WICHITA, Kan., Aug. 3 /PRNewswire-Asia/ --
-- Second Quarter 2010 Revenues of $1.056 billion
-- Operating Income of $86 million; Operating Margins of 8.1 percent
-- Fully Diluted Earnings Per Share of $0.39 per share
-- Cash and Cash Equivalents were $118 million
-- Total backlog of approximately $27.2 billion
Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported second quarter 2010 financial results reflecting solid operating performance.
Spirit's second quarter 2010 revenues were $1.056 billion, down slightly from $1.060 billion for the same period of 2009, driven by model mix and volume. Operating income increased to $86 million, compared to ($10) million for the same period in 2009. Net income for the quarter increased to $55 million, or $0.39 per fully diluted share, compared to ($8) million, or ($0.06) per fully diluted share, in the same period of 2009.
Second quarter pre-tax earnings were reduced by approximately ($19) million for the quarter, or ($0.10) per share, related to the award of stock to eligible union employees as part of the new 10-year agreement with Spirit's largest labor union, the International Association of Machinists and Aerospace Workers (IAM). Results in the comparable quarter of 2009 were impacted by several unusual charges which also resulted in a tax benefit. (Table 1)
(All amounts in U.S. dollars unless otherwise specified.)
Table 1. Summary Financial Results (unaudited)
-----------------------------------------------
2nd Quarter
($ in millions, except per share
data) 2010 2009 Change
Revenues $1,056 $1,060 ~0%
Operating Income $86 ($10) NM
Operating Income as a % of
Revenues 8.1% (1.0%) NM
Net Income $55 ($8) NM
Net Income as a % of Revenues 5.2% (0.8%) NM
Earnings per Share (Fully
Diluted) $0.39 ($0.06) NM
Fully Diluted Weighted Avg Share
Count 140.4 138.0
Six Months
($ in millions, except per share
data) 2010 2009 Change
Revenues $2,099 $1,947 8%
Operating Income $179 $87 104%
Operating Income as a % of
Revenues 8.5% 4.5% 400 BPS
Net Income $111 $54 103%
Net Income as a % of Revenues 5.3% 2.8% 250 BPS
Earnings per Share (Fully
Diluted) $0.79 $0.39 103%
Fully Diluted Weighted Avg Share
Count 140.6 139.9
"We generated solid operating performance across the company," said President and Chief Executive Officer Jeff Turner. "With our core businesses executing well, continued progress on our development programs, and our team for the future intact, we have the positive momentum needed to fulfill our long-term value creation strategy."
"Underscoring our ongoing diversification, on July 1st, we were pleased to celebrate the grand opening of Spirit North Carolina in Kinston, NC. A significant milestone for Spirit, this facility will initially focus on the design and manufacture of the Airbus A350 XWB Section 15 fuselage and the forward wing spar employing state-of-the-art composite technology and processes. We're excited about our continued journey helping build the next generation of commercial aircraft, as well as our growing partnership with Airbus and the State of North Carolina," Turner added.
"Looking forward, the commercial aerospace market continues to strengthen, with demand for our core products growing. While certain segments of the business jet market are still a concern and several significant development milestones are ahead of us, our priority will continue to be on solid execution as we deliver on our customer commitments to ensure we meet our company's potential," Turner concluded.
Spirit's backlog at the end of the second quarter of 2010 was $27.2 billion, down approximately three percent, as deliveries exceeded orders. 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.
Spirit contract profitability estimates during the second quarter of 2010 resulted in no net contract adjustments. In comparison, Spirit recognized a $33 million unfavorable cumulative catch-up adjustment for the second quarter of 2009.
