Spirit AeroSystems Holdings, Inc. Reports First Quarter 2011 Financial Results; Reports Revenues of $1.050 Billion and Fully Diluted EPS of $0.24 Per Share

WICHITA, Kan., May 5, 2011 /PRNewswire/ — Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported first quarter 2011 financial results reflecting solid core operating performance as demand for large commercial aircraft remains strong.

Spirit’s first quarter 2011 revenues were $1.050 billion, slightly up from $1.043 billion for the same period of 2010 primarily driven by model mix.

Operating income was $70 million, compared to $93 million for the same period in 2010, as the company recognized a $28 million ($0.14 per share) pre-tax charge on the CH-53K program and realized higher R&D expense associated with 787-9 development in the current quarter. Net income for the quarter was $35 million, or $0.24 per fully diluted share, compared to $56 million, or $0.40 per fully diluted share, in the same period of 2010, as the current period also included increased interest expense associated with increased debt outstanding and a higher effective tax rate.

“Our core businesses continue to perform well and the market for large commercial airplanes remains strong,” said President and Chief Executive Officer Jeff Turner. “During the first quarter, we delivered ship sets for more than 250 aircraft to our various customers, including six 787 forward fuselages to Boeing Commercial Airplanes.”

“While the additional cost growth on the CH-53K program is disappointing, getting it right for the future is our focus. Our approach was to adapt some of our commercial manufacturing practices to this military product and to-date we have been unsuccessful,” Turner said.

“As we move through 2011 and 2012 we will continue to invest in additional capacity for our core business while we move new programs through the development cycle and into early production. Moving forward we expect to benefit from expanding demand for our core products as we help bring the next generation of large commercial airplanes and business jets to market,” Turner concluded.

Spirit’s backlog at the end of the first quarter of 2011 remained stable at $28.2 billion. 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 $28 million ($0.14 per share) on the CH-53K program, moving the development contract on the program into a loss position. The additional cost on this program is associated with the decision to proceed with a more traditional design and build approach to manufacture the remaining six test units.

Spirit updated its contract profitability estimates during the first quarter of 2011, resulting in a net pre-tax $3 million ($0.02 per share) unfavorable cumulative catch-up adjustment primarily associated with changes in contract profitability estimates on the A350 wing development effort, partially offset by improved productivity and efficiencies in the Propulsion segment. In comparison, Spirit recognized an $8 million unfavorable cumulative catch-up adjustment for the first quarter of 2010.

Cash flow from operations was a $128 million use of cash for the first quarter of 2011, compared to a $110 million use of cash for the first quarter of 2010. The current quarter compared to the same period of 2010 reflects increased working capital primarily driven by inventory growth on development programs, partially offset by deferred revenue, timing of liabilities, and favorable tax impacts.

Cash balances at the end of the quarter were $311 million, down $171 million from year-end 2010, largely reflecting the increase in inventory associated with increased production rates and continuing investments in new programs. At the end of the first quarter of 2011, the company’s $650 million revolving credit facility remained undrawn. Approximately $20 million of the credit facility is reserved for financial letters of credit. Debt balances at the end of the first quarter were $1,196 million, relatively flat from year-end.

The company’s credit rating remains unchanged at the end of the first quarter 2011 with a BB rating, stable outlook by Standard & Poor’s and a Ba2 rating, stable outlook by Moody’s Investor Services.

Financial Outlook

Spirit revenue guidance for the full-year 2011 remains unchanged and is expected to be between $4.5 and $4.7 billion based on Boeing’s 2011 delivery guidance of 485 to 500 aircraft; expected B787 deliveries; expected Airbus deliveries in 2011 of approximately 520 to 530 aircraft; internal Spirit forecasts for other customer production activities; expected non-production revenues; and foreign exchange rates consistent with those in the second half of 2010.

Fully diluted earnings per share guidance for 2011 remains unchanged and is expected to be between $1.70 and $1.90 per share, reflecting increased volumes on certain core programs and productivity and efficiency gains.

Guidance for cash flow from operations, less capital expenditures, remains unchanged and is expected to be approximately a $250 million use of cash in the aggregate, with capital expenditures of approximately $325 million.

The effective tax rate, forecast to be between 31 and 32 percent for 2011, remains unchanged. (Table 3)

Risk to our financial guidance includes, among other factors: 787 delivery volumes; higher than forecast 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 our ability to complete the 787 contract amendment.