Spirit AeroSystems Holdings, Inc. Reports Fourth Quarter and Full-Year 2014 Financial Results; Provides 2015 Guidance

2015 Guidance

Full-Year 2015 Guidance: Revenues $6.6 – $6.7 billion, Earnings Per Share of $3.60 – $3.80, Free Cash Flow of $600 – $700 million*
Fourth Quarter 2014 Consolidated Results

Total Revenues of $1.6 billion, up 5% y/y
Reports fully diluted EPS loss of ($0.77), adjusted EPS of $0.87* excluding the impact of the divestiture of the Gulfstream programs and deferred tax valuation allowance
Adjusted Free Cash Flow of $107 million*
Records loss of ($197) million for previously announced divestiture of the Gulfstream programs
Full-Year 2014 Consolidated Results

Total Revenues of $6.8 billion, up 14% y/y
Reports fully diluted EPS of $2.53, adjusted EPS of $3.57* excluding the impact of the divestiture of the Gulfstream programs and deferred tax valuation allowance
Adjusted Free Cash Flow of $302 million*
A record total backlog of ~$47 billion
Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported fourth quarter and full-year 2014 financial results driven by strong mature program operating performance. Spirit’s fourth quarter 2014 revenues were $1.6 billion, up from $1.5 billion for the same period of 2013.

• Non-GAAP financial measure, see Appendix for reconciliation

Operating loss for the fourth quarter of 2014 was ($273) million compared to operating loss of ($321) million in the fourth quarter of 2013. Net loss for the quarter was ($106) million, or ($0.77) per share, compared to net loss of ($587) million, or ($4.15) per share, in the same period of 2013. The current quarter includes a pretax charge of ($471) million, or ($1.42) per share*, for the divestiture of Gulfstream programs and ($30) million, or ($0.22) per share, negative impact for deferred tax asset valuation allowance not associated with the Gulfstream programs. This is compared to pretax ($546) million of forward loss charges in the same period of 2013, and a ($381) million negative impact due to the establishment of a valuation allowance against U.S. net deferred tax assets. Revenue for the full-year 2014 increased 14 percent to $6.8 billion. Operating income for the full-year was $354 million compared to operating loss of ($364) million for the prior year. Full-year net income was $359 million, or $2.53 per share, compared to net loss of ($621) million, or ($4.40) per share in 2013. (Table 1)

“This was a record year for sales and deliveries; 2014 was a year of transition for Spirit. We addressed performance challenges in both development and production, we improved productivity and quality, and we mitigated risk as exemplified by the sale of the Gulfstream wing programs,” said President and Chief Executive Officer Larry Lawson.

“We delivered a record 1,545 ship sets last year. We also made positive inroads in defense, with focused program execution on Sikorsky’s CH-53K and Textron’s Bell V-280 Valor, and we celebrated with Boeing and the U.S. Air Force the successful first test flight for the KC-46A tanker program,” Lawson added.

“Our objectives for 2015 are well defined. We will continue to focus on increasing productivity, making thoughtful investments in preparation for rate increases, continuing progress on A350, increasing our emphasis on long-term growth, and addressing how we deploy capital,” Lawson concluded.

Spirit’s backlog at the end of the fourth quarter of 2014 increased by approximately 7 percent from the previous quarter to a record $47 billion as orders exceeded deliveries.

Spirit updated its contract profitability estimates during the fourth quarter of 2014 resulting in pretax $63 million, or $0.31 per share#, favorable cumulative catch-up adjustments on mature programs due to improved performance and reduced risks. Additionally, the company recorded reversal of forward loss charges of $27 million on the BR725, 767 and 747-8 programs combined. In comparison, Spirit recorded pretax ($546) million forward losses and pretax $51 million favorable cumulative catch-up adjustments in the fourth quarter of 2013.

1. The earnings per share amount is presented net of income taxes of 31.0%.

• Non-GAAP financial measure, see Appendix for reconciliation

Adjusted free cash flow from operations was a $107 million* source of cash for the fourth quarter of 2014, compared to a $6 million* source of cash in the fourth quarter of 2013 due to greater reduction in accounts receivable partially offset by higher cash tax payments. Adjusted full-year free cash flow was a $302 million* source of cash compared to a $57 million* source of cash in 2013. (Table 2)

Cash balances at the end of the year were $378 million after a $160 million cash payment to Triumph Group related to the divestiture of the Gulfstream programs and $129 million related to the first share repurchase in Spirit’s history. At the end of 2014, the company’s $650 million revolving credit facility was undrawn. Debt balances at the end of the fourth quarter were $1.2 billion. The company’s credit rating remained unchanged at the end of the fourth quarter 2014.

Financial Outlook and Risk to Future Financial Results
Spirit revenue for the full-year 2015 is expected to be $6.6 – $6.7 billion. Fully diluted earnings per share for 2015 is expected to be $3.60 – $3.80 per share and does not include the impact of potential future adjustments to the deferred tax asset valuation allowance. Free cash flow is expected to be between $600 million and $700 million*, with higher capital expenditures of $325 million to $375 million. The effective tax rate for 2015 is forecasted to be approximately 32.0 – 33.0 percent, including the expected benefit of the U.S. Research Tax Credit for 2015, and excluding any potential adjustment to the valuation allowance against U.S. net deferred tax assets. (Table 3)

Risks to our financial guidance are described more fully in the Cautionary Statement Regarding Forward-Looking Statements in this release and in the “Risk Factors” section of our filings with the Securities and Exchange Commission.