WICHITA, Kan., Feb. 8 /PRNewswire-FirstCall/ -- Spirit AeroSystems
Holdings, Inc. [NYSE: SPR] reported fourth quarter revenues of $852 million,
up 53 percent from the same period last year. Full-year 2006 revenues were
$3.2 billion, reflecting the continued strong demand for commercial aircraft
and included nine months of revenues from Spirit Europe, or $313 million,
which was acquired on April 1, 2006.
Overall operating performance for the fourth quarter exceeded expectations
after consideration of costs related to the Initial Public Offering (IPO) for
Spirit stock which occurred on November 21, 2006. IPO costs reduced pre-tax
earnings by $334 million for the quarter and year, creating a pre-tax loss of
($245) million and ($72) million, respectively (Table 1). Adjusted pre-tax
earnings*(1) for the fourth quarter, excluding IPO related costs, were $89
million yielding an adjusted pre-tax margin* of 10.4 percent. Adjusted pre-
tax margins* for the full year 2006 excluding IPO related costs were 8.2
percent.
(1) * Non-GAAP Measure. A complete definition of Spirit's use of non-GAAP
measures, identified by an asterisk (*) is found on page 7-8 of this
release, "Non-GAAP Measure Disclosure".
Table 1. Summary Financial Results
Period from
June 17, 2005
through
4th Quarter December 29,
($'s in millions, 2005 Full Year 2005
except per share data) 2006 Restated(1) 2006(2) Restated(1)
Revenues $852 $557 $3,208 $1,208
Pre-tax Earnings/(Loss) ($245) ($44) ($72) ($77)
Pre-tax Margins (28.8%) (7.9%) (2.2%) (6.4%)
Reported Net Income/
(Loss) ($69) ($47) $17 ($90)
Reported Earnings/(Loss)
per Share ($0.58) ($0.41) $0.15 ($0.80)
Basic Weighted Avg Share
Count (Million) 120.4 113.8 115.6 113.5
NOTE: The items detailed below for IPO related costs and the tax
valuation allowance reversal are included in the results above.
IPO Related Costs
Pre-Tax ($334) ($334)
After Tax ($209) ($209)
Basic EPS ($1.74) ($1.81)
Tax Valuation Allowance
Tax Provision and
After Tax $75 $42
Basic EPS $0.62 $0.36
(1) Does not include Spirit Europe acquired on April 1, 2006; Includes
impact of 2005 IAM strike at Boeing Commercial Airplanes.
(2) Includes nine months of Spirit Europe
Full-year 2006 net income was $17 million, or $0.15 per basic share. IPO
related costs reduced net income by $209 million, or $1.74 per share in the
fourth quarter and $1.81 per share for the full year 2006 as basic weighted
average share counts for the quarter and the full year varied. Partially
offsetting the IPO costs was the release of a previously established tax
valuation allowance of $75 million, or $0.62 per share in the fourth quarter,
and $42 million, or $0.36 per share for the full year.
During the fourth quarter, Spirit updated its contract profitability
estimates resulting in a favorable change in contract estimates of $22 million
recorded in the quarter. These changes were driven by favorable cost trends
and higher production activity within the current contract blocks. Because
Spirit recognizes changes in contract estimates utilizing the cumulative catch
up method of accounting under Statement of Position 81-1, approximately $8
million of the $22 million favorable adjustment relates to revenues recognized
in 2005. For the full-year 2006, approximately $59 million of favorable
changes in contract estimates related to 2005 revenues has been recognized.
"Our strong operating performance and progress on the 787 program during
2006 along with our successful Initial Public Offering underscore what Spirit
can accomplish by focusing on execution," said President and Chief Executive
Officer Jeff Turner. "During 2006, we expanded our customer base in the 100
seat plus market through the acquisition of Spirit Europe, won yet to be
announced programs with new customers and successfully managed production rate
increases on existing programs," Turner added. "Looking forward, we expect to
deliver consistently strong financial performance through the application of
industry leading design and build capabilities for our core products and by
maintaining a competitive cost structure."
