lien 2029 Notes are guaranteed by the Guarantors, and each existing and future, direct and indirect, wholly-owned material domestic subsidiary of the Company, subject to certain customary exceptions. The First Lien 2029 Notes are secured by a first-priority lien with respect to substantially all assets of Spirit and the Guarantors, subject to certain exceptions.
The First Lien 2029 Notes Indenture contains covenants that limit Spirit’s, the Company’s and the Company’s restricted subsidiaries’ ability, subject to certain exceptions and qualifications, to incur indebtedness secured by liens, enter into sale and leaseback transactions, make restricted payments and investments and enter into certain mergers or consolidations and transfer substantially all of the Company and its subsidiaries’ assets. These covenants are subject to a number of qualifications and limitations. In addition, the First Lien 2029 Notes Indenture provides for customary events of default.
As of December 31, 2024, the outstanding balance of the First Lien 2029 Notes was $900.0 million and the carrying value was $889.9 million .
2025 Notes
On October 5, 2020, Spirit entered into an Indenture (the “First Lien 2025 Notes Indenture”), by and among Spirit, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent, in connection with Spirit’s offering of $500.0 million aggregate principal amount of its 5.500% Senior Secured First Lien Notes due 2025 (the “2025 Notes”).
The 2025 Notes were issued and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions to non-U.S. persons pursuant to Regulation S under the Securities Act.
The 2025 Notes matured on January 15, 2025 and bore interest at a rate of 5.500% per year payable semiannually in cash in arrears on January 15 and July 15 of each year. The first interest payment date was January 15, 2021.
The 2025 Notes were guaranteed by the Guarantors and were initially secured by a first-priority lien with respect to substantially all assets of Spirit and the Guarantors, subject to certain exceptions.
The 2025 Notes Indenture initially contained covenants that limit Spirit’s, the Company’s and the Company’s restricted subsidiaries’ ability, subject to certain exceptions and qualifications, to incur indebtedness secured by liens, enter into sale and leaseback transactions, make restricted payments and investments and enter into certain mergers or consolidations and transfer substantially all of the Company and its subsidiaries’ assets. These covenants were subject to a number of qualifications and limitations. In addition, the First Lien 2025 Indenture provides for customary events of default.
In the fourth quarter of 2022, Spirit purchased $479.2 million in aggregate principal amount of its outstanding 2025 Notes for cash pursuant to a tender offer (the “Tender Offer”). A s of December 31, 2024, the outstanding balance of the 2025 Notes was $20.8 million and the carrying value was $20.8 million . In connection with the Tender Offer, Spirit received the requisite consents from holders of the 2025 Notes necessary to approve amendments to the 2025 First Lien Notes Indenture, to, among other things, eliminate certain of the restrictive covenants and events of default contained in the 2025 First Lien Notes Indenture (the “Majority Amendments”) and terminate the security interest and release the collateral under the 2025 First Lien Notes Indenture (the “Collateral Release Amendments”). Spirit, the Company, Spirit NC and The Bank of New York Mellon Trust Company, N.A. entered into the First Supplemental Indenture, dated as of November 23, 2022, to the 2025 First Lien Notes Indenture, which effects (i) the Majority Amendments and (ii) the Collateral Release Amendments, in each case, as of November 23, 2022. As of December 31, 2023, the 2025 Notes were unsecured and the First Lien 2025 Notes Indenture no
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longer included covenants that limit Spirit’s, the Company’s and the Company’s subsidiaries’ ability to incur indebtedness secured by liens, enter into sale and leaseback transactions or make restricted payments and investments.
2026 Notes
In June 2016, the Company issued $300.0 million 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, 2024, the outstanding balance of the 2026 Notes was $300.0 million and the carrying value was $299.5 million . The Company and Spirit NC guarantee Spirit’s obligations under the 2026 Notes on a senior secured basis.
On February 24, 2020, Spirit entered into a Second Supplemental Indenture (the “Second Supplemental Indenture”) by and among Spirit, the Company, Spirit NC, and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with the 2026 Notes. Under the Second Supplemental Indenture, the 2026 Noteholders were granted security on an equal and ratable basis with the lenders under the 2018 Credit Agreement until the security in favor of the lenders under the 2018 Credit Agreement was released on October 5, 2020. The Supplemental Indenture also added Spirit NC as an additional guarantor under the indenture governing the 2026 Notes.
