WICHITA, Kan., Nov. 1 /PRNewswire-FirstCall/ -- Spirit AeroSystems
Holdings, Inc. [NYSE: SPR] reported increases in its third quarter financial
results and updated its 2007 financial guidance and provided 2008 guidance,
citing strong global commercial aerospace markets and improved operational
efficiencies.
Table 1. Summary Financial Results
($'s in Millions, except per 3rd Quarter Nine Months
share data) 2007 2006 Change 2007 2006 Change
Revenues $968 $830 17% $2,880 $2,356 22%
Operating Income $107 $78 38% $313 $184 70%
Operating Income as a %
of Revenues 11.0% 9.3% 170 BPS 10.8% 7.8% 300 BPS
Net Income $84 $34 146% $221 $86 157%
Net Income as a % of
Revenues 8.6% 4.1% 450 BPS 7.7% 3.7% 400 BPS
Earnings per Share (Fully
diluted) $0.60 $0.28 114% $1.59 $0.71 124%
Fully Diluted Weighted
Avg Share Count
(Million) 139.5 121.2 139.2 121.7
Spirit's third quarter net income rose 146 percent to $84 million from $34
million a year ago, and fully diluted earnings per share rose 114 percent to
$0.60 per share from $0.28 per share last year. (Table 1) The company
benefited from a lower effective tax rate during the third quarter 2007. The
lower tax rate contributed $0.09 of diluted earnings per share to the third
quarter results. Revenue for the quarter increased 17 percent to $968 million
from $830 million, and the company's operating margins rose to 11.0 percent
from 9.3 percent last year.
"Strong operating performance continues across the company while we
execute our key development programs and pursue new business opportunities,"
said President and Chief Executive Officer Jeff Turner. "Executing our
backlog of over twenty-three billion dollars remains our top near-term
opportunity to grow profitability and expand operating margins," Turner added.
"The recent delays on the 787 program, while disappointing, represent a short-
term challenge for an enormously successful product that will deliver long-
term value to customers and shareholders," Turner continued. "Additionally,
we are pleased to be named to Boeing's P-8A Poseidon team this quarter. The
U.S. Navy's P-8A program is another example of the value the 737 Next
Generation aircraft brings to customers and demonstrates, yet again, the
adaptability of the airframe for both commercial and military applications.
Looking forward, we will continue to invest in key growth programs and
diversification while improving our financial performance."
Spirit's backlog during the quarter increased from $21.8 billion to $23.5
billion, as combined net orders for 528 aircraft at Boeing and Airbus outpaced
their combined deliveries of 208 aircraft. Spirit's backlog is calculated
based on contractual prices for products and expected delivery volumes from
the published firm order backlogs of both Boeing and Airbus.
Spirit updated its contract profitability estimates during the third
quarter of 2007, which resulted in no net changes to contract estimates.
Third quarter 2006 results included a $17 million favorable cumulative catch-
up adjustment.
Cash flow from operations for the third quarter was $42 million, despite
increases in inventory on the 787 program and other development programs.
Investments in capital expenditures totaled $69 million in the quarter. Half
of the investment in property, plant and equipment supported the start-up of
the 787 program.
Cash balances at the end of the quarter were $105 million, down $22
million from the end of the second quarter 2007, reflecting planned investment
in Spirit's core business, primarily for the 787 program. Debt balances at
the end of the third quarter were $605 million, down slightly from second
quarter levels. (Table 2)
Table 2. Cash Flow and Liquidity
3rd Quarter Nine Months
($'s in Millions) 2007 2006 2007 2006
Cash Flow from Operations $42 $113 $107 $326
Purchases of Property, Plant &
Equipment ($69) ($53) ($228) ($233)
As of As of
Sept 27, Dec 31,
Liquidity 2007 2006
Cash $105 $184
Current Portion of Long-term Debt
plus Long-term Debt $605 $618
Financial Outlook
The company's financial guidance for 2007 is updated and 2008 guidance is
provided incorporating the benefit of higher production volumes on large
commercial aircraft programs. The company is forecasting approximately 18 to
20 percent growth in revenues in 2008 and increasing operating margins from
year-to-year reflecting the company's solid operating performance across
business segments. Guidance for 2007 reflects a lower effective tax rate
consistent with reported results as of nine months ending September 27, 2007.