Cash flow from operations was a ($7) million use of cash for the second quarter of 2010, compared to a ($67) million use of cash for the second quarter of 2009. The current quarter improvement is largely the result of the slowing of new program inventory growth; net favorable accounts payable and accounts receivable results, which were largely the result of timing; and additional receipts of deferred revenue. (Table 2)
Table 2. Cash Flow and Liquidity
2nd Quarter Six Months
----------- ----------
($ in millions) 2010 2009 2010 2009
--------------- ---- ---- ---- ----
Cash Flow from Operations ($7) ($67) ($117) ($216)
Purchases of Property, Plant
& Equipment ($61) ($52) ($131) ($107)
July 1, December 31,
Liquidity 2010 2009
---- ----
Cash $118 $369
Total Debt $893 $894
---------- ---- ----
Cash balances at the end of the second quarter 2010 were $118 million and debt balances were $893 million. At the end of the second quarter, the company's $409 million revolving credit facility remained undrawn, with approximately $19 million of the credit facility reserved for financial letters of credit.
The company's credit ratings remained unchanged at the end of the second quarter with a BB rating at Standard & Poor's and a Ba3 rating at Moody's.
2010 Outlook
Spirit revenue guidance for the full-year 2010 remains unchanged and is expected to be between $4.0 and $4.2 billion based on Boeing's 2010 delivery guidance of 460 - 465 aircraft; anticipated B787 deliveries; expected Airbus deliveries in 2010 of approximately 498 aircraft; internal Spirit forecasts for non-OEM production activity and other customers; and foreign exchange rates consistent with those in the first half of 2010.
Fully diluted earnings per share guidance for 2010 remains unchanged and is expected to be between $1.50 and $1.70 per share.
Cash flow from operations, less capital expenditures, is expected to be approximately ($250) million use of cash in the aggregate, with capital expenditures of approximately $325 million. Anticipated capital expenditures in 2010 include approximately $100 million of tooling associated with the Airbus A350 XWB program. Cash flow from operations, less capital expenditures, is expected to be significantly improved in 2011.
The effective tax rate, forecasted to be approximately 27 percent for 2010, remains unchanged. This assumes the benefit attributable to extending the U.S. research tax credit. (Table 3)
Risk to our financial guidance includes, among other factors: higher than
forecasted non-recurring and recurring costs on our development programs;
mid-range business jet market risks; our ability to achieve anticipated
productivity and cost improvements; and the ability to resolve significant
787 program claims with Boeing.
Table 3. Financial 2009 2010
Outlook Actual Guidance
------------------- ------ --------
Revenues $4.1 billion $4.0 - $4.2 billion
Earnings Per Share
(Fully Diluted) $1.37 $1.50 - $1.70
Effective Tax Rate 29.7% ~27% *
Cash Flow from
Operations ($14) million ~$75 million
Capital Expenditures $228 million ~$325 million
Customer Reimbursement $115 million N/A**
---------------------- ------------- -----
* Effective tax rate guidance, among other factors, assumes the benefit attributable to extending the U.S. research tax credit (Assumes ~2.5% benefit).
** Although calculations for years through 2009 included customer reimbursements, these payments concluded in December 2009.
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, or the negative thereof, unless the context requires otherwise. 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 those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: our ability to continue to grow our business and execute our growth strategy, including the timing and execution of new programs; our ability to perform our obligations and manage costs related to our new commercial and business aircraft development programs and the related recurring production; potential 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 negatively impacted by continuing weakness in the global economy and economic challenges facing commercial airlines, and by a lack of business and consumer confidence and the impact of continuing instability in the global financial and credit markets, including, but not limited to, sovereign debt concerns in Europe; the inability to resolve significant claims with Boeing related to non-recurring and recurring costs on the B787 program; 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 certification and delivery of Boeing's new B787 and Airbus' new A350 XWB 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 and Airbus, our two major customers, and other customers and the risk of nonpayment by such customers; any adverse impact on Boeing's and Airbus' production of aircraft resulting from cancellations, deferrals or reduced orders by their customers or from labor disputes or acts of terrorism; 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; 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 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 possibility that our cash flows and borrowing facilities may not be adequate for our additional capital needs or for payment of interest on and principal of our indebtedness and the possibility that we may be unable to borrow additional funds or refinance debt; our exposure under our revolving credit facility to higher interest payments should interest rates increase substantially; the outcome or impact of ongoing or future litigation and regulatory actions; our exposure to potential product liability and warranty claims; and the other factors described under Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any 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 2010 were $515.2 million, down 4.8 percent over the same period last year, driven by model mix and volume. Operating margin for the second quarter of 2010 was 15.7 percent as compared to 11.0 percent during the same period of 2009. During the second quarter of 2009, the segment realized an unfavorable pre-tax $34 million of unusual items.
