- Second Quarter 2008 Revenues grew 11 percent to $1.1 billion
- Operating Income grew 33 percent as Operating Margins expanded to 12.8
percent
- Fully Diluted Earnings Per Share increased 27 percent to $0.62 per
share
- Total Backlog increased 9 percent to approximately $30 billion
WICHITA, Kansas, July 31 /Xinhua-PRNewswire/ -- Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported second quarter 2008 financial results reflecting revenue and earnings growth across the company as ship set deliveries for large commercial aircraft increased and lower period expenses were realized.
Spirit's second quarter 2008 revenues increased to $1.1 billion, up 11 percent from the same period last year. Operating income increased 33 percent to $136 million, up from $102 million in the same period a year ago as revenues increased and research and development costs and SG&A expenses declined. Net income was $86 million, or $0.62 per fully diluted share, up 27 percent from $68 million, or $0.49 per fully diluted share, in the same period of 2007 (Table 1).
Table 1. Summary Financial Results
($'s in Millions, except per 2nd Quarter Six Months
share data) 2008 2007 Change 2008 2007 Change
Revenues $1,062 $959 11% $2,099 $1,913 10%
Operating Income $136 $102 33% $266 $206 29%
Operating Income as a % of
Revenues 12.8% 10.6% 220 BPS 12.7% 10.8% 190 BPS
Net Income $86 $68 27% $172 $138 25%
Net Income as a % of
Revenues 8.1% 7.1% 100 BPS 8.2% 7.2% 100 BPS
Earnings per Share (Fully
diluted) $0.62 $0.49 27% $1.23 $0.99 24%
Fully Diluted Weighted Avg
Share Count (Millions) 139.8 139.2 139.8 139.2
"We delivered a record 270 ship sets to our customers in the second quarter while we rebalanced 787 production, made progress on new development programs, and won new business," said President and Chief Executive Officer Jeff Turner. "Revenues increased and company-wide operating margins and net income expanded as we continue to execute our business plan and improve performance across the company," Turner continued. "We have made good progress in establishing the Spirit brand across the aerospace industry in our three years as an independent company. The recent A350 XWB wins, along with our new business jet and defense programs, demonstrate the value we bring to the industry in terms of aerostructures design, manufacturing, and product support capability," Turner added. "Additionally, we are pleased to be expanding Spirit's U.S. operations by establishing a new design and manufacturing facility in the State of North Carolina. This facility will provide Spirit the capacity and capability to execute new programs and serve as an important base for future growth."
"As for the outlook of the commercial aerospace market," Turner maintained, "we absolutely believe that we operate in a global market which will continue to see strong long-term growth. While today's countervailing market forces create some uncertainty about the near-term, our backlog continues to expand and our strategy is squarely focused on being the market leader in terms of total value creation for our customers and our shareholders over the long-term."
Spirit's backlog during the quarter increased 9 percent from $27.5 billion to $29.9 billion, as combined 2008 year-to-date net orders for 962 aircraft at Boeing and Airbus outpaced their combined deliveries of 486 aircraft. Spirit's backlog is calculated based on contractual prices for products and volumes from the published firm order backlogs of Boeing and Airbus along with firm orders from other customers.
Spirit updated its contract profitability estimates during the second quarter of 2008, resulting in a $4 million favorable cumulative catch-up adjustment reflected mainly in the Fuselage Systems segment, compared to a $3 million favorable cumulative catch-up adjustment for the second quarter of 2007 reflected mainly in the Propulsion Systems segment.
Cash flow from operations was $7 million for the second quarter of 2008, compared to $14 million for the second quarter of 2007, as the company received additional cash advances from Boeing associated with the 787 program; continued to invest in new development programs; and made cash tax payments of $82 million (Table 2).