Cash flow from operations for 2006 was $272 million including cash
outflows of $191 million related to the IPO. Cash used in investing
activities for the year included $343 million in capital expenditures as the
company prepares for 787 production, and $145 million used to diversify
Spirit's customer base and establish international operations through the
acquisition of Spirit Europe.
Debt balances at year-end were $618 million after reducing debt by $100
million with IPO proceeds. In conjunction with the IPO, the company
restructured its credit agreements which increased available credit capacity
from $325 million to $400 million. The restructure included the termination
of the $150 millionBoeing credit facility and increased the revolving credit
facility by $225 million, effectively replacing the Boeing facility and
increasing overall credit capacity by $75 million. The restructure also
resulted in lower interest rates and fewer financial covenants. Standard &
Poor's and Moody's upgraded the company's credit ratings during the year to BB
and Ba3, respectively.
Initial Public Offering
Spirit conducted an Initial Public Offering of common shares on November
21, 2006, and began trading publicly on the NYSE. The net proceeds and the
costs associated with the IPO were recognized in the fourth quarter 2006.
Total IPO pre-tax costs were $334 million, of which $322 million was
compensation expense related to the Union Equity Plan (UEP) as detailed in
Table 2. The UEP is an incentive program established for Spirit employees
that are represented by certain collective bargaining units and was part of
the initial collective bargaining agreements. The UEP plan obligation will be
settled with cash and stock payments to eligible employees. The cash
component of $185 million was paid in the fourth quarter 2006. The remaining
UEP obligation will be settled with common stock and will be distributed to
participants on or prior to March 15, 2007.
The company received $249 million in net cash proceeds from the Initial
Public Offering of common stock. A portion of these proceeds was used to
retire $100 million of Term Loan B debt. The other $149 million of proceeds
was used to fund a portion of the cash component of the UEP plan mentioned
above. The remainder of the UEP cash component of $36 million ($185 million
less $149 million) plus other IPO related cash expenses of $6 million, or $42
million in total, was funded from operations.
Table 2. Initial Public Offering Summary
($'s in millions, 4Q06
except per share data) Expense Cash Non-Cash
Net IPO Proceeds $249 $249 $-
Term Loan B - Debt Retirement (100) (100) -
Remaining Proceeds after Debt
Retirement 149 149 -
IPO Related Costs
Union Equity Plan (UEP)
Cash (185) (185) -
Stock (137) - (137)
UEP Total (Included in COGS) (322) (185) (137)
Onex Management Fee Termination
(Included in SG&A) (4) (4) -
Employee Payroll Taxes and other
(Included in SG&A) (4) (2) (2)
Sub-total (330) (191) (139)
Write off of Deferred Financing Fees
(Included in Interest Expense) (4) - (4)
Total Pre-Tax IPO Related Costs (334) (191) (143)
Total After-Tax IPO Related Costs (209)
EPS - IPO Related Costs ($1.74)
Cash Requirement In Excess of Proceeds $(42)
Outlook Spirit expects 2007 revenues between $4.0 billion and $4.1 billion,
approximately 25 percent higher than 2006, as increased market demand for
large commercial transport aircraft from Boeing and Airbus drives additional
ship set deliveries. This revenue projection is based on previously issued
2007 Boeing and Airbus delivery guidance of 440-445 aircraft from each
manufacturer and includes the initial deliveries to Boeing of Spirit products
on the 787 program as well as a full year of revenue from Spirit Europe
(Table 3).
Table 3. Financial Outlook
2007 Guidance
Revenues $4.0B - $4.1B
Operating Earnings $400M - $420M
Operating Margins 9.8% - 10.5%
Depreciation and Amortization $120M - $125M
Earnings Per Share (Fully Diluted) $1.80 - $1.90
Effective Tax Rate ~34%
Cash Flow from Operations* + / - $280M
Capital Expenditures + / - $300M
Customer Advances ~$45M
Research & Development Expense + / - $60M
Stock-based Incentive Compensation Expense ~$35M
Average Fully Diluted Shares Outstanding 141M
* Includes $40-$50 million for capital expenditures funded by customers
Spirit's operating margins are expected to be between 9.8 percent and 10.5
percent as benefits from higher volumes, cost reduction and productivity
initiatives, as well as lower R&D, stock compensation, and transition expenses
expand operating margins versus 2006 actual results. Spirit's 2007 fully
diluted EPS guidance is between $1.80 and $1.90 per share.