On April 17, 2020, Spirit entered into a Third Supplemental Indenture (the “Third Supplemental Indenture”), by and among Spirit, the Company, Spirit NC and The Bank of New York Mellon Trust Company, N.A., as trustee in connection with the 2026 Notes. Under the Third Supplemental Indenture, the noteholders were granted security on an equal and ratable basis with the holders of the Second Lien 2025 Notes until the security in favor of the holders of the Second Lien 2025 Notes was released on November 21, 2023.
On October 5, 2020, Spirit entered into a Fourth Supplemental Indenture (the “Fourth Supplemental Indenture”), by and among Spirit, the Company, Spirit NC and The Bank of New York Mellon Trust Company, N.A., as trustee in connection with the 2026 Notes. Under the Fourth Supplemental Indenture, the holders of the 2026 Notes were granted security on an equal and ratable basis with the holders of the First Lien 2025 Notes (until the security in favor of the lenders under the holders of the First Lien 2025 Notes was released on November 23, 2022) and the secured parties under the Amended Credit Agreement.
On November 23, 2022, Spirit entered into a Fifth Supplemental Indenture (the “Fifth Supplemental Indenture”), by and among Spirit, the Company, Spirit NC and The Bank of New York Mellon Trust Company, N.A., as trustee in connection with the 2026 Notes. Under the Fifth Supplemental Indenture, the holders of the 2026 Notes were granted security on an equal and ratable basis with the holders of the First Lien 2029 Notes.
On November 21, 2023, Spirit entered into a Sixth Supplemental Indenture (the “Sixth Supplemental Indenture”), by and among Spirit, the Company, Spirit NC and The Bank of New York Mellon Trust Company, N.A., as trustee in connection with the 2026 Notes. Under the Sixth Supplemental Indenture, the holders of the 2026 Notes were granted security on an equal and ratable basis with the holders of the Second Lien 2030 Notes.
On June 30, 2024, Spirit entered into a Seventh Supplemental Indenture (the “Seventh Supplemental Indenture”), by and among Spirit, Holdings, Spirit NC and The Bank of New York Mellon Trust Company, N.A., as trustee, in connection with the 2026 Notes. Under the Seventh Supplemental Indenture, the holders of the 2026 Notes were granted security on an equal and ratable basis with the secured parties under the Bridge Credit Agreement.
2028 Notes
On May 30, 2018, Spirit entered into an Indenture (the “2018 Indenture”) by and among Spirit, the Company and The Bank of New York Mellon Trust Company, N.A., as trustee in connection with Spirit’s offering of $300.0 million aggregate principal amount of its Senior Floating Rate Notes due 2021 (the “Floating Rate Notes”), $300.0 million aggregate principal amount of its 3.950% Senior Notes due 2023 (the “2023 Notes”) and $700.0 million 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 “2018 Notes”). Holdings guaranteed Spirit’s obligations under the 2018 Notes on a senior unsecured basis.
On February 24, 2021, Spirit redeemed the outstanding $300.0 million principal amount of the Floating Rate Notes. On November 23, 2022, Spirit redeemed the outstanding $300.0 million principal amount of the 2023 Notes. The 2028 Notes bear interest at a rate of 4.600% per annum and mature on June 15, 2028. Interest on the 2028 Notes is payable on June 15 and December 15 of each year, beginning on December 15, 2018. The outstanding balance of the Floating Rate Notes, 2023 Notes,
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and 2028 Notes was $0.0, $0.0, and $700.0 million as of December 31, 2024, respectively. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $0.0, $0.0, and $697.3 million as of December 31, 2024, respectively.
The 2018 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 and enter into sale and leaseback transactions. These covenants are subject to a number of qualifications and limitations. In addition, the 2018 Indenture provides for customary events of default.
As of December 31, 2024, the Company was in compliance with all covenants contained in the indentures governing the First Lien 2029 Notes, First Lien 2025 Notes, Second Lien 2030 Notes, 2026 Notes, and the 2028 Notes.
For additional information on our outstanding debt, please see Note 17 to the Consolidated Financial Statements, Debt .
