2007'06.23.Sat
Spirit AeroSystems Holdings, Inc. Reports Significant Growth in Revenue and Earnings; Appointed to Boeing's Global Tanker Team
June 22, 2007
- First quarter EPS increased 163 percent to $0.50 as
net income grew to
$70 million
- Revenue grew 42 percent to $954 million; Operating
earnings more than
doubled to $104 million
- Won new aftermarket business on 777 Thrust Reversers;
Chosen by Boeing
to provide Next Generation 737 and 777 nacelle
component repair and
overhaul services; Selected to be on Boeing's Global
Tanker Team
- 2007 guidance reaffirmed, reflecting strength of the
commercial
aerospace market
Table 1. Summary Financial Results
1st
Quarter
($ in millions, except per share data) 2007
2006(1) Change
Revenues $954
$671 42%
Operating Income $104
$51 104%
Operating Income as a % of Revenues 10.9%
7.5% 340 BPS
Net Income $70
$23 204%
Net Income as a % of Revenues 7.3%
3.4% 390 BPS
Earnings per Share (Fully diluted) $0.50
$0.19 163%
Fully Diluted Weighted Avg Share
Count (Million) 139.0
117.5
(1) Excludes Spirit Europe acquired on April 1, 2006
WICHITA, Kan., April 26 /Xinhua-PRNewswire/ -- Spirit
AeroSystems Holdings, Inc. (NYSE: SPR) reported significant
increases in its first quarter financial results and
reaffirmed its 2007 financial guidance, reflecting strong
commercial aerospace markets globally and continued
execution of the company's strategy.
Spirit's first quarter net income rose over 200 percent
to $70 million from $23 million a year ago, and fully
diluted earnings per share rose 163 percent to $0.50 per
share from $0.19 per share last year. Revenue for the
quarter increased 42 percent to $954 million from $671
million, and the company's operating margins rose to 10.9
percent from 7.5 percent last year. First quarter 2007
results include Spirit Europe which was acquired on April
1, 2006. Spirit Europe's revenue for the first quarter 2007
was
$127 million.
"Solid overall performance combined with increased
production volume and productivity improvements drove this
quarter's results," said President and Chief Executive
Officer Jeff Turner. "Revenues increased, operating
margins improved and we continue to make good progress on
the 787 program," Turner added. "We are pleased
to make progress in our aftermarket business and to be
selected to Boeing's Global Tanker Team that is offering
the KC-767 Advanced Tanker to the United States Air Force.
Boeing's selection of Pratt & Whitney 4062 engines for
the program and our sole source supplier agreement with
Boeing for thrust reversers on Pratt & Whitney's
engines adds potential growth to our propulsion business
and provides potential increased demand for engine pylons
and forward fuselages for the KC-767 program. Looking
forward, we expect to deliver financial performance that
reflects the strength of our design and manufacturing
capabilities, the talent of our people, and the application
of industry leading technology."
The company continued to build momentum in its
aftermarket business during the month of April with an
initial agreement to provide overhaul services and rotables
leasing to Cathay Pacific on up to 10 sets of Trent 800
Thrust Reversers. Additionally, Spirit was designated by
Boeing as a provider of nacelle component repair and
overhaul services for Boeing 777 and Next Generation 737
airplanes.
Spirit's backlog during the quarter increased from
$19.2 billion to $19.9 billion, as combined net orders for
323 aircraft at Boeing and Airbus out paced their combined
deliveries of 221 aircraft. Spirit's backlog is calculated
based on contractual prices for products and expected
delivery volumes from the published firm order backlogs of
both Boeing and Airbus.
During the first quarter, Spirit updated its contract
profitability estimates resulting in a favorable change in
contract estimates of $6 million. Almost all of the
estimate changes are reflected in the Wing Systems segment
and were driven by favorable cost trends within the current
contract blocks. Because Spirit recognizes changes in
contract estimates utilizing the cumulative catch up method
of accounting under Statement of Position 81-1,
approximately $1 million of the favorable adjustment
relates to revenues recognized in 2005, and approximately
$5 million relates to revenues recognized in 2006. Largely
offsetting the favorable cumulative catch up adjustment in
the quarter were certain adjustments at Spirit Europe,
including a contract loss provision also recorded in the
Wing Systems segment. First quarter 2006 results included a
$34 million favorable cumulative catch up adjustment.
