Spirit AeroSystems Holdings Inc. (NYSE: SPR), through its subsidiaries, designs, manufactures and engineers commercial airplane assemblies and components.  SPR offers products and services in the areas of: fuselages, under-wing components, composites, wings, and spares and repairs. The Company earns revenues primarily through long-term supply agreements with original equipment manufacturers (OEMs) Boeing (NYSE: BA) and Airbus (Paris: EAD). SPR manufactures components for every Boeing commercial aircraft currently in production, including more than 70% of the airframe content for the Boeing 737. SPR is also the largest content supplier for the wing for the Airbus A320 family and a significant supplier for Airbus’ new A380.

SPR was established in 2005 after Canada-based Onex Corp. (TSX: OCX) acquired it from Boeing.  Prior to the acquisition, the Company operated under the name Mid-Western Aircraft Systems Inc. SPR is headquartered in Wichita, Kansas, and has additional operations in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Samlesbury, England; and Kuala Lumpur, Malaysia.

Share Statistics			2007	2008	%Chg	Q2 20081	Q2 20092	% Chg
Aug-31-09
Symbol	SPR	Revenue, Mn	3860.8	3,771.8	-2.31%	1062.1	1059.6	-0.24%
Current price	$15.49	Gross margin	17.19%	16.14%	-105 b.p.	17.66%	3.59%	-1407 b.p.
52wk Range:	$15.18-$15.61	Oper. margin	10.86%	10.76%	-10 b.p.	12.81%	-0.98%	-1379 b.p.
Avg Vol (3m):	1.17M	Net margin	7.69%	7.04%	-65 b.p.	8.13%	-0.78%	-891 b.p.
Market Cap.	2.19B
Dil. Shares Outst.	141.0M	EPS	2.13	1.91	-10.33%	0.62	-0.06	-109.68%

¹Three months ended June 28, 2009.

²Three months ended July 2, 2009.

Source: Google Finance, Company Financial Statements.

The Company’s net revenues for the three months ended July 2, 2009, were $1.06 billion, a decrease of $2.5 million from the three months ended June 26, 2008. Fewer B747 deliveries due to the transition to the B747-8 model led to a $36.9 million decrease in net revenues.  Also, net revenues from the subsidiary Spirit Europe fell by $29.3 million due to the strengthening U.S. dollar.  However, this loss was partially offset by development program revenues and higher Airbus volume.

SPR’s cost of sales as a percentage of net revenues was 96% for the three months ended July 2, 2009, as compared to 82% for the three months ended June 26, 2008.  The Company’s cost of sales for the three months ended July 2, 2009, was impacted by several unusual charges.

First, the Company realized a $93.0 million forward-loss charge on its Gulfstream G250 business jet program. The program was in a loss position due to significant overruns in expected development costs, uncertainty in recurring cost estimates versus negotiated selling prices, and continued softening in the business jet market.

Second, the Company recorded a $10.9 million charge to reflect the estimated impact of Textron’s (Cessna’s parent company) July 8, 2009, decision to terminate its Cessna Citation Columbus business jet program.  SPR had been selected as the supplier for the Citation Columbus jet’s fuselage and empennage.

Additionally, SPR updated its contract profitability estimates resulting in an unfavorable cumulative catch-up adjustment of $33.0 million. The unfavorable cumulative catch-up adjustment was driven primarily by the post strike production ramp-up as a result of a 2008 Machinist strike at Boeing and nut plate rework along with the simultaneous transition to a new enterprise resource planning (ERP) system, which reduced operating efficiency.

The Company reported a cash balance of $89 million and debt balances of $736 million for July 2, 2009.  During the three months ended July 2, 2009, SPR utilized its credit line to invest in development programs.  As of July 2, 2009, the Company had borrowed $150 million from the facility while $579 million remained unused.  SPR also extended its credit facility in the three months ended July 2, 2009, from June 2010 to June 2012.  This temporarily increases borrowing capacity from $650 million to $729 million.

SPR expects total revenue for 2009 to be between $4.2 billion and $4.3 billion (an 11%-13% increase over the year) based on Boeing’s 2009 delivery guidance of 480-450 aircraft; anticipated ramp-up of Boeings 787 aircraft deliveries; Airbus deliveries of 483 aircraft; internal forecasts for non-OEM production activity and non-Boeing and Airbus customers; and foreign exchange rates consistent with year-end 2008 levels.