Common Stock Offering
On November 8, 2023, we entered into an underwriting agreement in connection with the registered public offering of 10,454,545 shares of our Class A common stock, including the underwriters’ option to purchase 1,363,636 additional shares of Class A common stock, at a price to the public of $22.00 per share of Class A common stock. On November 13, 2023, we issued and sold 10,454,545 shares of our Class A common stock pursuant to the Underwriting Agreement, which included the exercise in full of the underwriters’ option to purchase additional shares of Class A common stock. The net proceeds to us from the Common Stock Offering, after deducting underwriting discounts and commissions and offering expenses payable by us, were approximately $220.7 m illion.
Receivables Financing
We have agreements to sell, on a revolving basis, certain trade accounts receivable balances with Boeing, Airbus, and Rolls-Royce to third-party financial institutions. These programs were primarily entered into as a result of Boeing and Airbus seeking payment term extensions with us, and they continue to allow us to monetize the receivables prior to their payment date, subject to payment of a discount. Our ability to continue using such agreements is primarily dependent upon the strength of Boeing’s, Airbus’s, and Rolls-Royce’s financial condition. If any of these financial institutions involved with these arrangements experiences financial difficulties, becomes unwilling to support Boeing, Airbus, or Rolls-Royce due to a deterioration in their financial condition or otherwise, or is otherwise unable to honor the terms of the factoring arrangements, we may experience significant disruption and potential liquidity issues, which could have an adverse impact upon our operating results, financial condition and cash flows. For the twelve months ended December 31, 2024, $3,525.2 million of accounts receivable were sold via these arrangements. For additional information on the sale of receivables, please see Note 7 to the Consolidated Financial Statements, Accounts Receivable, net .
Supply Chain Financing Applicable to Suppliers
We have provided our suppliers with access to a supply chain financing program through facilities with third-party financing institutions. The program allows suppliers to monetize the receivables prior to their payment date, subject to payment of a discount. Our suppliers’ ability to continue using such agreements is primarily dependent upon the strength of our financial condition. During the twelve months ended December 31, 2024 , we decreased capacity under our existing supply chain financing program as we removed a financing institution from the program in 2024. While our suppliers’ access to this supply chain financing program could be curtailed if our credit ratings are downgraded, we do not expect that changes in the availability of supply chain financing to our suppliers will have a significant impact on our liquidity.
The balance of payables to suppliers who elected to participate in the supply chain financing program included in our accounts payable balance as of December 31, 2024 was $76.8 mill ion, a decrease of $78.8 million over the balance as of December 31, 2023 of $155.6 million as we removed a financing institution from the program. In the comparable prior year period, payables to suppliers who elected to participate in the supply chain financing program increased by $53.6 million over the twelve months ended December 31, 2022 as we added an additional financing institution to provide more capacity during 2023. The changes in each period primarily reflect purchases from suppliers related to production levels during the applicable period.
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Credit Ratings
As of December 31, 2024, our corporate credit ratings were B by Standard & Poor’s Global Ratings (“S&P”), and B2 by Moody’s Investors Service, Inc. (“Moody’s”).
The ratings reflect, among other things, the agencies’ assessment of our ability to pay interest and principal on our debt securities and credit agreements. A rating is not a recommendation to purchase, sell or hold securities. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be considered independently of all other ratings. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings have in the past resulted in, and may in the future result in, more stringent covenants and higher interest rates under the terms of any new debt.
Derivatives and Hedging
The Company has entered into a series of currency forward contracts, each designated as a cash flow hedge upon the date of execution, for the purpose of reducing the variability of cash flows and hedging against the foreign currency exposure for forecasted payroll, pension and vendor disbursements that are expected to be made in the British pound sterling at our operations located in Belfast, Northern Ireland. All outstanding foreign currency forward contracts were settled in August 2024. Since the forecasted transactions remain probable of occurring, the changes in the fair value of cash flow hedges recorded in AOCI will be recognized in earnings in the period in which the forecasted transactions impact earnings. Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the forecasted transactions impact earnings. The gain recognized in AOCI was $1.5 million for the twelve months ended December 31, 2024 . Within the next 12 months, the Company expects to recognize a gain of $0.9 million in earnings related to the foreign currency forward contracts.
