On January 10, 2020, Spirit completed the acquisition of 100% of the outstanding equity of Fiber Materials Inc. (FMI). The acquisition-date fair value of consideration transferred was $121.6, which included cash payment to the seller, payment of closing indebtedness, and payment of selling expenses.

Acquiring FMI aligns with the Company's strategic growth objectives to diversify its customer base and expand the current defense business. Founded in 1969 and headquartered in Biddeford, ME, FMI is an industry-leader in the design and manufacture of complex composite solutions that are primarily used in aerospace applications. Over the past 50 years, FMI has developed a portfolio related to its high temperature composites. FMI's main operations focus on multidirectional reinforced composites that enable high-temperature applications such as thermal protection systems, re-entry vehicle nose tips, and rocket motor throats and nozzles. Their unique capabilities have positioned them as a leader in 3D woven carbon-carbon high-temperature materials for hypersonic missiles, which the Department of Defense has identified as a national priority.

The acquisition was funded from cash on hand. The Company incurred $1.5 in acquisition-related costs. Acquisition-related expenses were $0.0 and $0.5 for the three and six months ended July 2, 2020, respectively, and are included in SG&A on the condensed consolidated statement of operations.

The purchase price has been allocated among assets acquired and liabilities assumed at fair value based on information currently available, with the excess purchase price recorded as goodwill. The Company’s allocation of the purchase price is subject to change on receipt of additional information, including, but not limited to, the finalization of the underlying cash flows used to determine the intangible asset valuations and the Company’s review of FMI’s accounting practices that could potentially result in an adjustment to goodwill or the respective segment allocation of the total goodwill. The Company expects to have sufficient information available to resolve these items before December 31, 2020. The Company has recorded purchase accounting entries on a preliminary basis as follows:



At January 10, 2020
Cash and cash equivalents	$	3.5
Accounts receivable	5.3
Inventory	1.9
Contract Assets, short-term	5.6
Prepaid and other current assets	0.5
Equipment and leasehold improvements	12.3
Intangible assets	30.0
Goodwill	76.0
Other noncurrent assets	0.2
Total assets acquired	$	135.3

Accounts payable and accrued liabilities	1.8
Income Tax Payable	1.4
Contract liabilities, short-term	2.2
Accrued payroll and employee benefits	0.6
Other current liabilities	0.2
Deferred income taxes, non-current	7.5
Other noncurrent liabilities	0.2
Total liabilities assumed	13.9
Net assets acquired	$	121.4

FMI has developed proprietary know-how over the past 50 years related to its densification and weaving processes. FMI's densification and weaving processes are used to develop specialized composites which can withstand high temperatures and meet the structural requirements set forth by FMI's customers. FMI has developed proprietary designs for 3D and 4D weaving of uncrimped carbon fibers. The densification process utilizes proprietary formulas of heat, pressure, materials, and time to create high density composite solutions at scale. FMI's developed technology results in high strength to weight composites with unmatched density, stability, and heat resistance, which are essential for the mission critical markets it serves. This developed technology is the primary driver of FMI's longstanding, competitive advantage in the markets.

FMI is typically engaged with government agencies through purchase orders and does not have any life of program commitments from customers. As a result of FMI’s existing developed technology and incumbent position on previous purchase orders, FMI is positioned to capture future government programs. As such, the developed technology and contract assets were subsumed into one consolidated intangible asset (collectively referred to as the developed technology asset).

The developed technology intangible asset is deemed to be the primary revenue-generating identifiable intangible asset acquired in the Transaction. The multi-period excess earnings method ("MPEEM") was used as the approach for estimating the fair value of the developed technology intangible asset which utilizes significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. The principle behind this method is that the value of the intangible asset is equal to the present value of the after-tax cash flows attributable to the intangible asset only. The analysis included assumptions for projections of revenues and expenses, contributory asset charges, discount rates, and a tax impacts.

The goodwill amount of $76.0 recognized is attributable primarily to expected revenue synergies generated by the integration of our products and technologies with those of FMI and intangible assets that do not qualify for separate recognition, such as the assembled workforce of FMI. None of the goodwill is expected to be deductible for income tax purposes. The goodwill is allocated $42.9 to the Fuselage Systems Segment and $33.1 to the Propulsion Systems Segment. This allocation was based upon the fair value of the projected earnings as of the acquisition date. As of July 2, 2020, the recognized goodwill was adjusted from $76.2 to $76.0 resulting from settlement of net working capital in second quarter of 2020. See Note 11, Other Assets, Goodwill, and Intangible Assets for more information on goodwill.

The fair value of accounts receivables acquired is $5.3, which approximates the gross contractual amount. The Company expects substantially all amounts to be collectible. Prior to the acquisition, the Company did not have a preexisting relationship with FMI.