Table 2. Cash Flow and Liquidity
2nd Quarter Six Months
($'s in Millions) 2008 2007 2008 2007
Cash Flow from Operations $7 $14 $78 $65
Purchases of Property, Plant &
Equipment ($54) ($72) ($119) ($159)
June 26, December 31,
Liquidity 2008 2007
Cash $147 $133
Current Portion of Long-term Debt
plus Long-term Debt $595 $595
Cash balances at the end of the second quarter were $147 million, up
$14 million from year-end 2007. Debt balances at the end of the second quarter were $595 million, unchanged from year-end 2007 as term loan borrowings associated with Spirit Malaysia were offset by planned debt payments. The company repaid $75 million in outstanding borrowings against its credit line on April 2, 2008. At the end of the second quarter of 2008,
$636 million of the $650 million revolving credit facility was undrawn. Approximately $14 million of the credit facility continues to be used for financial letters of credit.
The company's long-term credit ratings remain unchanged with a BB rating at Standard & Poor's and a Ba3 rating at Moody's.
2008 Outlook
Spirit revenue guidance for the full-year 2008 remains unchanged and is expected to be approximately $4.4 billion based on 2008 Boeing delivery guidance of 475-480 aircraft, 2008 Airbus delivery guidance of approximately 470 aircraft, and internal Spirit forecasts for other products as well as revenue associated with non-recurring development work.
Fully diluted earnings per share guidance for 2008 has increased to between $2.35 and $2.45 to reflect improved performance in the first half of 2008 and current expectations for the second half of 2008.
Cash flow from operations full-year guidance is unchanged and is expected to be approximately $400 million. Capital expenditures guidance for 2008 is unchanged and is expected to be approximately $275 million (Table 3).
Table 3. Financial Outlook
2008 Guidance
Revenues ~$4.4 billion
Earnings Per Share (Fully Diluted) $2.35 - $2.45
Effective Tax Rate (% Pre-Tax Earnings) ~33%*
Cash Flow From Operations ~$400 million
Capital Expenditures ~$275 million
Capital Reimbursement ~$116 million
* Effective tax rate guidance assumes the benefit of a retroactive
extension to the U.S. research tax credit.
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 view 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; 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; the success and timely progression of Boeing's new B787 and Airbus' new A350 aircraft programs, including receipt of necessary regulatory approvals; 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 or reduced orders by their customers; the impact of continuing high oil prices on the commercial aviation market; 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, such as U.S. export control laws, the Foreign Corrupt Practices Act, environmental laws and agency regulations, both in the U.S. and abroad; the effect of new commercial and business aircraft development programs, and the resulting timing and resource requirements that may be placed on us; the cost and availability of raw materials and purchased components; our ability to recruit and retain highly skilled employees and our relationships with the unions representing many of our employees; spending by the United States 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 2008 were
$493 million, up almost 10 percent over the same period last year, as deliveries to Boeing increased. Operating margin for the second quarter of 2008 was 18.7 percent, compared to 18.3 percent in the second quarter of 2007, as productivity gains on the 737 program generated a favorable cumulative
catch-up adjustment and more than offset higher R&D spending in the current quarter.
Propulsion Systems
Propulsion Systems segment revenues for the second quarter of 2008 were $297 million, up 14.5 percent over the same period last year as deliveries to Boeing increased. Operating margin for the second quarter of 2008 was 16.6 percent compared to 17.0 percent in the second quarter of 2007, as favorable cumulative catch-up adjustments in the prior year quarter were not repeated in the current quarter.
Wing Systems
Wing Systems segment revenues for the second quarter of 2008 were
$264 million, up 7.7 percent over the same period last year, as deliveries to Boeing increased. Operating margin for the second quarter of 2008 was 12.4 percent compared to 11.6 percent in the second quarter of 2007, reflecting improved operating efficiencies and lower R&D expenses.