Propulsion Systems
Propulsion Systems segment revenues for the second quarter of 2010 were $272.0 million, down 2.3 percent over the same period last year, driven by model mix and volume. Operating margin for the second quarter of 2010 was 12.3 percent as compared to 8.3 percent in the second quarter of 2009. During the second quarter of 2009, the segment realized an unfavorable pre-tax $18 million cumulative catch-up adjustment.
Wing Systems
Wing Systems segment revenues for the second quarter of 2010 were $266.9 million, up 13.7 percent over the same period last year, as the current quarter includes additional new program revenues. Operating margin for the second quarter of 2010 was 10.6 percent as compared to (25.1) percent during the same period of 2009, as the previous quarter reflected a $90 million forward-loss on the Gulfstream G250. During the second quarter of 2009, the segment realized a favorable pre-tax $8 million cumulative catch-up adjustment.
Table 4. Segment Reporting (unaudited)
2nd Quarter
-----------
($ in millions) 2010 2009 Change
--------------- ---- ---- ------
Segment Revenues
Fuselage Systems $515.2 $541.2 (4.8%)
Propulsion Systems $272.0 $278.5 (2.3%)
Wing Systems $266.9 $234.7 13.7%
All Other $1.9 $5.2 (63.5%)
---- ---- -------
Total Segment Revenues $1,056.0 $1,059.6 (0.3%)
Segment Earnings from
Operations
Fuselage Systems $80.9 $59.3 36.4%
Propulsion Systems $33.4 $23.2 44.0%
Wing Systems $28.3 ($58.8) 148.1%
All Other ($2.5) ($2.4) (4.2%)
----- ----- ------
Total Segment
Operating Earnings $140.1 $21.3 557.7%
Unallocated Corporate
SG&A ($34.7) ($30.7) (13.0%)
Unallocated Research &
Development ($0.8) ($1.0) 20.0%
Unallocated Cost of
Sales (1) ($18.9) $0.0 NA
------ ---- ---
Total Earnings from
Operations $85.7 ($10.4) 924.0%
Segment Operating
Margins
Fuselage Systems 15.7% 11.0% 470 BPS
Propulsion Systems 12.3% 8.3% 400 BPS
Wing Systems 10.6% (25.1%) 3,570 BPS
All Other (131.6%) (46.2%) (8,540) BPS
-------- ------- ----------
Total Segment
Operating Margins 13.3% 2.0% 1,130 BPS
Total Operating
Margins 8.1% (1.0%) 910 BPS
--------------- --- ------ --------
(unaudited)
Six Months
----------
($ in millions) 2010 2009 Change
--------------- ---- ---- ------
Segment Revenues
Fuselage Systems $1,031.4 $971.7 6.1%
Propulsion Systems $546.4 $505.9 8.0%
Wing Systems $515.8 $455.6 13.2%
All Other $5.7 $13.8 (58.7%)
---- ----- -------
Total Segment Revenues $2,099.3 $1,947.0 7.8%
Segment Earnings from
Operations
Fuselage Systems $156.8 $134.2 16.8%
Propulsion Systems $67.0 $61.9 8.2%
Wing Systems $47.2 ($39.3) 220.1%
All Other ($2.2) ($2.0) (10.0%)
----- ----- -------
Total Segment
Operating Earnings $268.8 $154.8 73.6%
Unallocated Corporate
SG&A ($69.7) ($66.2) (5.3%)
Unallocated Research &
Development ($1.5) ($1.2) (25.0%)
Unallocated Cost of
Sales (1) ($18.9) $0.0 NA
------ ---- ---
Total Earnings from
Operations $178.7 $87.4 104.5%
Segment Operating
Margins
Fuselage Systems 15.2% 13.8% 140 BPS
Propulsion Systems 12.3% 12.2% 10 BPS
Wing Systems 9.2% (8.6%) 1,780 BPS
All Other (38.6%) (14.5%) (2,410) BPS
------- ------- ----------
Total Segment
Operating Margins 12.8% 8.0% 480 BPS
Total Operating
Margins 8.5% 4.5% 400 BPS
--------------- --- --- --------
(1) Charges in the second quarter of 2010 related to the grant of shares to represented employees of the IAM in connection with the ratification of a new ten-year labor contract on June 25, 2010.