Financial guidance for 2007 and 2008 incorporates 787 program schedule changes
resulting from the delay of aircraft certification and entry into service
announced by The Boeing Company on October 10, 2007. Table 3 summarizes the
company's financial outlook.
Table 3. Financial Outlook
2007 Guidance 2008 Guidance
Revenues $3.9B - $4.0B ~$4.7B
Operating Income $415M - $425M
Operating Income as a % of Revenues 10.4% - 10.8%
Depreciation and Amortization $115M - $120M
Earnings Per Share (Fully Diluted) $2.10 - $2.15 $2.30 - $2.40
Effective Tax Rate + / - 29.5% 33% - 34%
Cash Flow from Operations* + / - $250M
Capital Expenditures + / - $300M
Customer Reimbursement of Capital
Expenditures ~$45M
Average Fully Diluted Shares Outstanding 139.5M - 140.0M
* Includes $40-$50 million of customer advances for capital expenditures
2007 Outlook
Spirit's 2007 revenue expectations are now expected to be between $3.9 and
$4.0 billion, or approximately 23 percent higher than 2006. The new guidance
is a change from the previous guidance range of between $4.0 and $4.1 billion.
The 2007 revenue projection is based on previously issued 2007 Boeing and
Airbus delivery guidance of 440 and 440-450 aircraft, respectively, and
includes fewer initial deliveries of Spirit products to Boeing on the 787
program.
Spirit's 2007 operating margins are now expected to be in the range of
10.4 to 10.8 percent, and 2007 fully diluted EPS guidance is increased to
between $2.10 and $2.15 per share as benefits from cost reductions,
productivity initiatives and a lower than expected effective tax rate improve
profitability.
2007 cash flow from operations is now expected to be +/- $250 million
which includes working capital spending for the new 787 program. Fiscal 2007
capital expenditures are unchanged and are expected to be +/- $300 million.
Approximately 50 percent of the capital expenditures will be utilized for the
installation of production capacity for the new 787 program. Spirit
anticipates approximately $45 million of customer reimbursement to partially
offset these capital expenditures.
2007 Depreciation and Amortization expenses are unchanged and forecasted
to be between $115 and $120 million, while 2007 Research and Development
expense is expected to be approximately $55 to $60 million. SG&A expense for
2007 is now expected to be approximately $195 to $200 million.
2008 Outlook
Spirit's 2008 revenue is expected to be approximately $4.7 billion, or 18
to 20 percent higher than 2007 revenues. The 2008 revenue projection is based
on previously issued 2008 Boeing delivery guidance of 480-490 aircraft and
includes internal Spirit forecasts for Airbus and other products. Spirit's
revenue guidance for 2008 assumes delivery of approximately forty-five 787
ship sets from Spirit to Boeing based on aircraft certification and entry into
service occurring during the fourth quarter 2008. A reduction in Spirit's
2008 787 ship set delivery forecast would likely result in lower than
forecasted revenues and earnings for the year.
Earnings per share for 2008 is expected to be between $2.30 and $2.40 per
share as increased volumes on large commercial aircraft programs and improved
operating efficiencies increase profitability.
Cash from Operations and Capital Expenditure guidance will be provided
when the company reports fourth quarter and full-year 2007 results in early
February 2008.
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 787 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.
Appendix
Segment Results
Fuselage Systems
Fuselage Systems segment revenue for the third quarter was $434 million,
up 7 percent over the same period last year as deliveries on the 747 and 777
programs increased. Fuselage Systems posted segment operating margins of 18.0
percent during the third quarter 2007, down from 20.4 percent in the same
period of 2006. A favorable cumulative catch-up adjustment of $9 million was
recognized in the segment for the third quarter of 2006.
Propulsion Systems
Propulsion Systems segment revenue for the third quarter was $279 million,
up 23 percent over the same period last year as deliveries increased in
support of primary customer production volume. Propulsion Systems posted
segment operating margins of 16.5 percent for the third quarter 2007, down
from 18.2 percent in the same period of 2006. A favorable cumulative catch-up
adjustment of $7 million was recognized in the segment for the third quarter
of 2006.