Table 4. Segment Reporting
($'s in Millions,
except margin 2nd Quarter Six Months
percent) 2008 2007 Change 2008 2007 Change
Segment Revenues
Fuselage
Systems $493.4 $449.7 9.7% $985.4 $894.9 10.1%
Propulsion
Systems $296.9 $259.2 14.5% $571.6 $519.6 10.0%
Wing Systems $264.4 $245.4 7.7% $526.7 $486.6 8.2%
All Other $7.4 $4.5 64.4% $14.8 $11.8 25.4%
Total Segment
Revenues $1,062.1 $958.8 10.8% $2,098.5 $1,912.9 9.7%
Segment Earnings
from Operations
Fuselage
Systems $92.4 $82.1 12.5% $181.5 $165.1 9.9%
Propulsion
Systems $49.3 $44.0 12.0% $93.8 $84.3 11.3%
Wing Systems $32.9 $28.4 15.8% $65.4 $51.6 26.7%
All Other ($0.3) $0.7 (142.9%) $0.1 $1.5 (93.3%)
Total Segment
Operating
Earnings $174.3 $155.2 12.3% $340.8 $302.5 12.7%
Unallocated
Corporate
SG&A Expense ($38.0) ($51.9) (26.8%) ($74.1) ($94.4) (21.5%)
Unallocated
Research &
Development
Expense ($0.2) ($1.2) (83.3%) ($0.4) ($2.2) (81.8%)
Total Earnings
from
Operations
$136.1 $102.1 33.3% $266.3 $205.9 29.3%
Segment Operating
Earnings as % of
Revenues
Fuselage
Systems 18.7% 18.3% 40 BPS 18.4% 18.4% -
Propulsion
Systems 16.6% 17.0% (40) BPS 16.4% 16.2% 20 BPS
Wing Systems 12.4% 11.6% 80 BPS 12.4% 10.6% 180 BPS
All Other (4.1%) 15.6% (1,970) BPS 0.7% 12.7% (1,200) BPS
Total Segment
Operating
Earnings as %
of Revenues 16.4% 16.2% 20 BPS 16.2% 15.8% 40 BPS
Total Operating
Earnings as %
of Revenues 12.8% 10.6% 220 BPS 12.7% 10.8% 190 BPS
Spirit Ship Set Deliveries
(One Ship Set equals One Aircraft)
2007 Spirit AeroSystems Deliveries
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 2007
B737 83 85 84 79 331
B747 5 4 5 4 18
B767 3 4 3 3 13
B777 21 21 21 20 83
B787* 0 1 0 0 1
Total 112 115 113 106 446
A320 Family 93 84 91 91 359
A330/340 22 21 22 20 85
A380 0 0 2 3 5
Total 115 105 115 114 449
Hawker 850XP 16 15 17 20 68
Total Spirit 243 235 245 240 963
* Full-Revenue Units Only, Does not include Static and Fatigue test units
2008 Spirit AeroSystems Deliveries
1st Qtr 2nd Qtr YTD 2008
B737 93 95 188
B747 4 7 11
B767 3 3 6
B777 20 22 42
B787* 1 1 2
Total 121 128 249
A320 Family 95 95 190
A330/340 24 21 45
A380 4 2 6
Total 123 118 241
Hawker 850XP 15 24 39
Total Spirit 259 270 529
* Full-Revenue Units Only, Does not include Static and Fatigue test units
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations (unaudited)
For the Three For the Six
Months Ended Months Ended
June 26, June 28, June 26, June 28,
2008 2007 2008 2007
($ in millions, except per share data)
Net Revenues $1,062.1 $958.8 $2,098.5 $1,912.9
Operating costs and expenses:
Cost of sales 874.5 788.7 1,731.8 1,583.5
Selling, general and
administrative 40.9 54.3 80.0 99.4
Research and development 10.6 13.7 20.4 24.1
Total Costs and Expenses 926.0 856.7 1,832.2 1,707.0
Operating Income 136.1 102.1 266.3 205.9
Interest expense and financing
fee amortization (10.5) (9.5) (19.6) (18.4)
Interest income 5.0 7.2 10.7 14.8
Other income, net 0.2 1.8 1.6 3.8
Income From Continuing
Operations Before Income
Taxes 130.8 101.6 259.0 206.1
Income tax provision (44.4) (33.6) (87.4) (68.3)
Net Income $86.4 $68.0 $171.6 $137.8
Earnings per share
Basic $0.63 $0.50 $1.25 $1.04
Shares 137.0 134.9 136.9 132.3
Diluted $0.62 $0.49 $1.23 $0.99
Shares 139.8 139.2 139.8 139.2
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets (unaudited)