Cash flow from operations for the first quarter 2007
was $50 million reflecting planned increases in working
capital primarily for the 787 as the airplane enters
production. Cash flow from operations declined 44 percent
from the prior year period due to the $71 million reduction
in customer advances in the first quarter of 2007.
Investments in capital expenditures totaled $88 million in
the quarter (Table 2). Over half of the investment in
property, plant and equipment supported the start-up of the
787 program.
Cash balances at the end of the quarter were $157
million, down from year end 2006 levels reflecting planned
investment in Spirit's core businesses. Debt balances at
the end of the first quarter were $615 million, down
slightly from the year end level.
Table 2. Cash Flow and Liquidity
1st Quarter
($ in millions)
2007 2006(1)
Cash Flow from Operations
$50 $90
Purchases of Property, Plant & Equipment
($88) ($94)
Liquidity
March 29 December 31
2007 2006
Cash
$157 $184
Current Portion of Long-term Debt plus Long-term Debt
$615 $618
(1) Excludes Spirit Europe acquired on April 1, 2006
OUTLOOK
The company's financial guidance for 2007 is
reaffirmed. The company is forecasting solid growth in 2007
that reflects strong operating performance across business
segments and higher commercial airplane deliveries.
Spirit's 2007 revenue is expected to be between $4.0
billion and
$4.1 billion, approximately 25 percent higher than 2006, as
increased market demand for large commercial transport
aircraft from Boeing and Airbus drives additional shipset
deliveries. This revenue projection is based on previously
issued 2007 Boeing and Airbus delivery guidance of 440-445
and 440-450 aircraft, respectively, and includes the
initial deliveries to Boeing of Spirit products on the 787
program as well as a full year of revenue from Spirit
Europe (Table 3).
Table 3. Financial Outlook
2007
Guidance
Revenues
$4.0B - $4.1B
Operating Income
$400M - $420M
Operating Income as a % of Revenues
9.8% - 10.5%
Depreciation and Amortization
$120M - $125M
Earnings Per Share (Fully Diluted)
$1.80 - $1.90
Effective Tax Rate
~34%
Cash Flow from Operations* +
/ - $280M
Capital Expenditures + / -
$300M
Customer Reimbursement of Capital Expenditures ~
$45M
Research & Development Expense + / -
$60M
Average Fully Diluted Shares Outstanding 141M
* Includes $40-$50 million of customer advances for
capital expenditures
Spirit's operating margins are expected to be between
9.8 percent and
10.5 percent as benefits from higher volumes, cost
reduction and productivity initiatives, as well as lower
R&D and stock compensation expenses expand operating
margins vs. 2006 actual results. Spirit's 2007 fully
diluted EPS guidance is between $1.80 and $1.90 per share.
Cash flow from operations is expected to be +/- $280
million, which includes additional working capital spending
for the new 787 program. Fiscal 2007 capital expenditures
are expected to be +/- $300 million. Approximately 50
percent of the capital expenditures will be utilized to
complete the installation of production capacity for the
new 787 program. Spirit anticipates approximately $45
million of customer reimbursement to partially offset these
capital expenditures.
Depreciation and amortization expenses are forecasted
to be between $120 and $125 million as new capital
equipment is placed into service.
Cautionary Statement Regarding Forward-Looking
Statements
This press release includes forward-looking statements
that reflect the plans and expectations of Spirit
AeroSystems Holdings, Inc. To the extent that statements in
this press release do not relate to historical or current
facts, they constitute forward-looking statements.
Forward-looking statements can generally be identified by
the use of forward-looking terminology such as
"may," "will," "expect,"
"intend," "estimate,"
"anticipate," "believe,"
"project," "continue," or other similar
words. These statements reflect Spirit AeroSystems Holdings,
Inc.'s current view with respect to future events and are
subject to risks and uncertainties, both known and unknown.
