- Second quarter 2009 Revenues of $1.06 billion - EPS of ($0.06)
per share after unusual items - Cash and Cash Equivalents were $89
million - Total backlog of approximately $28.2 billion WICHITA,
Kan., July 30 /PRNewswire-FirstCall/ -- Spirit AeroSystems
Holdings, Inc. (NYSE:SPR) reported second quarter financial results
reflecting $1.06 billion in revenue and a loss of ($0.06) per
share. Included in the EPS results are several unusual items that,
in the aggregate, reduced pre-tax income by ($137) million and net
income by ($95) million, or ($0.67) per share. (Table 1) Unusual
items in the quarter include the recognition of a forward-loss on
the Gulfstream G250 wing program and tooling contract that reduced
pre-tax income by ($93) million, or ($0.46) per share; an unusually
large unfavorable cumulative catch-up adjustment related to the
residual effects of the strike and nutplate rework along with the
ERP systems transition that reduced pre-tax income by ($33)
million, or ($0.16) per share; and Spirit's estimate of the impact
of Textron's decision to terminate the Cessna Citation Columbus
business jet program that reduced pre-tax income by ($11) million,
or ($0.05) per share. Table 1. Summary Financial Results ($ in
Millions, 2nd Quarter Six Months except per ----------- ----------
share data) 2009 2008 Change 2009 2008 Change --------------- ----
---- ------ ---- ---- ------ Revenues $1,060 $1,062 (0.2%) $1,947
$2,099 (7%) Operating Income (Loss) ($10) $136 (108%) $87 $266
(67%) Operating Income (Loss) as a % of Revenues (1.0%) 12.8%
(1,380) BPS 4.5% 12.7% (820) BPS Net Income (Loss) ($8) $86 (110%)
$54 $172 (68%) Net Income (Loss) as a % of Revenues (0.8%) 8.1%
(890) BPS 2.8% 8.2% (540) BPS Earnings per Share (Fully Diluted)
($0.06) $0.62 (110%) $0.39 $1.23 (68%) Fully Diluted Weighted Avg
Share Count (Millions) 138.0 139.8 139.9 139.8 Revenue for the
second quarter of 2009 of $1.06 billion was essentially unchanged
from the same period in 2008 as fewer 747 ship set deliveries
related to the transition to the 747-8 model and $29 million of
unfavorable foreign exchange impact due to the strengthening dollar
were offset by higher volumes on Airbus products and increased
revenue on development programs. "This is obviously a disappointing
quarter for us financially," said President and Chief Executive
Officer Jeff Turner. "Our Wichita operations were disrupted as
residual effects from the strike and the nutplate rework along with
the implementation of a new ERP system reduced operating
efficiencies. Despite these disruptions, the company continued to
meet customer deliveries and made good progress in returning to
pre-strike operating performance levels," Turner said. "We also
encountered additional challenges during our development efforts on
the G250 wing program at our Tulsa facility. While we believe the
G250 program will be successful over the long-term, several factors
culminated in the second quarter that indicated the program was
likely in a loss position. These factors included a re-assessment
of both market and execution risk, the cumulative cost impact of
late design and engineering changes, and increased cost forecasts
for vendor supplied parts and internal manufacturing," Turner
continued. "We have taken the necessary steps to improve our
performance in Tulsa, including implementation of a more robust
program management process including aggressive engineering change
control, and making a number of management changes at the Tulsa
division. We believe these changes will get the G250 program back
on track and we expect the other Tulsa programs to deliver solid
long-term financial performance," Turner concluded. Spirit's
backlog at the end of the second quarter 2009 was $28.2 billion, a
slight decrease from the end of the first quarter 2009, as Airbus
and Boeing second quarter deliveries exceeded orders. During the
quarter, Spirit was selected to design and manufacture engine
pylons for the Bombardier CSeries airplane, which is now included
in Spirit's backlog. The company continues to pursue new business
opportunities in commercial aerospace and defense markets. Spirit
calculates its backlog based on contractual prices for products and
volumes from the published firm order backlogs of Airbus and
Boeing, along with firm orders from other customers. The company
realized a pre-tax charge of approximately $93 million, or $0.46
per fully diluted share, to recognize a forward-loss for the
Gulfstream G250 business jet program. While early in its product
lifecycle, Spirit now believes its G250 wing production and tooling