The Company expects fully diluted earnings per share (EPS) for 2009 to be between $1.45-$1.55 as compared to an actual fully diluted EPS of $1.91 for 2008.  The EPS forecast reflects unusual items booked for the three months ended July 2, 2009.

Analysts polled by Thomson Reuters expect SPR to “Outperform,” with five analysts rating the penny stock as a “Buy,” one more than three months ago; five analysts expecting the stock to “Outperform,” the same as three months ago; five analysts rating the stock as a “Hold,” two less than three months ago; and two analysts rating the stock as a “Sell,” the same as three months ago.

	# of Estimates	Mean	High	Low	1 Year
					Ago
SALES (in millions)
Quarter Ending Sep-09	9	1127.0	1261.0	1073.3	1220.1
Quarter Ending Dec-09	9	1141.0	1226.7	1064.0	1282.4
Year Ending Dec-09	12	4209.3	4364.0	4105.0	4760.8
Year Ending Dec-10	12	4060.9	4452.0	3823.0	5084.9
Earnings (per share)
Quarter Ending Sep-09	15	0.55	0.59	0.31	0.67
Quarter Ending Dec-09	14	0.57	0.63	0.48	0.7
Year Ending Dec-09	15	1.72	2.25	1.25	2.65
Year Ending Dec-10	17	1.87	2.7	1.41	2.79

Source: Thompson Financial.

Lower demand for air travel and higher fuel costs in 2008 has caused some airlines to reduce their aircraft fleet.  This in turn has caused some of SPR’s customers to delay their development programs and reduce anticipated production rate increases.

At the Company’s June 3, 2009, Investor Day, Company CEO Jeff Turner reported that SPR was responding to current industry conditions proactively by instituting a hiring freeze and salary freezes for executives, management and some non-management employees.  The Company also expects that its large backlog (approximately $28.2 billion as of July 2, 2009) will partially offset lower orders for 2009.  SPR also reported that it is attempting to diversify and reduce its dependence on Boeing (NYSE: BA) by pursuing new programs including regional, business and military aircraft.

On August 27, 2009, Boeing announced that its 787 aircraft would make its first flight by the end of 2009, with initial delivery expected in the fourth quarter of 2010. The date of the first test flight had been put off repeatedly due to production problems and a two-month labor strike.  However, the announcement eased uncertainty surrounding the launch of the aircraft. SPR manufactures the aircraft’s fuselage and will be able to assess the full impact of the announcement once it receives a full schedule from Boeing in September.

Once the aircraft is in the production stage, Boeing has said that it wants SPR to have a production rate of 10 airplanes/month for the 787.  This will require greater investment from SPR as it currently has a production rate of only seven airplanes per month. Robert Spingarn, an analyst at Credit Suisse, said that there is still a risk that Boeing’s new schedule will face delays given the current challenge of re-fitting the 787’s wing-body join, the possibility changes to the electrical and environmental control.

On August 27, 2009, engineers represented by the Society of Professional Engineering Employees in Aerospace (SPEEA) at SPR’s Wichita, Kansas, plant rejected a second contract offer from the Company and authorized a strike. SPEEA reported that they had sought the strike authorization in order to bring in a federal mediator.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

SPR is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this small cap stock.

SPR’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally,  SPR is trading within its Bollinger Bands. This is a normal condition and suggests that the penny stock is neither overbought nor oversold relative to the recent price action.

The MACD for SPR currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Aug-26-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
Lockheed Martin Corp.	LMT	74.98	2,882	10.17	9.11	0.06	0.06
Kaman Corp.	KAMN	20.78	532	17.76	12.91	0.45	0.43
Northrop Grumman Corp.	NOC	48.81	1,553	10.06	8.94	0.04	0.04
General Dynamics Corp.	GD	59.19	2,279	9.61	9.18	0.07	0.07
AAR Corp.	AIR	17.01	661	11.90	8.95	0.47	0.44
Median				10.17	9.11	0.07	0.07
Spirit AeroSystems Holdings Inc.	SPR	15.49	2,190	9.01	8.28	0.52	0.54
Source: Google Finance, Reuters.

Net Share Purchase Activity

Insider Purchases - Last 6 Months Shares Trans Purchases N/A 0 Sales 6,087 5 Net Shares Purchased (Sold) (6,078) 5 Total Insider Shares Held 36.1K N/A % Net Shares Purchased (Sold) (14.6%) N/A

Net Institutional Purchases - Prior Qtr to Latest Qtr Shares Net Shares Purchased (Sold) (16,950,200) % Change in Institutional Shares Held (14.7%)

Data provided by Thomson Financial

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