Cash from operations is expected to be +/- $280 million, which includes
additional working capital spending for the new 787 program. Fiscal 2007
capital expenditures are expected to be +/- $300 million. Approximately 50
percent of the capital expenditures will be utilized to complete the
installation of production capacity for the new 787 program. Partially
offsetting these capital expenditures is approximately $45 million of
anticipated customer financing.
Depreciation and amortization expenses are forecasted to be between $120
and $125 million as new capital equipment is placed into service.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements that reflect the
plans and expectations of Spirit AeroSystems Holdings, Inc. To the extent that
statements in this press release do not relate to historical or current facts,
they constitute forward-looking statements. Forward-looking statements can
generally be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "estimate," "anticipate," "believe,"
"project," "continue," or other similar words. These statements reflect
Spirit AeroSystems Holdings, Inc.'s current view with respect to future events
and are subject to risks and uncertainties, both known and unknown. Such
risks and uncertainties may cause the actual results of Spirit AeroSystems
Holdings, Inc. to vary materially from those anticipated in forward-looking
statements, and therefore we caution investors not to place undue reliance on
them. Potential risks and uncertainties include, but are not limited to: our
customers' aircraft build rates; the ability to enter into supply arrangements
with additional customers and satisfy performance requirements under existing
contracts; any adverse impact on our customers' production of aircraft; the
success and timely progression of our customers' new programs including, but
not limited to The Boeing Company's B787 aircraft program; future levels of
business in the aerospace and commercial transport industries; competition
from original equipment manufacturers and other aerostructures suppliers; the
effect of governmental laws; the effect of new commercial and business
aircraft development programs; the cost and availability of raw materials; the
ability to recruit and retain highly skilled employees and relationships with
unions; spending by the United States and other governments on defense; the
continuing ability to operate successfully as a stand alone company; the
outcome of ongoing or future litigation and regulatory actions; and exposure
to potential product liability claims. Additional information as to factors
that may cause actual results to differ materially from our forward-looking
statements can be found in Spirit AeroSystems Holdings, Inc.'s filings with
the United States Securities and Exchange Commission. Spirit AeroSystems
Holdings, Inc. undertakes no obligation and does not intend to update publicly
any forward-looking statements after the date of this press release, except as
required by law.
Non-GAAP Measure Disclosure
Management believes that the non-GAAP (Generally Accepted Accounting
Principles) measures (indicated by an asterisk*) used in this report provide
investors with important perspectives into the company's ongoing business
performance. The company does not intend for the information to be considered
in isolation or as a substitute for the related GAAP measure. Other companies
may define the measure differently. The following definitions are provided:
Adjusted Pre-Tax Earnings
Adjusted Pre-Tax Earnings is defined as GAAP pre-tax earnings excluding
the $334 million expense related to the Initial Public Offering that occurred
in the fourth quarter of 2006. Management believes adjusted pre-tax earnings
are important to understanding the company's on-going operations and provide
additional insights into underlying business performance. Management derived
the adjusted pre-tax earnings by adding the $334 million IPO expense in fourth
quarter to GAAP pre-tax earnings. The calculation for the fourth quarter 2006
is (($245) + $334) = $89. The calculation for the full year 2006 is (($72) +
$334) = $262. Adjusted pre-tax earnings for third quarter 2006 are the same
as GAAP.
Adjusted Pre-Tax Margins
Adjusted Pre-Tax Margins is defined as GAAP pre-tax margins excluding the
$334 million expense related to the Initial Public Offering that occurred in
the fourth quarter of 2006. Management believes adjusted pre-tax margins are
important to understanding the company's on-going operations and provide
additional insights into underlying business performance. Management derived
the adjusted pre-tax margins by dividing GAAP revenues into GAAP pre-tax
earnings adjusted for the $334 million in fourth quarter 2006. The
calculation for the fourth quarter 2006 is (($245) + $334)/$852 = 10.4%. The
calculation for the full year 2006 is (($72) + $334) / $3,208 = 8.2%.
Adjusted pre-tax margins for third quarter 2006 are the same as GAAP.