Pension and Other Post-Retirement Benefit Obligations
Effective October 1, 2021, we spun off a portion of the existing PVP A, to a new plan called PVP B. As part of the PVP B plan termination process, a lump sum offering was provided during 2021 for PVP B participants and the final asset distribution was completed in the first quarter of 2022. At December 31, 2024, a pension reversion asset of $41.2 million is recorded on the Restricted plan assets line item on the Company’s Consolidated Balance Sheets. Restricted plan assets are expected to be reduced over five years as they are distributed to employees under a qualified benefit program.
In July 2022 the Company adopted and communicated to participants a plan to terminate the PVP A. During the twelve months ended December 31, 2022, the PVP A plan was amended, providing for an enhancement to benefits the Company is providing to certain U.S. employees in conjunction with the plan termination. The estimated liability impact of this plan amendment, $73.5 million, was recognized immediately as a non-cash, pre-tax non-operating charge for amortization of prior service costs. We recognized additional non-cash, pre-tax non-operating accounting charges of $34.7 million related to the plan termination, primarily reflecting the accounting for bulk lump-sum payments made in the fourth quarter of 2022, which resulted in a settlement charge related to the accelerated recognition of the actuarial losses for the PVP A plan that were previously included in the Accumulated other comprehensive loss line item in the Stockholders’ Equity section of the Company’s Balance Sheet. See also Note 18 Pension and Other Post-Retirement Benefits .
In the fourth quarter of 2023, the Company applied final settlement accounting to the PVP A. During 2023, the Company received excess plan asset reversion of $188.5 million of cash from PVP A. This transaction was accounted for as a negative contribution, and is included on the Pension plans employer contributions line item on the Consolidated Statements of Cash Flows for the year ended December 31, 2023. Excise tax of $37.7 million related to the reversion of excess plan assets was separately recorded to the Other expense, net line item on the Consolidated Statements of Operations for the year ended December 31, 2023. See also Note 24 Other Expense, net to our consolidated financial statements included in Item 8 of this Annual Report for more information. At December 31, 2024 and 2023, an excess pension plan asset reversion of $41.2 million and $61.1 million is recorded on the Restricted plan assets line item on the Company’s Consolidated Balance Sheets. Restricted plan assets are expected to be reduced over five years as they are distributed to employees under a qualified benefit program.
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Cash Flows
The following table provides a summary of our cash flows for the twelve months ended December 31, 2024, 2023, and 2022:
For the Twelve Months Ended
December 31, 2024
December 31, 2023
December 31, 2022
($ in millions)
Net loss
Adjustments to reconcile net income
Changes in working capital
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net (decrease) increase in cash, cash equivalents, and restricted cash for the period
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Twelve Months Ended December 31, 2024 as Compared to Twelve Months Ended December 31, 2023
Operating Activities
For the twelve months ended December 31, 2024, we had a net cash outflow of $1,120.9 million from operating activities, an increase in net outflow of $895.1 million compared to a net cash outflow of $225.8 million for the prior year. The increase in net cash outflow was driven primarily by the use of cash related to negative program performance year-over-year and the buildup of contract assets due to the significant reduction in shipments of Boeing end items due to changes implemented by Boeing in March 2024 to introduce a new product verification process in Wichita, KS. This change in business process has delayed delivery acceptances and caused a buildup of undelivered units in Wichita, KS. Additionally, the prior year was impacted by the excess pension plan asset reversion as discussed in Note 15 Pension and Other Post-Retirement Benefits to our consolidated financial statements included in Item 8 of this Annual Report.
Investing Activities
For the twelve months ended December 31, 2024, we had a net cash outflow of $152.4 million from investing activities, compared to a net cash outflow of $147.8 million for the prior year. This increase in net cash outflow was primarily driven by slightly increased capital expenditures.
Financing Activities
For the twelve months ended December 31, 2024, we had a net cash inflow of $994.5 million for financing activities, an increase in inflows of $462.9 million as compared to a net cash inflow of $531.6 million for the same period in the prior year. The increased cash inflow was primarily driven by $445.0 million of increased receipts of Boeing advances and $350.0 million of borrowings under the Bridge Credit Agreement in the current year, partially offset by the impact of the common stock offering in the prior year. No dividends were paid to our stockholders of record, nor were there repurchases of Common Stock under our share repurchase program during the twelve months ended December 31, 2024 or December 31, 2023, respectively.
