3. Changes in Estimates

The Company has a Company-wide quarterly Estimate at Completion (“EAC”) process in which management assesses the progress and performance of the Company’s contracts. This process requires management to review each program’s progress towards completion by evaluating the program schedule, changes to identified risks and opportunities, changes to estimated contract revenues and estimated contract costs over the current contract block, and any outstanding contract matters. Risks and opportunities include management’s judgment about the cost associated with a program’s ability to achieve the schedule, technical requirements (e.g., a newly-developed product versus a mature product) and any other contract requirements. Due to the span of years it may take to complete a contract block and the scope and nature of the work required to be performed on those contracts, the estimation of total revenue and costs at completion is complicated and subject to many variables and, accordingly, is subject to change. When adjustments in estimated total contract block revenue or estimated total cost are required, any changes from prior estimates for delivered units are recognized in the current period as a cumulative catch-up adjustment for the inception-to-date effect of such changes. Cumulative catch-up adjustments are driven by several factors including improved production efficiencies, assumed rate of production, the rate of overhead absorption, changes to scope of work, and contract modifications. When the total cost estimate exceeds the total revenue estimate on a contract block, a provision for the entire loss on the contract block is recorded in the period in which the loss is determined. Changes in estimates are summarized below:



	For the Three Months Ended						For the Nine Months Ended
Changes in Estimates	September 28, 2017			September 29, 2016			September 28, 2017			September 29, 2016
(Unfavorable) Favorable Cumulative Catch-up Adjustment by Segment
Fuselage Systems	$	(2.4	)	$	(1.9	)	$	5.3		$	15.1
Propulsion Systems	2.4			(1.6		)	4.3			(1.8		)
Wing Systems	(2.8		)	(0.8		)	19.1			18.7
Total (Unfavorable) Favorable Cumulative Catch-up Adjustment	$	(2.8	)	$	(4.3	)	$	28.7		$	32.0

(Forward Loss) and Changes in Estimates on Loss Programs by Segment
Fuselage Systems	$	(0.9	)	$	(1.6	)	$	(238.5	)	$	(133.0	)
Propulsion Systems	1.3			(0.5		)	(46.7		)	6.0
Wing Systems	(2.4		)	0.9			(74.4		)	5.1
Total Forward Loss	$	(2.0	)	$	(1.2	)	$	(359.6	)	$	(121.9	)

Total Change in Estimate	$	(4.8	)	$	(5.5	)	$	(330.9	)	$	(89.9	)
EPS Impact (diluted per share based upon statutory rates)	$	(0.03	)	$	(0.03	)	$	(1.75	)	$	(0.44	)

Boeing Memorandum of Understanding and Definitive Documentation

On August 1, 2017, Boeing and the Company through its subsidiary, Spirit, entered into a Memorandum of Understanding (the “MOU”), which required Boeing and Spirit to negotiate and execute definitive documentation implementing the agreements set forth in the MOU by September 29, 2017.

On September 22, 2017, Boeing and Spirit completed their negotiation of such definitive documentation and entered into Amendment No. 30 to the long-term supply agreement covering products for Boeing’s B737, B747, B767, and B777 commercial aircraft programs (“Sustaining Amendment #30”). Sustaining Amendment #30 generally establishes pricing terms for the B737, B747, B767, and B777 models (excluding the B777x) through 2022 (with certain limited exceptions). Sustaining Amendment #30 further provides that Boeing and Spirit will negotiate follow-on pricing for periods beyond January 1, 2023 beginning 24 months prior to January 1, 2023. If Boeing and Spirit are unable to reach an agreement with respect to follow-on pricing prior to January 1, 2023, Sustaining Amendment #30 provides a mechanism to establish interim pricing that takes into account escalation and reduces certain rate-based discounts. In addition, Sustaining Amendment #30 provides that the parties will make certain investments for rate increases on the B737 program and implements industry standard payment terms.

In addition, Boeing and Spirit also entered into Amendment No. 25 to the long-term supply agreement covering products for Boeing’s B787 commercial aircraft program (the “787 Amendment,” and, together with Sustaining Amendment #30, the “Definitive Documentation”). The 787 Amendment establishes pricing terms for the B787-8, -9, and -10 derivative models between line unit 501 and line unit 1405. The 787 Amendment provides that the parties will negotiate pricing for B787 line units 1406 and beyond beginning 24 months prior to the scheduled delivery date for line unit 1405.

In the second quarter of 2017, as a result of the expected completion of the 787 Amendment, the Company formally extended the current contract block ending at line unit 1003 to line unit 1300 and established a planning block from line units 1301 to 1405. Based on the pricing updates, contract block extension, and planning block addition, the Company updated its estimated contract costs and revenue for the B787 program. As a result, the Company recorded a second quarter 2017 reach-forward loss of $352.8 on its B787 program. See Note 8, Advance Payments and Deferred Revenue/Credits, and Note 21, Boeing Definitive Documentation, as well as Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, for further details regarding the Definitive Documentation.