Adjusted Segment Earnings
Adjusted Segment Earnings is defined as GAAP segment earnings excluding
the portion of the expense related to the Union Equity Plan (UEP) that
occurred in the fourth quarter of 2006. Management believes adjusted segment
earnings are important to understanding the company's on-going operations and
provide additional insights into underlying business performance. Management
derived the adjusted segment earnings by adding the respective segment's
portion of the $322 million UEP expense incurred in fourth quarter 2006 to
each segment's GAAP segment earnings. The calculation for the fourth quarter
2006 for each segment is (GAAP segment earnings + segment portion of the UEP
expense). The calculation for the full 2006 is (GAAP segment earnings +
segment portion of the UEP expense). A full reconciliation of adjusted
segment earnings is presented in Table 4 in the appendix of this press
release.
Adjusted Segment Margins
Adjusted Segment Margins is defined as GAAP segment margins excluding the
portion of the expense related to the UEP that occurred in the fourth quarter
of 2006. Management believes adjusted segment margins are important to
understanding the company's on-going operations and provide additional
insights into underlying business performance. Management derived the
adjusted segment operating margins by dividing GAAP segment revenues into GAAP
segment earnings adjusted for the respective segment's portion of the $322
million UEP expense incurred in fourth quarter 2006. The calculation for the
fourth quarter 2006 for each segment is (GAAP segment earnings + segment
portion of the UEP expense) / GAAP segment Revenues. The calculation for the
full 2006 is (GAAP segment earnings + segment portion of the UEP expense) /
GAAP segment Revenues. A full reconciliation of adjusted segment margins is
presented in Table 4 of this press release.
Appendix
Segment Results
Fuselage Systems Fuselage Systems segment fourth quarter 2006 revenue grew 37.5 percent
over the same period last year as production volumes increased in support of
primary customer deliveries. Fourth quarter 2005 revenues were negatively
impacted by the IAM strike at Boeing Commercial Airplanes. Fuselage Systems
revenue for the full year 2006 was $1.6 billion as its primary customer,
Boeing, increased overall deliveries by 37 percent between 2005 and 2006 with
deliveries of 737 and 777 aircraft increasing 42 percent and 63 percent,
respectively. Fuselage Systems posted strong double-digit adjusted segment
margins* of 19.4 percent for the fourth quarter 2006 and 18.2 percent for the
full year, excluding the impact of the UEP plan. Margins improved in the
third and fourth quarters versus the first half of 2006 as R&D expense on the
787 program declined and favorable cost trends and higher production rates
were realized.
Propulsion Systems
Propulsion Systems segment fourth quarter 2006 revenue grew 28.8 percent
over the same period last year and delivered 16.9 percent adjusted segment
margins* (excluding the impact of the UEP plan) as production volumes
increased in support of primary customer deliveries. Revenues for the full
year 2006 were $888 million as Propulsion Systems won new business from our
current customer on the 747-8 program. Additionally, the team successfully
competed and won new business from a new customer during the year. The new
business did not impact 2006 revenues. Margins improved in the third and
fourth quarters versus the first half of 2006 as R&D expense on the 787
program declined and favorable cost trends and higher production rates were
realized. Fourth quarter 2005 revenues were impacted by the IAM strike at
Boeing Commercial Airplanes.
Wing Systems
Wing Systems segment reported fourth quarter 2006 revenue of $229 million
and full year revenue of $720 million. The Spirit Europe acquisition was
completed on April 1, 2006 and significantly increased the revenues and
operating earnings in this segment versus 2005 results. Fourth quarter and
full-year adjusted segment margins* (excluding the impact of UEP costs) were
11.4 percent and 7.9 percent, respectively. Margins improved in the third and
fourth quarters versus the first half of 2006 as R&D expense on the 787
program declined, favorable cost trends and higher production rates were
realized, and improved fringe benefit rates generated $8 million of favorable
changes in contract estimates during the fourth quarter.