Twelve Months Ended December 31, 2023 as Compared to Twelve Months Ended December 31, 2022
Operating Activities
For the twelve months ended December 31, 2023 , we had a net cash outflow of $225.8 million from operating activities, a decrease in net outflow of $168.8 million compared to a net cash outflow of $394.6 million for the prior year. The decrease in
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net cash outflow was driven primarily by the receipt of pension asset reversion payments discussed in Note 18 Pension and Other Post-Retirement Benefits , an increase in advance payments and an increased deferred revenue, partially offset by an increase to working capital associated with increased production throughout the twelve months ended December 31, 2023. Operating activities also include the pension asset reversion to cash discussed in Note 18 Pension and Other Post-Retirement Benefits , $100.0 million in advances received from Airbus and $100.0 million received from Boeing in 2023 per the terms of the 2023 MOA for tooling and capital for certain planned and potential Boeing B737 and B787 program rate increases, as compared to the cash repayments of $123.0 million made in 2022 of the advance payment received from Boeing on the B737 program, and the interest payment associated with the settlement of the repayable investment agreement between the Company and the BEIS. See also Note 14 Advance Payments and Note 24 Other Expense, net .
Investing Activities
For the twelve months ended December 31, 2023 , we had a net cash outflow of $147.8 million from investing activities, compared to a net cash outflow of $155.5 million for the prior year. This decrease in net outflow was primarily driven by cash outflows related to our prior year acquisition of T.E.A.M., Inc., while the current year had no equivalent outflows. This was partially offset by higher capital expenditures in the current year.
Financing Activities
For the twelve months ended December 31, 2023 , we had a net cash inflow of $531.6 million for financing activities, an increase in inflows of $792.6 million as compared to a net cash outflow of $(261.0) million for the same period in the prior year. The increased cash inflow was primarily driven by various financing transactions including the issuance of common stock which represented a cash inflow of $220.7 million, the incremental $300 million borrowed as part of the issuance of the Second Lien 2030 Notes over the extinguishment of the Second Lien 2025 Notes as compared to the issuance of $900 million of First Lien 2029 Notes in the prior year, and $222.2 million from the issuance of the Exchangeable Senior Notes. During the twelve months ended December 31, 2023, we paid dividends of $0.0 million to our stockholders of record, compared to dividends of $4.2 million paid in the same period in the prior year. There were no repurchases of Common Stock under our share repurchase program during either the twelve months ended December 31, 2023 or December 31, 2022, respectively.
Future Cash Needs and Capital Spending
Impacts from , among other things, the B737 MAX grounding, the COVID-19 pandemic, production rate changes for the B737 MAX program and other programs, supply chain disruptions and quality issues, labor shortages and cost increases have significantly impacted our liquidity requirements and operations. Our primary future cash needs will consist of working capital, research and development, capital expenditures, debt service, integration activity, and potential merger and acquisition activity. We expend significant capital as we undertake new programs, which begin in the non-recurring investment phase of our business model. In addition, we expend significant capital to meet increased production rates, which we expect will happen as the aviation industry continues recovery through the current challenging macroeconomic environment; however, we cannot give any assurances that continued progress towards normalization to expected production rates will happen soon enough for us to fund our operations and meet our debt repayment obligations. We also require capital to develop new technologies for the next generation of aircraft, which may not be funded by our customers. Historically, share repurchases and dividend payments have also been factors affecting our liquidity. As described below, our share repurchase program and quarterly dividend have been paused.
Based on current operating trends and the current year impacts of the B737 MAX 9 derivative grounding and resultant production ramp up delays and increased financial liabilities which were needed to fund operations, our projected revenues and cash flows over the next twelve months have declined. Additionally, although the advances received in 2024 have provided essential operational liquidity, there can be no assurance that we will be able to obtain additional advances from our customers, repay current advances on the specified due dates, renegotiate the due date or otherwise obtain additional liquidity as needed under acceptable terms or at all. The Company will require additional liquidity to continue its operations over the next twelve months. Limitations on our ability to access the capital or credit markets, the cost impacts of additional production rate changes, difficulty with managing costs due to labor shortages, supply chain disruptions, inflation or other factors, or terms or general reductions in liquidity, may and materially impact our business, financial condition, and results of operations, and prevent us from being to meet our obligations as they become due. There can be no assurance that we will be to access the capital or credit markets or, if we do have such access, that it will be on terms. Further , we could experience significant fluctuations in our cash flows from period to period, particularly during the continued uncertainty during the aviation industry recovery and the current macroeconomic environment. While we may be to modify, or eliminate some of our uses of cash as described above to manage our cash consumption, other uses are relatively fixed and are to modify in the short-term.