Spirit Ship Set Deliveries
(One Ship Set equals One Aircraft)
2009 Spirit AeroSystems Deliveries
1st 2nd 3rd 4th Total
Qtr Qtr Qtr Qtr 2009
---- ---- ---- ---- ------
B737 74 96 93 87 350
B747 3 1 3 4 11
B767 3 3 3 3 12
B777 21 21 21 19 82
B787 2 2 2 5 11
--- --- --- --- ---
Total 103 123 122 118 466
A320
Family 105 101 94 108 408
A330/340 26 23 28 23 100
A380 -- 2 5 4 11
--- --- --- --- ---
Total 131 126 127 135 519
Hawker
850XP 18 13 6 7 44
--- --- --- --- ---
Total
Spirit 252 262 255 260 1,029
=== === === === =====
2010 Spirit AeroSystems Deliveries
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr YTD 2010
---- ---- ---- ---- --------
B737 94 96 190
B747 3 1 4
B767 3 4 7
B777 21 18 39
B787 5 4 9
--- --- ---
Total 126 123 249
A320
Family 102 95 197
A330/340 25 23 48
A380 1 5 6
--- --- ---
Total 128 123 251
Hawker
850XP 5 4 9
--- --- ---
Total
Spirit 259 250 509
=== === ===
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months
Ended
--------------------
July 1, July 2,
2010 2009
-------- --------
($ in millions, except per share data)
Net revenues $1,056.0 $1,059.6
Operating costs and
expenses:
Cost of sales 919.6 1,021.6
Selling, general and
administrative 38.1 34.7
Research and development 12.6 13.7
---- ----
Total operating costs and
expenses 970.3 1,070.0
Operating income (loss) 85.7 (10.4)
Interest expense and
financing fee amortization (13.8) (9.8)
Interest income 0.1 2.0
Other income (expense), net 2.7 4.2
--- ---
Income before income taxes
and equity in net (loss) of
affiliate 74.7 (14.0)
Income tax provision (19.6) 5.8
----- ---
Income before equity in net
(loss) of affiliate 55.1 (8.2)
Equity in net income (loss)
of affiliate -- (0.1)
--- ----
Net income $55.1 $(8.3)
===== =====
Earnings per share
Basic $0.40 $(0.06)
Shares 137.5 138.0
Diluted $0.39 $(0.06)
Shares 140.4 138.0
For the Six Months
Ended
------------------
July 1, July 2,
2010 2009
------- -------
($ in millions, except per share data)
Net revenues $2,099.3 $1,947.0
Operating costs and
expenses:
Cost of sales 1,820.7 1,758.9
Selling, general and
administrative 77.4 73.1
Research and development 22.5 27.6
---- ----
Total operating costs and
expenses 1,920.6 1,859.6
Operating income (loss) 178.7 87.4
Interest expense and
financing fee amortization (27.8) (18.9)
Interest income 0.2 4.6
Other income (expense), net (2.8) 5.7
---- ---
Income before income taxes
and equity in net (loss) of
affiliate 148.3 78.8
Income tax provision (37.4) (24.4)
----- -----
Income before equity in net
(loss) of affiliate 110.9 54.4
Equity in net income (loss)
of affiliate (0.3) --
---- ---
Net income $110.6 $54.4
====== =====
Earnings per share
Basic $0.80 $0.39
Shares 137.4 137.9
Diluted $0.79 $0.39
Shares 140.6 139.9
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
July 1, December
2010 31, 2009
-------- ---------
($ in millions)
Current assets
Cash and cash equivalents $117.6 $369.0
Accounts receivable, net 270.1 160.4
Inventory, net 2,375.3 2,206.9
Other current assets 91.7 116.6
---- -----
Total current assets 2,854.7 2,852.9
Property, plant and equipment, net 1,357.0 1,279.3
Pension assets 182.6 171.2
Other assets 148.7 170.4
----- -----
Total assets $4,543.0 $4,473.8
