US judge tosses investor lawsuit against Spirit AeroSystems

AP News
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Posted: May 14, 2015 6:11 PM

WICHITA, Kan. (AP) — A federal judge on Thursday threw out a class-action lawsuit brought by investors against aircraft parts maker Spirit AeroSystems alleging that the company and four of its officers made misleading statements that artificially inflated its stock price.

The shareholder lawsuit was filed after an October 2012 announcement that the Wichita-based company had recorded $590 million forward losses on six manufacturing contracts. Spirit AeroSystems' stock price dropped $6.55 per share, or 30 percent, following the announcement.

Investors sued in June 2013 in U.S. District Court in Kansas, alleging violations of federal securities laws. They alleged they bought Spirit stock at artificially inflated prices because of misrepresentations and omissions of material facts related to the progress of the company's cost-cutting efforts.

In dismissing their lawsuit, U.S. District Judge Eric Melgren ruled that shareholders failed to show any allegedly misleading statements were material to an investor deciding whether to buy or sell stock. The judge also said they did not show the company or officers made any statements with the intent to deceive or with recklessness.

Spirit issued a statement saying it believes its company and the officers named in the lawsuit have been vindicated by the judge's action. Then-CEO Jeffrey Turner; chief financial officer Philip Anderson; the vice president of Spirit's Oklahoma operations, Alexander Kummant; and the vice president of Spirit's 787 program, Terry George, were all named in the suit.

Attorneys for the plaintiffs did not immediately respond to an email seeking comment on the judge's decision.

The lawsuit pointed to a total of 86 misleading statements or omissions allegedly made by the officers before the loss announcement.

But Melgren said it's unclear the company and officers had anything to gain by delaying announcement of the loss to October 2012. Spirit AeroSystems' stock price immediately plummeted and Turner announced his resignation shortly afterward.

"Presumably, those same things would have happened even if Spirit had recorded those same forward-loss charges earlier as Plaintiffs contend it should have done," Melgren wrote.

The forward losses included $184 million for the Boeing 787 program, $162.5 million for its Gulfstream G650 program, $151 million for its Rolls-Royce BR725 program, $88.1 million for its Gulfstream G280 program, $2.4 million for its Airbus 350 program and $2.4 million for its Boeing 747 program.

The company attributed the losses to performance issues in its Tulsa facility; higher cost estimates related to certification; the decision to delay moving work to lower-cost facilities in Kinston, North Carolina, and Chanute, Kansas; and the finalization of supplier contracts. They contended the losses did not become evident until the third quarter of 2012, when they were reported.