Wing Systems
Wing Systems segment revenue for the third quarter was $252 million, up 31
percent over the same period last year as deliveries increased in support of
primary customer production volume. Wing Systems posted segment operating
margins of 9.3 percent for the third quarter 2007, up from 6.0 percent in the
same period of 2006 as R&D expense on the 787 program declined. A favorable
cumulative catch-up adjustment of $1 million was recognized in the segment for
the third quarter of 2006.
Table 4. Segment Reporting
3rd Quarter Nine Months
($'s in Millions,
except margin
percent) 2007 2006 Change 2007 2006(1) Change
Segment Revenues
Fuselage Systems $434.3 $405.9 7.0% $1,329.2 $1,174.1 13.2%
Propulsion
Systems $278.9 $227.1 22.8% $798.5 $668.8 19.4%
Wing Systems $251.5 $192.2 30.9% $738.1 $491.3 50.2%
All Other $2.8 $4.5 (37.8%) $14.6 $21.7 (32.7%)
Total Segment
Revenues $967.5 $829.7 16.6% $2,880.4 $2,355.9 22.3%
Segment Earnings from
Operations
Fuselage Systems $78.1 $82.8 (5.7%) $243.2 $208.3 16.8%
Propulsion
Systems $45.9 $41.3 11.1% $130.2 $100.4 29.7%
Wing Systems $23.5 $11.6 102.6% $75.1 $30.6 145.4%
All Other $0.3 $1.2 (75.0%) $1.8 $3.3 (45.5%)
Total Segment
Operating Earnings $147.8 $136.9 8.0% $450.3 $342.6 31.4%
Unallocated
Corporate
SG&A Expense ($39.9) ($57.9) 31.1% ($134.3) ($154.6) 13.1%
Unallocated
Research &
Development Expense ($1.3) ($1.5) 13.3% ($3.5) ($3.9) 10.3%
Total Earnings from
Operations $106.6 $77.5 37.5% $312.5 $184.1 69.7%
Segment Operating
Earnings as % of
Revenues
Fuselage Systems 18.0% 20.4% (240) BPS 18.3% 17.7% 60 BPS
Propulsion
Systems 16.5% 18.2% (170) BPS 16.3% 15.0% 130 BPS
Wing Systems 9.3% 6.0% 330 BPS 10.2% 6.2% 390 BPS
All Other 10.7% 26.7% (1600) BPS 12.3% 15.2% (290) BPS
Total Segment
Operating Earnings
as % of Revenues 15.3% 16.5% (120) BPS 15.6% 14.5% 110 BPS
Total Operating
Earnings as % of
Revenues 11.0% 9.3% 170 BPS 10.8% 7.8% 300 BPS
(1) Includes Spirit Europe since acquisition on April 1, 2006
Spirit Ship Set Deliveries
(BASED ON FUSELAGE DELIVERIES)
2006 Spirit AeroSystems Deliveries
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 06
B737 64 77 84 77 302
B747 3 3 3 4 13
B767 3 3 3 3 12
B777 14 16 16 19 65
Total 84 99 106 103 392
A320 0 81 74 86 241
A330/340 0 33 17 23 73
A380 0 4 0 0 4
Total(1) 0 118 91 109 318
Hawker 850XP(1) 0 12 15 24 51
Total Spirit 84 229 212 236 761
(1) Deliveries associated with Airbus and Hawker products were acquired
with Spirit Europe on April 1, 2006.