contracts are both 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. Spirit expects to recognize zero gross
margin on the program going forward while it continues to develop
plans for production cost savings and working contractual issues
with the customer. The development effort on the G250 wing
production contract is now approaching completion and the tooling
contract is complete. Spirit updated its contract profitability
estimates during the second quarter of 2009 that resulted in a $33
million unfavorable cumulative catch-up adjustment. The unfavorable
cumulative catch-up adjustment was driven by the higher than
forecasted disruption related to the post-strike ramp-up of
production after the Machinists' strike at Boeing, the residual
effects of the nutplate rework, and the simultaneous transition to
a new ERP system, all of which drove inefficiencies in our Wichita
operations. Spirit believes these disruptions were largely resolved
by the end of the second quarter and normal operations have now
resumed. Spirit recognized a $4 million favorable cumulative
catch-up adjustment during the second quarter of 2008. The
company's second quarter financial results also include the
estimated impact of Textron's announced decision on July 8, 2009,
to terminate the Cessna Citation Columbus business jet program.
Spirit expensed $11 million pre-tax, or $0.05 per fully diluted
share, of inventory related to development work on the airplane's
fuselage and empennage. Cash flow from operations was ($67) million
for the second quarter of 2009, compared to $7 million for the
second quarter 2008 as $20 million of net customer advances were
liquidated in the second quarter of 2009 compared to the net
receipt of $95 million in advance payments during the second
quarter of 2008. (Table 2) Table 2. Cash Flow and Liquidity 2nd
Quarter Six Months ----------- ---------- ($ in Millions) 2009 2008
2009 2008 --------------- ---- ---- ---- ---- Cash Flow from
Operations ($67) $7 ($216) $78 Purchases of Property, Plant &
Equipment ($52) ($54) ($107) ($119) July 2, December 31, Liquidity
2009 2008 ---- ---- Cash $89 $217 Total Debt $736 $588 Cash
balances at the end of the second quarter of 2009 were $89 million
and debt balances were $736 million. During the second quarter of
2009, the company utilized its credit-line as it continued to
invest in development programs. Spirit ended the quarter with $150
million borrowed from its revolving credit facility while $579
million remained unused. Approximately $17 million of the credit
facility is reserved for financial letters of credit. During the
second quarter Spirit extended its revolving credit facility to
June 2012. The new facility temporarily increases total borrowing
capacity from $650 million to $729 million, as new and existing
lenders provide additional capacity, with a step down from $729
million to $409 million in capacity in June 2010. The company's
credit ratings remained unchanged at the end of the second quarter
2009 with a BB rating at Standard & Poor's and a Ba3 rating at
Moody's. 2009 Outlook Spirit revenue guidance for the full-year
2009 has been lowered slightly to reflect the termination of the
Cessna Citation Columbus program. Revenue is now expected to be
between $4.2 and $4.3 billion based on Boeing's 2009 delivery
guidance of 480-485 aircraft; anticipated ramp-up of 787
deliveries; 2009 expected Airbus deliveries of approximately 483
aircraft; internal Spirit forecasts for non-OEM production activity
and non-Boeing and Airbus customers; and foreign exchange rates
consistent with year-end 2008 levels. Fully diluted earnings per
share for 2009 are now expected to be between $1.45 and $1.55,
reflecting the impact of the unusual items booked in the second
quarter of 2009. Cash flow from operations less capital
expenditures, net of customer reimbursements, is not expected to
exceed a ($100) million use of cash in the aggregate for the
full-year 2009, with capital expenditures expected to be
approximately $250 million. (Table 3) Table 3. Financial Outlook
2008 Actual 2009 Guidance Change ---------------------------
----------- ------------- ------ Revenues $3.8 billion $4.2 - 11% -
13% $4.3 billion Earnings Per Share (Fully Diluted) $1.91 $1.45 -
$1.55 (24%) - (19%) Effective Tax Rate (% Pre-Tax Earnings) 30.9%
31% - 32% Cash Flow From Operations $211 million* Capital
Expenditures $236 million* Customer Reimbursement $116 million*
*($100M) with ~$250 million of Capital Expenditures Cautionary
Statement Regarding Forward-Looking Statements This press release
contains "forward-looking statements." Forward-looking statements
reflect our current expectations or forecasts of future events.