Table 4. Segment Reporting
Period from
June 17, 2005
through
4th Quarter December 29,
(Millions, 2005 2005 Full Year 2005
except margin percent) 2006 Restated(1) 2006(2) Restated(1)
Segment Revenues
Fuselage Systems $396 $288 $1,570 $638
Propulsion Systems $219 $170 $888 $372
Wing Systems $229 $85 $720 $170
All Other $8 $14 $30 $28
Total Segment Revenues $852 $557 $3,208 $1,208
Segment Earnings (Loss) from
Operations(3)
Fuselage Systems ($96) $32 $112 $44
Propulsion Systems ($66) $12 $34 $24
Wing Systems ($19) ($7) $12 $5
All Other $1 $1 $4 ($1)
Total Segment Operating
Earnings ($180) $37 $162 $72
Segment Earnings (Loss) from
Operations % of Sales
Fuselage Systems (24.2%) 11.1% 7.1% 6.9%
Propulsion Systems (30.1%) 7.1% 3.8% 6.5%
Wing Systems (8.3%) (8.2%) 1.7% 2.9%
All Other 12.5% 7.1% 13.3% (3.6%)
Total Segment Operating
Margins (21.1%) 6.6% 5.0% 6.0%
(3) Earnings (Loss) from Operations includes Union Equity Participation
plan charges of $322 million.
Union Equity Participation (UEP)
Plan Related Costs by Segment
Fuselage Systems ($173) ($173)
Propulsion Systems ($103) ($103)
Wing Systems ($45) ($45)
All Other ($1) ($1)
Total Segment UEP Costs ($322) ($322)
Adjusted Segment Earnings*
Fuselage Systems $77 $32 $285 $44
Propulsion Systems $37 $12 $137 $24
Wing Systems $26 ($7) $57 $5
All Other $2 $1 $5 ($1)
Total Adjusted Segment
Earnings $142 $37 $484 $72
Adjusted Segment Margins*
Fuselage Systems 19.4% 11.0% 18.2% 6.9%
Propulsion Systems 16.9% 6.9% 15.4% 6.5%
Wing Systems 11.4% (8.7%) 7.9% 2.9%
All Other 25.0% 7.1% 16.7% (3.6%)
Total Adjusted Segment
Margins 16.7% 6.6% 15.1% 6.0%
(1) Does not include Spirit Europe acquired on April 1, 2006; Includes
impact of 2005 IAM strike at Boeing Commercial Airplanes.
(2) Includes nine months of Spirit Europe
* Non-GAAP Measure. A complete definition of Spirit's use of non-GAAP
measures, identified by an asterisk(*) is found on page 7-8 of this
release, "Non-GAAP Measure Disclosure".
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Income (Loss)
(Amounts in millions, except per share data)
For the Three For the Three
Months Ended Months Ended
December 31, 2006 December 29, 2005
(unaudited) (restated)
Net revenues $851.8 $557.4
Operating costs and expenses
Cost of sales 1,007.6 476.3
Selling, general and administrative 65.0 77.6
Research and development 19.6 42.5
Total costs and expenses $1,092.2 $596.4
Operating loss $(240.4) $(39.0)
Interest expense and financing fee
amortization (15.3) (12.3)
Interest income 8.1 8.0
Other income, net 2.3 (0.9)
Loss from continuing operations
before income taxes $(245.3) $(44.2)
Income tax provision 175.9 (2.7)
Net income (loss) $(69.4) $(46.9)
Earnings (loss) per share
Basic $(0.58) $(0.41)
Diluted $(0.58) $(0.41)
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Income (Loss)
(Amounts in millions, except per share data)
For the Twelve Period from June
Months Ended 17, 2005 through
December 31, 2006 December 29, 2005
(unaudited) (restated)
Net revenues $3,207.7 $1,207.6
Operating costs and expenses
Cost of sales 2,934.3 1,056.4
Selling, general and administrative 225.0 140.7
Research and development 104.7 78.3
Total costs and expenses $3,264.0 $1,275.4
Operating loss $(56.3) $(67.8)
Interest expense and financing fee
amortization (50.1) (25.5)
Interest income 29.0 15.4
Other income, net 5.9 1.3
Loss from continuing operations
before income taxes $(71.5) $(76.6)
Income tax provision 88.3 (13.7)
Net income (loss) $16.8 $(90.3)
Earnings (loss) per share
Basic $0.15 $(0.80)
Diluted $0.15 $(0.80)
Spirit AeroSystems Holdings, Inc.