2007 Spirit AeroSystems Deliveries
1st Qtr 2nd Qtr 3rd Qtr
B737 83 85 84
B747 5 4 5
B767 3 4 3
B777 21 21 21
B787 0 1 0
Total 112 115 113
A320 93 84 91
A330/340 22 21 22
A380 0 0 2
Total 115 105 115
Hawker 850XP 16 15 17
Total Spirit 243 235 245
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations (unaudited)
For the Three For the Nine
Months Ended Months Ended
September September September September
27, 28, 27, 28,
2007 2006 2007 2006
($ in millions, except per share data)
Net Revenues $967.5 $829.7 $2,880.4 $2,355.9
Operating costs and
expenses:
Cost of sales 804.7 677.7 2,388.2 1,926.7
Selling, general and
administrative 42.9 59.9 142.3 160.0
Research and development 13.3 14.6 37.4 85.1
Total Costs and Expenses 860.9 752.2 2,567.9 2,171.8
Operating Income 106.6 77.5 312.5 184.1
Interest expense and financing
fee amortization (9.7) (11.9) (28.1) (34.8)
Interest income 8.0 6.9 22.8 20.9
Other income, net 1.3 0.7 5.1 3.6
Income From Continuing
Operations Before Income
Taxes 106.2 73.2 312.3 173.8
Income tax provision (22.6) (39.2) (90.9) (87.6)
Net Income $83.6 $34.0 $221.4 $86.2
Earnings per share
Basic $0.61 $0.30 $1.65 $0.76
Shares 136.7 114.0 133.8 113.9
Diluted $0.60 $0.28 $1.59 $0.71
Shares 139.5 121.2 139.2 121.7
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
September 27, December 31,
2007 2006
(unaudited)
($ in millions)
Current assets
Cash and cash equivalents $105.4 $184.3
Accounts receivable, net 247.2 200.2
Other receivable 92.3 43.0
Inventory, net 1,198.4 882.2
Prepaid expenses 14.8 20.8
Income tax receivable - 21.7
Other current assets 59.6 68.3
Total current assets 1,717.7 1,420.5
Property, plant and equipment, net 937.7 773.8
Long-term receivable 141.0 191.5
Pension assets 231.5 207.3
Other assets 138.1 129.1
Total assets $3,166.0 $2,722.2
Current liabilities
Accounts payable $374.9 $339.1
Accrued expenses 229.2 198.5
Current portion of long-term debt 22.8 23.9
Other current liabilities 19.8 8.2
Total current liabilities 646.7 569.7
Long-term debt 582.5 594.3
Advance payments 638.5 587.4
Pension obligation 56.6 53.7
Other liabilities 101.7 58.1
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, 102,563,955
and 63,345,834 issued and outstanding,
respectively 1.0 0.6
Common stock, Class B par value $0.01,
150,000,000 shares authorized, 36,890,084
and 71,351,347 shares issued and
outstanding, respectively 0.4 0.7
Additional paid-in capital 917.2 858.7
Accumulated other comprehensive income 74.0 72.5
Retained earnings / (deficit) 147.4 (73.5)
Total shareholders' equity 1,140.0 859.0
Total liabilities and
shareholders' equity $3,166.0 $2,722.2
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flow (unaudited)
For the Nine For the Nine
Months Ended Months Ended
September 27, September 28,
2007 2006
($ in millions)
Operating activities
Net income $221.4 $86.2
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation expense 67.1 30.3
Amortization expense 5.7 6.2
Accretion of long-term receivable (16.0) (15.3)
Employee stock compensation expense 26.8 40.8
Excess tax benefits from share-
based payment arrangements (32.9) -
Loss on disposition of assets 0.4 -
Deferred taxes 3.8 -
Changes in assets and liabilities,
net of acquisition
Accounts receivable (48.0) (63.2)
Inventory, net (312.6) (171.5)
Other current assets 6.1 (6.1)
Accounts payable and accrued
liabilities 18.7 142.0
Customer advances 93.6 300.0
Deferred revenue and other
deferred credits 36.4 -
Other 36.1 (23.7)
Net cash provided by
operating activities 106.6 325.7
Investing Activities
Purchase of property, plant and equipment (228.0) (233.4)
Proceeds from sale of assets 0.2 -
Acquisition of business, net of cash
required - (135.4)
Long-term receivable 22.8 -
Financial derivatives 3.1 3.1
Other (1.3) -
Net cash (used in) investing
activities (203.2) (365.7)
Financing Activities
Principal payments of debt (14.4) (10.2)
Excess tax benefits from share-based
payment arrangements 32.9 -
Equity issuance costs - (3.4)
Executive stock
investments/(repurchases) (1.0) 1.1
Net cash provided by (used
in) financing activities 17.5 (12.5)
Effect of exchange rate changes on
cash and cash equivalents 0.2 0.2
Net (decrease) in cash and
cash equivalents for the
period (78.9) (52.3)
Cash and cash equivalents, beginning
of the period 184.3 241.3
Cash and cash equivalents, end of the
period $105.4 $189.0
SOURCE Spirit AeroSystems Holdings, Inc.
Contact: Investor Relations, Phil Anderson, +1-316-523-1797, or Media, Debbie Gann, +1-316-519-7340, both of Spirit AeroSystems Holdings, Inc.