Spirit AeroSystems Holdings, Inc. Reports Fourth Quarter and Full-Year 2012 Financial Results

WICHITA, Kan., Feb. 12, 2013 /CNW/ – Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported fourth quarter and full-year 2012 financial results reflecting record revenue on higher ship set deliveries and solid core program operating performance.

Spirit’s fourth quarter 2012 revenues were $1.426 billion, up from $1.219 billion for the same period of 2011 as the company benefited from higher production deliveries during the quarter.

Operating income for the fourth quarter of 2012 was $98 million including a net pre-tax $34 million forward loss associated with development and low rate programs. Net income for the quarter was $61 million, or $0.43 per fully diluted share, compared to $60 million, or $0.42 per fully diluted share, in the same period of 2011. The current quarter includes a net pre-tax $34 million, or ($0.19) per share, of forward loss charges principally on development programs.

Revenue for the full-year 2012 increased 11 percent to $5.398 billion. Operating income for the full-year was $92 million, significantly lower compared to 2011 due primarily to development program charges of $645 million, which was partially offset by the net insurance gain of $146 million related to the severe weather event at Spirit’s Wichita, Kan. facility in April 2012. Full-year net income was $35 million, or $0.24 per fully diluted share, compared to $192 million, or $1.35 per fully diluted share in 2011. (Table 1)

After adjusting for forward losses and certain other items, adjusted operating income for the full-year 2012 was $556 million, 21 percent higher compared to 2011 adjusted operating income of $460 million, primarily due to increased production volumes. After adjusting for forward losses and certain other items, full-year 2012 adjusted earnings per share was $2.30 per fully diluted share, compared to 2011 adjusted earnings per share of $1.85 per fully diluted share.*

“Spirit’s strong core business performance in 2012 continues to deliver the results we expect,” said President and Chief Executive Officer Jeff Turner. “Annual revenues increased to record levels reflecting higher demand and increased production rates for our core products even while we recovered from an EF3 tornado at our Wichita, KS facility. Our development program performance in 2012 underscores the complexity of our business as we transitioned multiple programs to full rate production after over seven years of concurrent development and delivered initial production units on the A350 XWB,” Turner continued.

“Our primary goal in 2013 is to continuously improve operational and cost performance across the business and manage the risk profile of development programs,” Turner concluded.

Spirit’s backlog at the end of the fourth quarter of 2012 increased by over 4 percent to $35 billion as orders exceeded deliveries. 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 updated its contract profitability estimates during the fourth quarter of 2012, resulting in a net pre-tax $10 million, or $0.06 per share, favorable cumulative catch-up adjustment primarily associated with productivity and efficiency improvements on core programs. In comparison, Spirit recognized a net pre-tax $21 million favorable cumulative catch-up adjustment for the fourth quarter of 2011.

Additionally, in the fourth quarter of 2012 the company recorded forward loss charges on the G280 program of an additional pre-tax ($20) million, or ($0.11) per share driven by cost growth in the quarter and a total of ($14) million, or ($0.08) per share on low volume large commercial programs driven by model mix and program performance.

Cash flow from operations was a $309 million source of cash for the fourth quarter of 2012, compared to a $128 million source of cash for the fourth quarter of 2011. The current quarter reflects net insurance proceeds of approximately $112 million associated with the severe weather event at Spirit’s Wichita, Kan. facility in April 2012 and the timing of accounts receivable and accounts payable.

Cash balances at the end of the year were $441 million, up $263 million from a year ago, reflecting the net insurance proceeds and customer cash advances, offset by the increase in inventory associated with increased production rates and continuing investments in development programs. At the end of 2012, the company’s $650 million revolving credit facility was undrawn. Approximately $20 million of the credit facility is reserved for financial letters of credit. Debt balances at the end of the fourth quarter were $1.176 billion.

The company’s credit rating remained unchanged at the end of the fourth quarter 2012 with a BB rating, stable outlook by Standard & Poor’s and a Ba2 rating, negative outlook by Moody’s Investor Services.

Financial Outlook

Spirit revenue guidance for the full-year 2013 remains unchanged and is expected to be between $5.8 – $6.0 billion based on Boeing’s 2013 delivery guidance of 635 to 645 aircraft; expected B787 ship set deliveries; expected Airbus deliveries in 2013 of approximately 600 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 2012.

Fully diluted earnings per share guidance for 2013 is unchanged and expected to be between $1.90 – $2.10 per share, reflecting continued growth and solid execution in core programs and transitioning development programs to full rate of production. Fully-diluted earnings per share guidance for 2013 excluding severe weather adjustments is expected to be between $2.20 – $2.40.*

Cash flow from operations, less capital expenditures, is expected to be between a net outflow of ($150) million to ($50) million, after capital expenditures of approximately $400 million, including approximately $50 million of expense included in cash from operations and approximately $50 million of capital expenditures related to the severe weather event.

The effective tax rate for 2013 is forecasted to be approximately 31 percent, reflecting the benefit of research tax credits for 2012 and 2013. (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; commercial settlements with customers; business jet market risks; and our ability to achieve anticipated productivity and cost improvements. You should review carefully the sections captioned “Risk Factors” in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.