Forward-looking statements generally can be identified by the use
of forward-looking terminology such as "may," "will," "expect,"
"anticipate," "intend," "estimate," "believe," "project,"
"continue," "plan," "forecast," or other similar words. These
statements reflect management's current views with respect to
future events and are subject to risks and uncertainties, both
known and unknown. Our actual results may vary materially from
those anticipated in forward-looking statements. We caution
investors not to place undue reliance on any forward-looking
statements. Important factors that could cause actual results to
differ materially from forward-looking statements include, but are
not limited to: our ability to continue to grow our business and
execute our growth strategy, including the timing and execution of
new programs; reduction in the build rates of certain Boeing
aircraft including, but not limited to, the B737 program, the B747
program, the B767 program and the B777 program, and build rates of
the Airbus A320 and A380 programs, which could be affected by the
impact of a deep recession on business and consumer confidence and
the impact of continuing turmoil in the global financial and credit
markets; declining business jet manufacturing rates and customer
cancellations or deferrals as a result of the weakened global
economy; the success and timely execution of key milestones such as
first flight and delivery of Boeing's new B787 and Airbus' new A350
aircraft programs, including receipt of necessary regulatory
approvals and customer adherence to their announced schedules; our
ability to enter into supply arrangements with additional customers
and the ability of all parties to satisfy their performance
requirements under existing supply contracts with Boeing, Airbus,
and other customers; any adverse impact on Boeing's and Airbus'
production of aircraft resulting from cancellations, deferrals or
reduced orders by their customers; any adverse impact on the demand
for air travel or our operations from the outbreak of diseases such
as the influenza outbreak caused by the H1N1 virus, avian
influenza, severe acute respiratory syndrome or other epidemic or
pandemic outbreaks; returns on pension plan assets and impact of
future discount rate changes on pension obligations; our ability to
borrow additional funds or refinance debt; competition from
original equipment manufacturers and other aerostructures
suppliers; the effect of governmental laws, such as U.S. export
control laws, the Foreign Corrupt Practices Act, environmental laws
and agency regulations, both in the U.S. and abroad; our ability to
perform our obligations and manage cost related to our new
commercial and business aircraft development programs; the cost and
availability of raw materials and purchased components; our ability
to successfully extend or renegotiate our primary collective
bargaining contracts with our labor unions; our ability to recruit
and retain highly skilled employees and our relationships with the
unions representing many of our employees; spending by the U.S. and
other governments on defense; the outcome or impact of ongoing or
future litigation and regulatory actions; and our exposure to
potential product liability claims. These factors are not
exhaustive, and new factors may emerge or changes to the foregoing
factors may occur that could impact our business. Except to the
extent required by law, we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Appendix
Segment Results Fuselage Systems Fuselage Systems segment revenues
for the second quarter of 2009 were $541 million, up 10 percent
over the same period last year, as increased development program
revenues more than offset fewer 747 deliveries. Operating margin
for the second quarter of 2009 was 11.0 percent, down from 18.7
percent in the second quarter of 2008, as an unfavorable cumulative
catch-up of $23 million was realized during the second quarter of
2009. The unfavorable cumulative catch-up adjustment was driven by
disruption related to the post-strike production ramp-up after the
Machinists' strike at Boeing, the residual effects of the nutplate
rework, and Spirit Wichita's transition to a new ERP system, as
well as an $11 million pre-tax charge for the estimated termination
costs associated with the Cessna Citation Columbus program. During
the second quarter of 2008, the segment realized a favorable $3
million cumulative catch-up adjustment. Propulsion Systems
Propulsion Systems segment revenues for the second quarter of 2009
were $279 million, down 6 percent over the same period last year
due to fewer 747 deliveries and slightly lower aftermarket sales.