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Prolonged global inflationary pressures have also impacted labor, supply chain, energy, freight, raw material and other costs, in addition to increased interest costs related to counter-inflationary measures taken by central banks. In certain situations, we have the ability to recover certain abnormal inflationary impacts through contractual agreements with our customers, however, we anticipate that we will experience reduced levels of profitability related to inflationary impacts until such time as the rate of inflation subsides to normal historical levels.
The B737 MAX grounding and its residual demand impacts created and continues to create significant liquidity challenges for the Company. Spirit delivered 268 B737 MAX shipsets in year ended December 31, 2024 compared to 606 B737 MAX shipsets delivered in the last full year period prior to the grounding, which was the year ended December 31, 2019. While we expect the production rate to increase in future periods, that expectation is subject to a number of risks that are described further in Item 1A. “Risk Factors” of this Annual Report.
If production levels are further reduced by our customers for any reason beyond current expectations or if we have difficulties in managing our cost structure to take into account changes in production schedules, our liquidity position may worsen if we are unable to procure additional financing, and our business, financial condition, results of operations and cash flows could be materially adversely impacted.
On November 17, 2024, the Company entered into a definitive agreement to sell our FMI business, a fully owned subsidiary of Spirit AeroSystems, Inc., for $165.0 million, subject to customary purchase price adjustments and closing conditions as set forth in the definitive agreement. The transaction closed on January 13, 2025 and the Company received $160.1 million in cash. For additional information, see Note 30 Acquisitions and Dispositions .
As of December 31, 2024 , there was $925 million remaining in the Company’s Board-approved share repurchase program. Share repurchases are currently on hold. On November 3, 2022, the Company announced that the Board had suspended payments of dividends. The Board regularly evaluates the Company’s capital allocation strategy and dividend policy. Any future determination 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.
Foreign Operations
We engage in business in various non-U.S. markets. As of December 31, 2024 , we have facilities in the U.K., France, Malaysia, and Morocco. We are also members of joint ventures in both Taiwan and the People’s Republic of China.
Currency fluctuations, tariffs and similar import limitations, price controls, tax reform, and labor regulations can affect our foreign operations. Other potential limitations on our foreign operations include expropriation, nationalization, restrictions on foreign investments or their transfers, and additional political and economic risks. In addition, the transfer of funds from foreign operations could be impaired by any restrictive regulations that foreign governments could enact.
Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations, political uncertainties, and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other actions that would have a direct or indirect adverse impact on our business or market opportunities with such governments’ countries. Furthermore, the political, cultural, and economic climate outside the U.S. may be unfavorable to our operations and growth strategy.
For the twelve months ended December 31, 2024, our net revenues from direct sales to non-U.S. customers were $1,505.6 million, or 24% of total net revenues for the same period. For the twelve months ended December 31, 2023, our net revenues from direct sales to non-U.S. customers were $1,380.8 million, or 23% of total net revenues for the same period. For the twelve months ended December 31, 2022, our net revenues from direct sales to non-U.S. customers were $1,215.1 million, or 24% of total net revenues for the same period.
Our foreign operations subject us to risks that are described further in Item 1A. “Risk Factors” of this Annual Report.
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Information Regarding Guarantors of Spirit’s Notes Registered Under the Securities Act of 1933
Spirit’s 2026 Notes are guaranteed by Spirit AeroSystems North Carolina, Inc., a wholly-owned subsidiary of the Company (“Spirit NC”) and Spirit Holdings, and Spirit’s 2028 Notes are guaranteed by Spirit Holdings. None of Spirit’s notes are guaranteed by Spirit’s or Spirit Holdings’ other domestic subsidiaries or any foreign subsidiaries (together, the “Non-Guarantor Subsidiaries”). Spirit Holdings consolidates each of Spirit and Spirit NC in its consolidated financial statements. Spirit and Spirit NC are both 100 percent-owned and controlled by Spirit Holdings. Spirit Holdings’ guarantees of Spirit’s indebtedness are full and unconditional, except that the guarantees may be automatically released and relieved upon satisfaction of the requirements for legal defeasance or covenant defeasance under the applicable indenture being met. Spirit Holdings’ guarantees are also subject to a standard limitation which provides that the maximum amount guaranteed by the Company will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws.