Consolidated Balance Sheets
(Amounts in millions)
December 31, 2006 December 29, 2005
(unaudited) (restated)
Current assets
Cash and cash equivalents $184.3 $241.3
Accounts receivable-net 200.2 98.8
Long-term receivable-current 43.0 -
Inventory-net 882.2 510.7
Prepaids-net 20.8 10.2
Deferred tax assets-current 90.0 1.1
Total current assets $1,420.5 $862.1
Property, plant and equipment, net 773.8 518.8
Long-term receivable 191.5 212.5
Pension assets 207.3 -
Other assets 129.1 63.2
Total assets $2,722.2 $1,656.6
Current liabilities
Accounts payable $322.9 $173.7
Accrued expenses 214.7 125.6
Current portion of long-term debt 23.9 11.6
Deferred revenue liability 8.2 -
Income taxes - 0.6
Total current liabilities $569.7 $311.5
Long-term debt 594.3 710.0
Advance payments 587.4 200.0
Other liabilities 111.8 108.2
Deferred tax liability- non-current - 1.1
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, 63,345,834 issued and
outstanding 0.6 -
Common stock, Class B par value
$0.01, 150,000,000 shares
authorized, 71,351,347 (unaudited)
and 122,670,336 shares issued and
outstanding, respectively 0.7 1.2
Additional paid-in capital 858.7 410.7
Accumulated other comprehensive income 72.5 4.2
Accumulated deficit (73.5) (90.3)
Total shareholders' equity $859.0 $325.8
Total liabilities and
shareholders' equity $2,722.2 $1,656.6
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Cash Flow
(Amounts in millions)
For the Twelve Period from June
Months Ended 17, 2005 through
December 31, 2006 December 29, 2005
(unaudited) (restated)
Operating activities
Net income (loss) $16.8 $(90.3)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation expense 52.8 28.6
Amortization expense 10.3 3.3
Accretion of long-term receivable (22.0) (9.7)
Employee stock compensation expense 182.3 34.7
Loss on disposition of assets 0.9 -
Deferred and long-term taxes (134.1) 8.4
Pension, net (33.2) (8.9)
Other 13.9 12.8
Changes in assets and liabilities,
net of acquisition
Accounts receivable (41.9) (88.4)
Inventories (317.7) (31.4)
Other current assets (10.5) 1.3
Accounts payable and accrued
liabilities 154.4 163.4
Customer advance from Boeing 400.0 200.0
Net cash provided by
operating activities $272.0 $223.8
Investing Activities
Purchase of property, plant and
equipment $(343.2) $(144.6)
Acquisition of business, net of cash
acquired (145.4) (885.7)
Financial derivatives 4.7 -
Transition payments 10.0 -
Proceeds from sale of assets 0.2 -
Net cash (used in) investing
activities $(473.7) $(1,030.3)
Financing Activities
Proceeds from short-term debt $85.0 $-
Payments on short-term debt (85.0) -
Proceeds from long-term debt - 700.0
Principal payments on debt (124.0) (5.0)
Debt issuance costs 0.8 (21.4)
Pool of windfall tax benefits, net 15.4 -
Equity contributions from shareholders - 370.0
Proceeds from IPO 249.3 -
Executive stock investments 1.1 4.2
Net cash provided by
financing activities $142.6 $1,047.8
Effect of exchange rate changes on
cash and cash equivalents 2.1 -
Net (decrease) increase in
cash and cash equivalents
for the period $(57.0) $241.3
Cash and cash equivalents, beginning
of the period 241.3 -
Cash and cash equivalents, end of the
period $184.3 $241.3
Supplemental Information
Interest paid $55.1 $28.1
Income taxes paid $29.3 $8.5
Appreciation of financial instruments $11.4 $4.2
Property acquired through capital
leases $11.5 $26.7
SOURCE Spirit AeroSystems Holdings, Inc.
Contact: Philip Anderson, Investor Relations, +1-316-523-1700, or Sam Marnick, Corporate Communications, +1-316-526-3153, both for Spirit AeroSystems Holdings, Inc.