Operating margin for the second quarter of 2009 was 8.3 percent,
down from 16.6 percent in the second quarter of 2008, as an
unfavorable cumulative catch-up of $18 million was realized during
the second quarter of 2009. The unfavorable cumulative catch-up
adjustment was driven by disruption related to the post-strike
production ramp-up after the Machinists' strike at Boeing and
Spirit Wichita's transition to a new ERP system. Wing Systems Wing
Systems segment revenues for the second quarter of 2009 were $235
million, down 11 percent over the same period last year as
increased deliveries to Airbus were more than offset by fewer 747
deliveries and the strengthening U.S. dollar which reduced revenue
by $29 million relative to the same period a year ago. The
strengthening dollar has reduced revenues by $70 million during the
six months ended July 2, 2009, versus the same prior year period.
Operating margin for the second quarter of 2009 was (25.1) percent,
down from 12.4 percent in the second quarter of 2008. The margin
decline reflects a $90 million forward-loss on the Gulfstream G250.
The segment realized a favorable cumulative catch-up of $8 million
during the second quarter of 2009 as remaining costs in the current
accounting blocks for the core businesses are forecasted to
improve. During the second quarter of 2008, the segment realized a
favorable $1 million cumulative catch-up adjustment. Other During
the second quarter of 2009, a $3 million loss provision was
recognized in the other segment related to the G250 tooling
contract that is now complete. Table 4. Segment Reporting ($ in
Millions, (Unaudited) (Unaudited) except 2nd Quarter Six Months
margin ----------- ---------- percent) 2009 2008 Change 2009 2008
Change ---------- ---- ---- ------ ---- ---- ------ Segment
Revenues Fuselage Systems $541.2 $493.4 9.7% $971.7 $985.4 (1.4%)
Propulsion Systems $278.5 $296.9 (6.2%) $505.9 $571.6 (11.5%) Wing
Systems $234.7 $264.4 (11.2%) $455.6 $526.7 (13.5%) All Other $5.2
$7.4 (29.7%) $13.8 $14.8 (6.8%) ---- ---- ----- ----- ----- ----
Total Segment Revenues $1,059.6 $1,062.1 (0.2%) $1,947.0 $2,098.5
(7.2%) Segment Earnings from Operations Fuselage Systems $59.3
$92.4 (35.8%) $134.2 $181.5 (26.1%) Propulsion Systems $23.2 $49.3
(52.9%) $61.9 $93.8 (34.0%) Wing Systems ($58.8) $32.9 (278.7%)
($39.3) $65.4 (160.1%) All Other ($2.4) ($0.3) 700.0% ($2.0) $0.1
(2,100.0%) ----- ----- ----- ----- ---- -------- Total Segment
Operating Earnings $21.3 $174.3 (87.8%) $154.8 $340.8 (54.6%)
Unallocated Corporate SG&A Expense ($30.7) ($38.0) (19.2%)
($66.2) ($74.1) (10.7%) Unallocated Research & Development
Expense ($1.0) ($0.2) 400.0% ($1.2) ($0.4) 200.0% ----- ----- -----
----- ----- ----- Total Earnings from Operations ($10.4) $136.1
(107.6%) $87.4 $266.3 (67.2%) Segment Operating Earnings as % of
Revenues Fuselage Systems 11.0% 18.7% (770) BPS 13.8% 18.4% (460)
BPS Propulsion Systems 8.3% 16.6% (830) BPS 12.2% 16.4% (420) BPS
Wing Systems (25.1%) 12.4% (3,750) BPS (8.6%) 12.4% (2,100) BPS All
Other (46.2%) (4.1%) (4,210) BPS (14.5%) 0.7% (1,520) BPS -----
---- ---------- ----- --- ---------- Total Segment Operating
