Spirit AeroSystems Holdings, Inc. Reports Second Quarter 2012 Financial Results; Reports Revenues of $1.341 billion

WICHITA, Kan., Aug. 2, 2012 /PRNewswire/ — Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported second quarter 2012 financial results reflecting solid core operating performance, continued strong demand for large commercial aircraft, and the impact of unusual charges. Spirit’s second quarter 2012 revenues were $1.341 billion, down from $1.466 billion for the same period of 2011 as the previous period included recognition of deferred revenue associated with the 787 program contract amendment.

Operating income was $83 million, compared to $64 million for the same period in 2011, driven by increased production volume. In the quarter, as previously announced, the company recognized a pre-tax ($55) million, or ($0.26) per share, charge for expenses related to the April 14, 2012 severe weather event at its Wichita, KS facility. The company also recognized a pre-tax ($7) million, or ($0.03) per share, additional forward-loss on the A350 non-recurring wing program. In comparison, the second quarter of 2011 operating income included a pre-tax ($53) million additional forward-loss on the Gulfstream G280 wing program.

Net income for the quarter was $35 million, or $0.24 per fully diluted share, compared to $30 million, or $0.21 per fully diluted share, in the same period of 2011. Current quarter includes a previously announced pre-tax ($10) million, or ($0.05) per share, charge related to the unamortized deferred financing fees associated with refinancing its senior secured credit facilities and a higher effective tax rate. (Table 1)

“During the quarter, our large commercial aircraft deliveries increased by 12 percent over the second quarter of 2011, reflecting the strong ongoing demand for aircraft worldwide,” said President and Chief Executive Officer Jeff Turner.

“We were also pleased that the Spirit team and our partners successfully restored production through extraordinary effort and teamwork after the severe weather event on April 14, minimizing the impact to our customers,” Turner continued.

“Overall, this quarter exemplifies how Spirit AeroSystems is well positioned to meet the demand for large aircraft as we are focused on continued reliability, capability, and teamwork to align the business for long-term value creation,” Turner concluded.

Spirit’s backlog at the end of the second quarter of 2012 was over $32 billion. Spirit calculates its backlog based on current 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 second quarter of 2012, resulting in a net pre-tax $6 million, or $0.03 per share, favorable cumulative catch-up adjustment driven by core program productivity and efficiency.

Additionally, the company realized a pre-tax ($7) million, or ($0.03) per share, additional forward-loss on the A350 non-recurring wing program due to engineering cost growth.

In comparison, Spirit recognized a net pre-tax $6 million favorable cumulative catch-up adjustment and a pre-tax ($53) million, or ($0.26) per share, forward-loss charge in the second quarter of 2011.

Cash flow from operations was a $121 million source of cash for the second quarter of 2012, compared to a $114 million use of cash for the second quarter of 2011. The current quarter reflects insurance cash advances of $105 million associated with the severe weather event and an additional $50 million customer advance associated with a customer agreement on the A350 fuselage program, partially offset by higher cash tax and the timing of accounts receivable and accounts payable. The customer advance is expected to be repaid at a rate of $1.25 million per ship set delivery. (Table 2)

Excluding the $50 million unused portion of the $105 million insurance cash advance and the $50 million customer advance payment, cash flow from operations was a $21 million source of cash in the quarter, which is a $135 million improvement, compared to second quarter 2011.

Cash balances at the end of the quarter were $180 million and debt balances were $1,178 million. The company utilized its credit line during the quarter as it continued to invest in development programs, and fully repaid the borrowing by the end of the quarter. Approximately $19.9 million of the credit facility is reserved for financial letters of credit.

On April 18, 2012, the company completed a $1.2 billion refinancing of its senior secured credit facilities that include a new $650 million revolving credit facility maturing in April 2017 and a new $550 million term loan maturing in April 2019. As a result of this refinancing, the company’s debt maturities now consist of $300 million of unsecured notes maturing in 2017; the new $550 million senior secured term loan maturing in 2019; and $300 million of unsecured notes maturing in 2020.

The company’s credit rating was affirmed (BB) and placed on positive outlook by Standard & Poor’s during the quarter and remained unchanged by Moody’s Investor Services (Ba2, positive outlook) at the end of the quarter.

Financial Outlook

On April 14, 2012, during a severe weather event, Spirit’s Wichita, Kansas facility was hit with an EF3 tornado, which caused significant damage to many buildings, disrupted utilities and resulted in an eight day suspension of operations. The total insurance claim associated with this event is currently estimated to be approximately $400 million. The company continues to work with insurers to determine the applicable deductibles related to property damage and expense items and is not able to reasonably estimate at this time the recovery of costs or predict the ultimate outcome of the insurance settlements.

The following guidance excludes the impact of this severe weather event:

Spirit’s revenue guidance remains unchanged for the full-year 2012 and is expected to be between $5.2 and $5.4 billion based on Boeing’s 2012 delivery guidance of approximately 585 to 600 aircraft; expected B787 ship set deliveries; expected Airbus deliveries in 2012 of approximately 580 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 2012.

Fully diluted earnings per share guidance for 2012 remains unchanged and is expected to be between $2.00-$2.15.

Guidance for cash flow from operations, less capital expenditures, remains unchanged and is expected to be greater than $50 million in the aggregate, excluding customer and insurance cash advances, with capital expenditures of approximately $250 million.

The 2012 forecasted tax rate is expected to be between 31 and 32 percent assuming the U.S. Research Tax Credit is extended. (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; mid-range 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 2011 Form 10-K filed with the Securities and Exchange Commission on February 23, 2012 and our first quarter 2012 Form 10-Q filed May 4, 2012 for a more complete discussion of these and other factors that may affect our business.