Segment Information

The Company operates in three principal segments: Fuselage Systems, Propulsion Systems, and Wing Systems. Revenue from Boeing represents a substantial portion of the Company's revenues in all segments. Wing Systems also includes significant revenues from Airbus. Approximately 95% of the Company's net revenues for the three months ended September 27, 2018, came from the Company's two largest customers, Boeing and Airbus. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas. The Company's primary profitability measure to review a segment’s operating performance is segment operating income before corporate selling, general and administrative expenses, research and development, and unallocated cost of sales.

Corporate selling, general and administrative expenses include centralized functions such as accounting, treasury, and human resources that are not specifically related to the Company's operating segments and are not allocated in measuring the operating segments’ profitability and performance and net profit margins. Research and development includes research and development efforts that benefit the Company as a whole and are not unique to a specific segment. Unallocated cost of sales includes general costs not directly attributable to segment operations, such as warranty, early retirement and other incentives. All of these items are not specifically related to the Company’s operating segments and are not utilized in measuring the operating segments’ profitability and performance.

The Company’s Fuselage Systems segment includes development, production, and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and overhaul (“MRO”) services. The Fuselage Systems segment manufactures products at the Company's facilities in Wichita, Kansas and Kinston, North Carolina. The Fuselage Systems segment also includes an assembly plant for the A350 XWB aircraft in Saint-Nazaire, France.

The Company’s Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers), and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services. The Propulsion Systems segment manufactures products at the Company's facility in Wichita, Kansas.

The Company’s Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces), and other miscellaneous structural parts primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place at the Company’s facilities in Tulsa and McAlester, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; and Subang, Malaysia.

The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from net profit margin as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below.

While some working capital accounts are maintained on a segment basis, much of the Company’s assets are not managed or maintained on a segment basis. Property, plant and equipment, including tooling, is used in the design and production of products for each of the segments and, therefore, is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets and deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to any particular segment. Raw materials and certain component parts are used in aerostructure production across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

The following table shows segment revenues and operating income for the three and nine months ended September 27, 2018, and September 28, 2017:



	Three Months Ended						Nine Months Ended
	September 27, 2018			September 28, 2017			September 27, 2018			September 28, 2017
Segment Revenues
Fuselage Systems	$	991.0		$	957.0		$	2,983.4		$	2,812.1
Propulsion Systems	442.4			407.9			1,259.6			1,250.7
Wing Systems	378.6			382.2			1,138.6			1,201.7
All Other	1.7			1.1			5.1			3.9
	$	1,813.7		$	1,748.2		$	5,386.7		$	5,268.4
Segment Operating Income (Loss)
Fuselage Systems ⁽¹⁾	$	134.8		$	143.8		$	417.7		$	205.0
Propulsion Systems ⁽¹⁾	76.2			72.4			203.9			183.4
Wing Systems ⁽¹⁾	58.6			49.1			166.1			134.7
All Other	1.3			0.2			0.3			(0.5		)
	270.9			265.5			788.0			522.6
SG&A	(37.3		)	(49.8		)	(154.5		)	(149.9		)
Impact of severe weather event	—			—			—			(19.9		)
Research and development	(10.8		)	(9.5		)	(31.3		)	(21.2		)
Unallocated cost of sales	(0.3		)	(3.9		)	(2.6		)	(17.0		)
Total operating income	$	222.5		$	202.3		$	599.6		$	314.6

(1)

Prior period information has been reclassified as a result of the Company's adoption of ASU 2017-07 on a retrospective basis in 2018. In accordance with the adoption of this guidance, prior year amounts related to the components of net periodic pension and postretirement benefit cost other than service costs have been reclassified from cost of sales and selling, general and administrative expense to other income (expense) within the consolidated statement of operations for all periods presented. Accordingly, expenses of $4.5, $1.8, and $1.8 on the Fuselage, Systems Propulsion Systems, and Wing Systems, respectively, were reclassified into segment operating income for the three months ended September 28, 2017 and expenses of $13.5, $5.5, and $5.5 on the Fuselage Systems, Propulsion Systems, and Wing Systems, respectively, were reclassified into segment operating income for the nine months ended September 28, 2017.