June 26, December 31,
2008 2007
($ in millions)
Current assets
Cash and cash equivalents $147.4 $133.4
Accounts receivable, net 234.3 159.9
Current portion of long-term receivable 110.8 109.5
Inventory, net 1,652.8 1,342.6
Prepaids 15.3 14.2
Other current assets 74.9 83.2
Total current assets 2,235.5 1,842.8
Property, plant and equipment, net 1,028.8 963.8
Long-term receivable 50.8 123.0
Pension assets 341.2 318.7
Other assets 89.6 91.6
Total assets $3,745.9 $3,339.9
Current liabilities
Accounts payable $404.9 $362.6
Accrued expenses 172.3 182.6
Current portion of long-term debt 8.9 16.0
Advance payments, short-term 159.8 67.6
Deferred revenue, short-term 40.0 42.3
Other current liabilities 13.8 3.9
Total current liabilities 799.7 675.0
Long-term debt 586.2 579.0
Advance payments, long-term 745.1 653.4
Other liabilities 171.4 165.9
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, 103,201,380
and 102,693,058 issued and outstanding,
respectively 1.0 1.0
Common stock, Class B par value $0.01,
150,000,000 shares authorized, 36,713,632
and 36,826,434 shares issued and
outstanding, respectively 0.4 0.4
Additional paid-in capital 931.9 924.6
Accumulated other comprehensive income 113.9 117.7
Retained earnings 396.3 222.9
Total shareholders' equity 1,443.5 1,266.6
Total liabilities and shareholders'
equity $3,745.9 $3,339.9
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
For the Six For the Six
Months Ended Months Ended
June 26, 2008 June 28, 2007
($ in millions)
Operating activities
Net Income $171.6 $137.8
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation expense 57.8 43.7
Amortization expense 4.6 3.8
Accretion of long-term receivable (9.3) (10.8)
Employee stock compensation expense 7.5 21.0
Excess tax benefit from share-based
payment arrangements - (34.5)
Loss from the ineffectiveness of hedge
contracts 0.6 -
Gain (Loss) on disposition of assets (0.4) 0.1
Deferred taxes 0.5 13.7
Pension and other post-retirement
benefits, net (14.3) (14.6)
Changes in assets and liabilities
Accounts receivable (52.9) (44.9)
Inventory, net (310.2) (212.4)
Accounts payable and accrued
liabilities 43.3 28.4
Customer advances 183.9 54.2
Income taxes payable 10.3 38.5
Deferred revenue and other deferred
credits 0.3 36.2
Other (14.9) 4.4
Net cash provided by operating
activities 78.4 64.6
Investing Activities
Purchase of property, plant and equipment (119.4) (159.2)
Proceeds from sale of assets 1.7 0.2
Long-term receivable 56.5 11.4
Financial derivatives 0.8 2.5
Investment in joint venture (1.0) -
Net cash (used in) investing
activities (61.4) (145.1)
Financing Activities
Proceeds from revolving credit facility 75.0 -
Payments on revolving credit facility (75.0) -
Proceeds from issuance of debt 9.4 -
Proceeds from government grants 1.4 -
Principal payments of debt (7.9) (10.8)
Debt issuance costs (6.8) -
Excess tax benefit from share-based
payment arrangements - 34.5
Executive stock repurchase - (1.0)
Net cash provided by (used in)
financing activities (3.9) 22.7
Effect of exchange rate changes on cash
and cash equivalents 0.9 0.5
Net increase (decrease) in cash
and cash equivalents for the
period 14.0 (57.3)
Cash and cash equivalents, beginning of
the period 133.4 184.3
Cash and cash equivalents, end of the
period $147.4 $127.0