Earnings as % of Revenues 2.0% 16.4% (1,440) BPS 8.0% 16.2% (820)
BPS Total Operating Earnings as % of Revenues (1.0%) 12.8% (1,380)
BPS 4.5% 12.7% (820) BPS Spirit Ship Set Deliveries (One Ship Set
equals One Aircraft) 2008 Spirit AeroSystems Deliveries 1st Qtr 2nd
Qtr 3rd Qtr 4th Qtr Total 2008 ------- ------- ------- -------
---------- B737 93 95 87 42 317 B747 4 7 4 1 16 B767 3 3 3 1 10
B777 20 22 18 8 68 B787 1 1 1 0 3 --- --- --- --- --- Total 121 128
113 52 414 A320 Family 95 95 90 87 367 A330/340 24 21 23 22 90 A380
4 2 4 6 16 --- --- --- --- --- Total 123 118 117 115 473 Hawker
850XP 15 24 24 28 91 --- --- --- --- --- Total Spirit 259 270 254
195 978 === === === === === 2009 Spirit AeroSystems Deliveries 1st
Qtr 2nd Qtr YTD 2009 ------- ------- -------- B737 74 96 170 B747 3
1 4 B767 3 3 6 B777 21 21 42 B787 2 2 4 --- --- --- Total 103 123
226 A320 Family 105 101 206 A330/340 26 23 49 A380 0 2 2 --- ---
--- Total 131 126 257 Hawker 850XP 18 13 31 --- --- --- Total
Spirit 252 262 514 === === === Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations (unaudited) For the
For the For the For the Three Months Three Months Six Months Six
Months Ended Ended Ended Ended July 2, 2009 June 26, 2008 July 2,
2009 June 26, 2008 ------------ ------------- ------------
------------- ($ in millions, except per share data) Net Revenues
$1,059.6 $1,062.1 $1,947.0 $2,098.5 Operating costs and expenses:
Cost of sales 1,021.6 874.5 1,758.9 1,731.8 Selling, general and
administrative 34.7 40.9 73.1 80.0 Research and development 13.7
10.6 27.6 20.4 ---- ---- ---- ---- Total Operating Costs and
Expenses 1,070.0 926.0 1,859.6 1,832.2 Operating Income (Loss)
(10.4) 136.1 87.4 266.3 Interest expense and financing fee
amortization (9.8) (10.5) (18.9) (19.6) Interest income 2.0 5.0 4.6
10.7 Other income 4.2 0.2 5.7 1.6 --- --- --- --- Income (Loss)
Before Income Taxes (14.0) 130.8 78.8 259.0 Income tax provision
5.8 (44.4) (24.4) (87.4) --- ----- ----- ----- Income (Loss) Before
Equity in Net Loss of Affiliate (8.2) 86.4 54.4 171.6 Equity in net
loss of affiliate (0.1) - - - ---- --- --- --- Net Income (Loss)
$(8.3) $86.4 $54.4 $171.6 ===== ===== ===== ====== Earnings per
share Basic $(0.06) $0.63 $0.39 $1.25 Shares 138.0 137.0 137.9
136.9 Diluted $(0.06) $0.62 $0.39 $1.23 Shares 138.0 139.8 139.9
139.8 Spirit AeroSystems Holdings, Inc. Condensed Consolidated
Balance Sheets (unaudited) July 2, 2009 December 31, 2008
------------ ----------------- ($ in millions) Current assets Cash
and cash equivalents $88.9 $216.5 Accounts receivable, net 263.8
149.3 Current portion of long-term receivable 55.7 108.9 Inventory,
net 2,093.1 1,882.0 Other current assets 116.6 76.6 ----- ----
Total current assets 2,618.1 2,433.3 Property, plant and equipment,
net 1,167.6 1,068.3 Pension assets 59.7 60.1 Other assets 215.6
198.6 ----- ----- Total assets $4,061.0 $3,760.3 ======== ========
Current liabilities Accounts payable $434.3 $316.9 Accrued expenses
159.1 161.8 Current portion of long-term debt 6.3 7.1 Advance
payments, short-term 206.2 138.9 Deferred revenue, short-term 64.3
110.5 Other current liabilities 18.7 8.1 ---- --- Total current