The Company’s consolidated income statement from the acquisition date to the period ending July 2, 2020 includes revenue and earnings of FMI of $25.8 and $2.6, respectively. The following summary, prepared on a pro forma basis, presents the unaudited consolidated results of operations for the six months ended July 2, 2020 and June 27, 2019, as if the acquisition of FMI had been completed as of the beginning of fiscal 2019, after including in fiscal 2019 any post-acquisition adjustments directly attributable to the acquisition, and after including the impact of adjustments such as amortization of intangible assets, and interest expense on related borrowings and, in each case, the related income tax effects. These amounts have been calculated after substantively applying the Company’s accounting policies. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicative of our results of operations had the Company owned FMI for the entire periods presented.



	For the Three Months Ended					For the Six Months Ended
	July 2, 2020			June 27, 2019		July 2, 2020			June 27, 2019
Revenue - as reported	$	644.6		$	2,016.1	$	1,721.9		$	3,983.9
Revenue - pro forma	644.6			2,023.8		1,722.7			3,999.4
Net (loss) income - as reported	$	(255.9	)	$	168.0	$	(418.9	)	$	331.1
Net (loss) income - pro forma	(255.9		)	169.2		(418.8		)	332.1
Earnings Per Share - Diluted - as reported	$	(2.46	)	1.61		$	(4.04	)	3.16
Earnings Per Share - Diluted - pro forma	(2.46		)	1.62		(4.03		)	3.17

On May 1, 2018, the Company and its wholly-owned subsidiary Spirit AeroSystems Belgium Holdings BVBA (“Spirit Belgium”) entered into a definitive agreement (as amended, the “Asco Purchase Agreement”) with certain private sellers pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of S.R.I.F. N.V., the parent company of Asco Industries N.V. (“Asco”), a leading supplier of high lift wing structures, mechanical assemblies and major functional components to major OEMs and Tier I suppliers in the global commercial aerospace and military markets subject to certain customary closing adjustments, including foreign currency adjustments (the “Asco Acquisition”). The Asco Purchase Agreement is subject to

customary closing conditions, including regulatory approvals. On October 28, 2019, the Company and Spirit Belgium entered into an agreement to amend and restate (the “Asco Amendment”) the Asco Purchase Agreement. The Asco Amendment incorporates amendments to the Purchase Agreement agreed among the Parties to date, and reduces the purchase price for the Asco Acquisition from $604 to $420. In addition, the Asco Amendment reduces the Sellers’ indemnification obligations under the Asco Purchase Agreement to $80 (except with respect to damages resulting or arising from the termination of certain commercial agreements), and removes the closing condition precedent that a “Material Adverse Change” in Asco’s business has not occurred since May 1, 2018.

On January 29, 2020, Asco and Spirit entered into an amendment to the Asco Purchase Agreement extending the date upon which the Asco Purchase Agreement will automatically terminate in the event that conditions to the Asco Acquisition are not satisfied or waived is extended from April 4, 2020, to October 1, 2020. In addition, the Amendment changed the closing date for the Acquisition to the last business day of the month that all conditions precedent are satisfied or waived (provided certain notice requirements are met) or as the parties agree.

Acquisition-related expenses were $6.4 and $2.5 for the three months ended July 2, 2020 and June 27, 2019, respectively, and $17.4 and $5.3 for the six months ended July 2, 2020 and June 27, 2019, respectively, and are included in selling, general and administrative costs on the condensed and consolidated statement of operations.

On October 31, 2019, Spirit and Spirit AeroSystems Global Holdings Limited (“Spirit UK”), wholly owned subsidiaries of the Company, entered into a definitive agreement (the “Bombardier Purchase Agreement”) with Bombardier Inc., Bombardier Aerospace UK Limited, Bombardier Finance Inc. and Bombardier Services Corporation (collectively, the “Bombardier Sellers”) pursuant to which, subject to the satisfaction or waiver of certain conditions, Spirit UK will acquire the outstanding equity of Short Brothers plc (“Shorts”) and Bombardier Aerospace North Africa SAS, and Spirit will acquire substantially all the assets of the maintenance, repair and overhaul business in Dallas, Texas (collectively, the “Bombardier Acquired Business”) for cash consideration of $500 (the “Bombardier Acquisition”).

The Company agreed to procure payment of a special contribution of £100 (approximately $130) to the Shorts pension scheme after closing and has reached a tentative agreement to delay payment of the special contribution to 2021.

The Bombardier Acquisition is subject to certain consents, regulatory approvals and customary closing conditions. Closing conditions include, but are not limited to, (i) the absence of certain legal impediments to the consummation of the Bombardier Acquisition, (ii) the receipt of specified third party consents and approvals, including consents from Airbus SE and its subsidiaries, (iii) the receipt of applicable regulatory approvals, and (iv) the absence of a material adverse change to the Bombardier Acquired Business. The date on which the Bombardier Acquisition will automatically terminate in the event that the conditions are not satisfied or waived is October 31, 2020. The Purchase Agreement contains customary representations, warranties and covenants among the parties, including, among others, certain covenants by the Sellers regarding the operation of the Bombardier Acquired Business during the interim period between the execution of the Purchase Agreement and the consummation of the Bombardier Acquisition. The Bombardier Acquisition is not conditioned upon the Company’s receipt of debt financing.