Such risks and uncertainties may cause the actual results of
Spirit AeroSystems Holdings, Inc. to vary materially from
those anticipated in forward-looking statements, and
therefore we caution investors not to place undue reliance
on them. Potential risks and uncertainties include, but are
not limited to: our customers' aircraft build rates; the
ability to enter into supply arrangements with additional
customers and satisfy performance requirements under
existing contracts; any adverse impact on our customers'
production of aircraft; the success and timely progression
of our customers' new programs including, but not limited
to The Boeing Company's 787 aircraft program; future levels
of business in the aerospace and commercial transport
industries; competition from original equipment
manufacturers and other aerostructures suppliers; the
effect of governmental laws; the effect of new commercial
and business aircraft development programs; the cost and
availability of raw materials; the ability to recruit and
retain highly skilled employees and relationships with
unions; spending by the United States and other governments
on defense; the continuing ability to operate successfully
as a stand alone company; the outcome of ongoing or future
litigation and regulatory actions; and exposure to
potential product liability claims. Additional information
as to factors that may cause actual results to differ
materially from our forward-looking statements can be found
in Spirit AeroSystems Holdings, Inc.'s filings with the
United States Securities and Exchange Commission. Spirit
AeroSystems Holdings, Inc. undertakes no obligation and
does not intend to update publicly any forward-looking
statements after the date of this press release, except as
required by law.
Appendix
Segment Results
Fuselage Systems
Fuselage Systems segment revenue for the first quarter
was $445 million, up 26 percent over the same period last
year as deliveries on the 737 and 777 programs increased.
Revenues in the first quarter 2006 were negatively impacted
by the IAM strike at Boeing which occurred in September of
2005. Fuselage Systems posted double-digit segment
operating margins of 18.6 percent for the first quarter
2007, up from 17.0 percent in the same period of 2006 as
R&D expense on the 787 program declined; higher
production rates were realized; and 737 model-mixes shifted
to longer aircraft types.
Propulsion Systems
Propulsion Systems segment revenue for the first
quarter was $260 million, up 20 percent over the same
period last year as deliveries increased in support of
primary customer production volume. Propulsion Systems
posted improved double-digit segment operating margins of
15.5 percent for the first quarter 2007, up from 13.8
percent in the same period of 2006 as R&D expense on
the 787 program declined and higher production rates were
realized.
Wing Systems
Wing Systems segment revenue for the first quarter was
$241 million, up from $92 million over the same period last
year. Spirit Europe was acquired on April 1, 2006, and
contributed $127 million to the first quarter 2007
revenues. Wing Systems posted segment operating margins of
9.6 percent for the first quarter 2007, up from 6.0 percent
in the same period of 2006 as R&D expense on the 787
program declined and favorable cost trends generated
favorable changes in contract estimates that were largely
offset by certain adjustments, including a loss provision
at Spirit Europe, during the first quarter 2007.
Table 4. Segment Reporting
1st Quarter
$ in millions, except margin percent) 2007
2006(1) Change
Segment Revenues
Fuselage Systems $445.2
$353.7 25.9%
Propulsion Systems $260.4
$216.5 20.3%
Wing Systems $241.2
$92.0 162.2%
All Other $7.3
$8.6 (15.1%)
Total Segment Revenues $954.1
$670.8 42.2%
Segment Earnings from Operations
Fuselage Systems $83.0
$60.1 38.1%
Propulsion Systems $40.3
$29.8 35.2%
Wing Systems $23.2
$5.5 321.8%
All Other $0.8
$0.5 60.0%
Total Segment Operating Earnings $147.3
$95.9 53.6%
Unallocated Corporate SG&A Expense
($42.5) ($43.4) 2.1%
Unallocated Research & Development Expense
($1.0) ($1.9) 47.4%
Total Earnings from Operations $103.8
$50.6 105.1%