======== ========
Current liabilities
Accounts payable $473.5 $441.3
Accrued expenses 176.4 165.5
Current portion of long-term debt 6.7 9.1
Advance payments, short-term 219.4 237.4
Deferred revenue, short-term 95.6 107.1
Other current liabilities 20.7 21.8
---- ----
Total current liabilities 992.3 982.2
Long-term debt 886.5 884.7
Advance payments, long-term 671.1 727.5
Deferred revenue and other deferred credits 40.3 46.0
Pension/OPEB obligation 66.1 62.6
Other liabilities 186.9 197.0
Shareholders' equity
Preferred stock, par value $0.01, 10,000,000
shares authorized, no shares issued -- --
Common stock, Class A par value $0.01,
200,000,000 shares authorized, 105,993,873
and 105,064,561 issued, respectively 1.1 1.0
Common stock, Class B par value $0.01,
150,000,000 shares authorized, 35,221,084
and 35,669,740 shares issued, respectively 0.4 0.4
Additional paid-in capital 974.4 949.8
Accumulated other comprehensive loss (69.0) (59.7)
Retained earnings 792.4 681.8
----- -----
Total shareholders' equity 1,699.3 1,573.3
Noncontrolling interest 0.5 0.5
--- ---
Total equity 1,699.8 1,573.8
------- -------
Total liabilities and shareholders' equity $4,543.0 $4,473.8
======== ========
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months
Ended
------------------
July 1, July 2,
2010 2009
------- -------
($ in millions)
Operating activities
Net income $110.6 $54.4
Adjustments to reconcile net income
to net cash (used in) operating
activities
Depreciation expense 55.2 62.2
Amortization expense 6.4 4.7
Accretion of long-term receivable -- (4.5)
Employee stock compensation expense 21.6 6.0
Excess tax benefits from share-based
payment arrangements (3.1) --
(Gain) loss from foreign currency
transactions 6.7 (4.7)
Gain on disposition of assets (0.1) --
Deferred taxes and long-term income
taxes payable (9.6) (4.6)
Pension and other post-retirement
benefits, net (5.7) 1.0
Grant income (0.6) (0.5)
Equity in net loss of affiliate 0.3 --
Changes in assets and liabilities
Accounts receivable (119.5) (109.4)
Inventory, net (172.2) (203.0)
Accounts payable and accrued
liabilities 50.2 109.2
Advance payments (74.4) (43.7)
Deferred revenue and other deferred
credits (14.8) (45.7)
Other 31.7 (37.4)
Net cash (used in) operating
activities (117.3) (216.0)
------ ------
Investing activities
Purchase of property, plant and
equipment (130.6) (106.7)
Long-term receivable -- 57.7
Other (0.7) 0.7
Net cash (used in) investing
activities (131.3) (48.3)
------ -----
Financing activities
Proceeds from revolving credit
facility -- 250.0
Payments on revolving credit facility -- (100.0)
Proceeds from government grants -- 0.6
Principal payments of debt (5.9) (3.9)
Debt issuance and financing costs -- (10.2)
Excess tax benefits from share-based
payment arrangements 3.1 --
Net cash provided by (used in)
financing activities (2.8) 136.5
---- -----
Effect of exchange rate changes on
cash and cash equivalents -- 0.2
--- ---
Net increase in cash and cash
equivalents for the period (251.4) (127.6)
Cash and cash equivalents, beginning
of the period 369.0 216.5
Cash and cash equivalents, end of the
period $117.6 $88.9
====== =====
Source: Spirit AeroSystems Holdings, Inc.
