Spirit AeroSystems Holdings, Inc. Reports Second Quarter 2011 Financial Results; Updates 2011 Financial Guidance

WICHITA, Kan., Aug. 4, 2011 /PRNewswire/ — Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported second quarter 2011 financial results reflecting solid core operating performance, strong demand for large commercial aircraft, and the incorporation of the 787 contract amendment.

Spirit’s second quarter 2011 revenues were $1.466 billion, up from $1.056 billion for the same period of 2010 as the company recognized the deferred revenue associated with the 787 program and benefited from slightly higher production deliveries and non-production revenues during the quarter.

Operating income was $64 million, compared to $86 million for the same period in 2010. The company recognized an additional pre-tax $53 million ($0.26 per share) forward-loss on the Gulfstream G280 wing program in the quarter. The core business generated favorable cumulative catch-up adjustments related to productivity and efficiency improvements and benefited from lower R&D expense. The 787 program continues to be a zero margin program for the company. Second quarter of 2010 operating income included a $19 million pre-tax impact related to the International Association of Machinists (IAM) stock award.

Net income for the quarter was $30 million, or $0.21 per fully diluted share, compared to $55 million, or $0.39 per fully diluted share, in the same period of 2010. Current quarter net income reflects higher interest expense associated with increased long-term debt and a higher effective tax rate as compared to the second quarter of 2010.

“We are successfully transitioning to higher production rates across our core businesses driven by a strong market for large commercial airplanes,” said President and Chief Executive Officer Jeff Turner. “During the second quarter, we delivered increased volumes to Boeing Commercial Airplanes, successfully completed our go-forward plan on the 787 program, and recently rolled out our first CSeries test pylon to Bombardier.”

“We continue to make progress on our development programs. Six of these programs are continuing through the test phases with five of them expected to achieve certification in 2011. Although we have experienced cost growth on some of these programs, we are focused on meeting customer commitments and are excited about the long-term value and diversification these programs bring to the company.”

“As recent order flow has signaled, we continue to benefit from the expanding global demand for commercial aircraft as we concurrently implement our diversification strategy with many of our new programs moving into production. By executing our growth plans and helping to bring the next generation of commercial aircraft to market, we are well positioned to create long-term value for our customers, shareholders, and employees,” Turner concluded.

Spirit’s backlog at the end of the second quarter of 2011 increased by 3 percent to $29 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.

The company realized and previously announced an additional pre-tax charge of $53 million ($0.26 per share) on the Gulfstream G280 program, which is recognized as further forward-loss on the program. The additional cost on this program is associated with development and manufacturing cost growth and the decision to transition the wing production to Spirit’s Kinston, North Carolina facility.

Spirit updated its contract profitability estimates during the second quarter of 2011, resulting in a net pre-tax $6 million favorable cumulative catch-up adjustment primarily associated with productivity and efficiency improvements on core programs, partially offset by cost growth in the Wing Systems segment. In comparison, no net cumulative catch-ups were recognized in the second quarter of 2010.

Cash flow from operations was a $114 million use of cash for the second quarter of 2011, compared to a $7 million use of cash for the second quarter of 2010. The current quarter compared to the same period of 2010 includes increased inventory on new programs and the impacts of timing of accounts receivable and accounts payable.

Cash balances at the end of the quarter were $154 million. At the end of the second 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 second quarter were $1,195 million.

The company’s credit rating remains unchanged at the end of the second 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 495 aircraft; expected B787 ship set 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 first half of 2011.

Fully diluted earnings per share guidance for 2011 is now expected to be between $1.40 and $1.50 per share, largely reflecting the impact of the G280 forward-loss.

Guidance for cash flow from operations, less capital expenditures, is expected to be approximately a $250 million use of cash in the aggregate, with capital expenditures of approximately $300 million.

The 2011 forecasted effective tax rate has been revised to approximately 30 percent. (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; and our ability to achieve anticipated productivity and cost improvements.