liabilities 888.9 743.3 Long-term debt 729.7 580.9 Advance
payments, long-term 812.5 923.5 Deferred revenue and other deferred
credits 60.1 58.6 Pension/OPEB obligation 48.3 47.3 Other
liabilities 147.1 109.2 Shareholders' equity Preferred stock, par
value $0.01, 10,000,000 shares authorized, no shares issued and
outstanding - - Common stock, Class A par value $0.01, 200,000,000
shares authorized, 104,686,385 and 103,209,466 issued and
outstanding, respectively 1.0 1.0 Common stock, Class B par value
$0.01, 150,000,000 shares authorized, 36,368,243 and 36,679,760
shares issued and outstanding, respectively 0.4 0.4 Additional
paid-in capital 945.6 939.7 Minority Interest 0.5 0.5 Accumulated
other comprehensive income (117.6) (134.2) Retained earnings 544.5
490.1 ----- ----- Total shareholders' equity 1,374.4 1,297.5
------- ------- Total liabilities and shareholders' equity $4,061.0
$3,760.3 ======== ======== Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited) For the
Six For the Six Months Ended Months Ended July 2, 2009 June 26,
2008 ------------- -------------- ($ in millions) Operating
activities Net Income $54.4 $171.6 Adjustments to reconcile net
income to net cash provided by operating activities Depreciation
expense 62.2 57.8 Amortization expense 4.7 4.6 Accretion of
long-term receivable (4.5) (9.3) Employee stock compensation
expense 6.0 7.5 Loss from the ineffectiveness of hedge contracts -
0.6 Gain from foreign currency transactions (4.7) - Loss on
disposition of assets - (0.4) Deferred taxes (4.6) 0.5 Pension and
other post-retirement benefits, net 1.0 (14.3) Grant income (0.5) -
Changes in assets and liabilities Accounts receivable (109.4)
(52.9) Inventory, net (203.0) (310.2) Accounts payable and accrued
liabilities 109.2 36.2 Advance payments (43.7) 183.9 Deferred
revenue and other deferred credits (45.7) 0.3 Other (37.4) 2.5
----- --- Net cash provided by (used in) operating activities
(216.0) 78.4 ------ ---- Investing Activities Purchase of property,
plant and equipment (106.7) (119.4) Long-term receivable 57.7 56.5
Other 0.7 1.5 --- --- Net cash (used in) investing activities
(48.3) (61.4) ----- ----- Financing Activities Proceeds from
revolving credit facility 250.0 75.0 Payments on revolving credit
facility (100.0) (75.0) Proceeds from issuance of debt - 9.4
Proceeds from government grants 0.6 1.4 Principal payments of debt
(3.9) (7.9) Debt issuance and financing costs (10.2) (6.8) -----
---- Net cash provided by (used in) financing activities 136.5
(3.9) ----- ---- Effect of exchange rate changes on cash and cash
equivalents 0.2 0.9 --- --- Net increase (decrease) in cash and
cash equivalents for the period (127.6) 14.0 Cash and cash
equivalents, beginning of the period 216.5 133.4 ----- ----- Cash
and cash equivalents, end of the period $88.9 $147.4 ===== ======
DATASOURCE: Spirit AeroSystems Holdings, Inc. CONTACT: Investor
Relations, Phil Anderson, +1-316-523-1797, or Media, Debbie Gann,
+1-316-526-3910, both of Spirit AeroSystems Holdings, Inc. Web
Site: http://www.spiritaero.com/
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