The guarantees of Spirit Holdings and Spirit NC with respect to Spirit’s 2026 Notes are made on a joint and several basis. The guarantee of Spirit NC is not full and unconditional because Spirit NC can be automatically released and relieved of its obligations under certain circumstances, including if it no longer guarantees Spirit’s Credit Agreement. Like Spirit Holdings’ guarantees, the guarantee of Spirit NC is subject to a standard limitation which provides that the maximum amount guaranteed by Spirit NC will not exceed the maximum amount that can be guaranteed without making the guarantee void under fraudulent conveyance laws.
All of the existing guarantees by Spirit Holdings and Spirit NC rank equally in right of payment with all of the guarantors’ existing and future senior indebtedness. The secured indebtedness of Spirit Holdings and Spirit NC (including guarantees of Spirit’s existing and future secured indebtedness) will be effectively senior to guarantees of any unsecured indebtedness to the extent of the value of the assets securing such indebtedness. Future guarantees of subordinated indebtedness will rank junior to any existing and future senior indebtedness of the guarantors. The guarantees are structurally junior to any debt or obligations of non-guarantor subsidiaries, including all debt or obligations of subsidiaries that are released from their guarantees of the notes. As of December 31, 2024 , indebtedness of our non-guarantor subsidiaries included $356.3 million of outstanding borrowings under intercompany agreements with guarantor subsidiaries and $15.8 million of finance leases of our non-guarantor subsidiaries. Based on our understanding of Rule 3-10 of Regulation S-X (“Rule 3-10”), we believe that the Spirit Holdings’ guarantees of Spirit’s indebtedness comply with the conditions set forth in Rule 3-10, which enable us to present summarized financial information for Spirit Holdings, Spirit and Spirit NC, which is a consolidated guarantor subsidiary, in accordance with Rule 13-01 of Regulation S-X. The summarized financial information excludes information regarding the non-guarantor subsidiaries. In accordance with Rule 3-10, separate financial statements of the guarantor subsidiaries have not been presented. The following tables include summarized financial information of Spirit, Holdings, and Spirit NC (together, the “obligor group”). Investments in and equity in the earnings of Spirit Holdings’ Non-Guarantor Subsidiaries, which are not a member of the obligor group, have been excluded. The summarized financial information of the obligor group is presented on a combined basis for Spirit and Spirit Holdings, and separately for Spirit NC, with intercompany balances and transactions between entities in the obligor group eliminated. The obligor group’s amounts due from, amounts due to and transactions with Non-Guarantor Subsidiaries have been presented in separate line items, if they are material. There are no non-controlling interest in any of the obligor group entities.
Summarized Statements of Income
Twelve Months Ended December 31, 2024
($ millions)
Holdings and Spirit
Spirit NC
Net Sales to unrelated parties
Net Sales to Non-Guarantor Subsidiaries
Gross loss on sales to unrelated parties
Gross (loss) profit on sales to Non-Guarantor Subsidiaries
(Loss) income from continuing operations
Net (loss) income
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Summarized Balance Sheets
Holdings and Spirit
Spirit NC
($ millions)
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Assets
Cash and cash equivalents
Receivables due from Non-Guarantor Subsidiaries
Receivables due from unrelated parties
Contract assets
Inventory, net
Assets of business held for sale
Other current assets
Total current assets
Loan receivable from Non-Guarantor Subsidiaries
Property, plant and equipment, net
Pension assets, net
Other non-current assets
Total non-current assets
Liabilities
Accounts payable to Non-Guarantor Subsidiaries
Accounts payable to unrelated parties
Accrued expenses
Current portion of long-term debt
Customer financing, short-term
Liabilities of business held for sale
Other current liabilities
Total current liabilities
Long-term debt
Contract liabilities, long-term
Forward loss provision, long-term
Customer financing, long-term
Other non-current liabilities
Total non-current liabilities