Segment Operating Earnings as % of Revenues
Fuselage Systems 18.6%
17.0% 160 BPS
Propulsion Systems 15.5%
13.8% 170 BPS
Wing Systems 9.6%
6.0% 360 BPS
All Other 11.0%
5.8% 520 BPS
Total Segment Operating Earnings as % of Revenues 15.4%
14.3% 110 BPS
Total Operating Earnings as % of Revenues 10.9%
7.5% 340 BPS
(1) Excludes Spirit Europe acquired on April 1, 2006
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three
For the Three
Months Ended
Months Ended
March 29, 2007
March 30, 2006
($ in millions,
except per share data)
Net Revenues $954.1
$670.8
Operating costs and expenses:
Cost of sales 794.8
533.0
Selling, general and administrative 45.1
44.8
Research and development 10.4
42.4
Total Costs and Expenses 850.3
620.2
Operating Income 103.8
50.6
Interest expense and financing fee
amortization (8.9)
(11.2)
Interest income 7.7
7.1
Other income, net 2.0
1.4
Income From Continuing Operations
Before Income Taxes 104.6
47.9
Income tax provision (34.8)
(25.4)
Net Income $69.8
$22.5
Earnings per share
Basic $0.54
$0.20
Diluted $0.50
$0.19
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
March 29, 2007
December 31, 2006
(unaudited)
($
in millions)
Current assets
Cash and cash equivalents $157.3
$184.3
Accounts receivable,net 256.8
200.2
Other receivable 32.6
43.0
Inventory, net 947.0
882.2
Income tax receivable --
21.7
Other current assets 78.1
89.1
Total current assets 1,471.8
1,420.5
Property, plant and equipment, net 841.0
773.8
Long-term receivable 196.4
191.5
Pension assets 215.4
207.3
Other assets 115.5
129.1
Total assets $2,840.1
$2,722.2
Current liabilities
Accounts payable $357.6
$339.1
Accrued expenses 185.8
198.5
Current portion of long-term debt 24.9
23.9
Other current liabilities 21.2
8.2
Total current liabilities 589.5
569.7
Long-term debt 590.2
594.3
Advance payments 600.5
587.4
Other liabilities 124.6
111.8
Shareholders' equity
Preferred stock, par value $0.01,
10,000,000 shares authorized, no
shares issued and outstanding --
--
Common stock, Class A par value
$0.01, 200,000,000 shares
authorized, 68,159,104 and
63,345,834 issued and outstanding,
respectively 0.7
0.6
Common stock, Class B par value
$0.01, 150,000,000 shares
authorized, 71,446,595 and
71,351,347 shares issued and
outstanding, respectively 0.7
0.7
Additional paid-in capital 867.2
858.7
Accumulated other comprehensive income 70.4
72.5
Accumulated deficit (3.7)
(73.5)
Total shareholders' equity 935.3
859.0
Total liabilities and
shareholders' equity $2,840.1
$2,722.2
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flow
(unaudited)
For the
Three For the Three
Months Ended
Months Ended
March 29,
2007 March 30, 2006
($
in millions)
Operating activities
Net income $69.8
$22.5
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation expense 20.9
16.7
Amortization expense 1.9
1.1
Accretion of long-term
receivable (5.5)
(5.0)
Employee stock compensation
expense 6.6
13.4
Loss on disposition of assets 0.1
--
Deferred taxes 6.0
2.3
Pension, net (8.1)
(3.2)
Changes in assets and liabilities,
net of acquisition
Accounts receivable (54.3)
(75.4)
Inventory, net (63.6)
(26.5)
Other current assets 10.3
4.4
Accounts payable and accrued
liabilities (11.5)
26.0
Customer advances 29.2
100.0
Income taxes payable 23.8
11.0
Deferred revenue and other
deferred credits 9.4
14.7
Other 15.1
(12.0)
Net cash provided by
operating activities 50.1
90.0
Investing Activities
Purchase of property, plant and
equipment (87.5)
(93.8)
Reimbursement of capital expenditures 11.4
--
Financial derivatives 1.1
--
Net cash (used in) investing
activities (75.0)
(93.8)
Financing Activities
Principal payments of debt (4.6)
(1.8)
Pool of windfall tax benefits 2.5
--
Executive stock investments --
0.5
Net cash (used in) financing
activities (2.1)
(1.3)
Effect of exchange rate changes on
cash and cash equivalents --
--
Net (decrease) in cash and
cash equivalents for the
period (27.0)
(5.1)
Cash and cash equivalents, beginning
of the period 184.3
241.3
Cash and cash equivalents, end of the
period $157.3
$236.2
For more information, please contact:
Investor Relations
Phil Anderson
Tel: +1-316-523-1797
Media
Sam Marnick
Tel: +1-316-523-3330
PR
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