Segment Information

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company operates in three principal segments: Commercial, Defense & Space and Aftermarket. Approximately 81% of the Company's net revenues for the three months ended March 31, 2022 came from the Company's two largest customers, Boeing and Airbus. Boeing represents a substantial portion of our revenues across segments. Airbus represents a substantial portion of revenues in the Commercial segment. The Company's primary profitability measure to review a segment’s operating performance is segment operating income before corporate selling, general and administrative expenses, and research and development.

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. 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 Commercial segment includes design and manufacturing of forward, mid and rear fuselage sections and systems, struts/pylons, nacelles (including thrust reversers) and related engine structural components, wings and wing components (including flight control surfaces), as well as other miscellaneous structural parts for large commercial aircraft and/or business/regional jets. Sales from this segment are primarily to the aircraft OEMs or engine OEMs of large commercial aircraft and/or business/regional jet programs. Approximately 59% and 56% of Commercial segment net revenues came from the Company's contracts with Boeing for the three months ended March 31, 2022, and April 1, 2021, respectively. Approximately 32% and 33% of Commercial segment net revenues came from the Company's contracts with Airbus for the three months ended March 31, 2022, and April 1, 2021, respectively. The Commercial segment manufactures products at the Company's facilities in Wichita, Kansas; Tulsa, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; Casablanca, Morocco; Belfast, Northern Ireland; and Subang, Malaysia.  The Commercial segment also includes an assembly plant for the A350 XWB aircraft in Saint-Nazaire, France.

The Company's Defense & Space segment includes design and manufacturing of fuselage, strut, nacelle, and wing aerostructures (primarily) for U.S. Government defense programs, including Boeing P-8, C40, and KC-46 Tanker, which are commercial aircraft that are modified for military use. The segment also includes fabrication, bonding, assembly, testing

tooling, processing, engineering analysis, and training on fixed wing aircraft aerostructures, missiles and hypersonics work, including solid rocket motor throats and nozzles and re-entry vehicle thermal protections systems, forward cockpit and cabin, and fuselage work on rotorcraft aerostructures. Sales from this segment are primarily to the prime contractors on various U.S. Government defense program contracts for which the Company is a sub-contractor. A significant portion of the Company's Defense & Space segment revenues are represented by defense business that is classified by the U.S. Government and cannot be specifically described. Approximately 36% and 35% of Defense & Space segment net revenues came from the Company's contracts with an individual customer for the three months ended March 31, 2022, and April 1, 2021, respectively. In addition, a customer accounted for approximately 40% and 42% of Defense & Space segment net revenues for the three months ended March 31, 2022, and April 1, 2021, respectively. The Defense & Space segment manufactures products at the Company's facilities in Wichita, KS; Tulsa, OK; Biddeford, ME; Belfast, Northern Ireland; and Prestwick, Scotland.

The Company's Aftermarket segment includes design, manufacturing, and marketing of spare parts and MRO services, repairs for flight control surfaces and nacelles, radome repairs, rotable assets, engineering services, advanced composite repair, and other repair and overhaul (MRO) services. Approximately 46% and 47% of Aftermarket segment net revenues came from the Company's contracts with a single customer for the three months ended March 31, 2022, and April 1, 2021, respectively. The Aftermarket segment manufactures products at the Company's facilities in Wichita, KS; Tulsa, OK; Kinston, North Carolina; Dallas, TX; Prestwick, Scotland; Casablanca, Morocco; and Belfast, Northern Ireland.

 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 Operating income 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 loss for the three months ended March 31, 2022 and April 1, 2021:

	Three Months Ended
	March 31, 2022		April 1, 2021
Segment Revenues
Commercial	$	938.4	$	696.1
Defense & Space	158.5		153.4
Aftermarket	77.8		51.3
	$	1,174.7	$	900.8
Segment Operating Income (Loss)
Commercial(1)	$	(3.4)	$	(82.9)
Defense & Space(2)	20.0		12.0
Aftermarket(3)	18.0		10.8
	$	34.6	$	(60.1)
SG&A	(64.5)		(57.6)
Research and development	(12.3)		(8.2)
Total operating loss	$	(42.2)	$	(125.9)

(1) The three months ended March 31, 2022 includes excess capacity production costs of $46.8 related to the temporary B737 MAX and A220 production schedule changes, abnormal costs of $9.5 for temporary workforce adjustments as a result of COVID-19 production pause net of U.S. employee retention credit and U.K. government subsidies, and net ($25.5) of restructuring costs and other costs, including partial offset related to the Aviation Manufacturing Jobs Protection Program grant (AMJP) of ($28.4). The three months ended April 1, 2021 includes excess capacity cost of $63.1 related to the B737 MAX production schedule adjustment that began on January 1, 2020, $2.1 of temporary workforce adjustment costs as a result of the COVID-19 pandemic net of U.S. employee retention credit and U.K government subsidies, $1.1 of restructuring costs, and other costs, including partial offset related to AMJP, of $0.0.

(2) The three months ended March 31, 2022 includes excess capacity production costs of $3.0 related to the temporary B737 production schedule changes, $0.0 of restructuring costs, and partial offset related to AMJP, of ($2.3). The three months ended April 1, 2021 includes excess capacity cost of $4.5 related to the B737 production schedule adjustment, $0.9 of restructuring costs, and other costs, including partial offset related to AMJP, of $0.0.

(3) The three months ended March 31, 2022 includes $0.0 of restructuring costs, and partial offset related to AMJP, of ($1.9). The three months ended April 1, 2021 includes $0.1 of restructuring costs, and partial offset related to AMJP, of $0.0.