SPIRIT AEROSYSTEMS HOLDINGS, INC. WICHITA, Kan., April 29, 2015 /PRNewswire/ --
First Quarter 2015 Consolidated Results
-- Total Revenues of $1.7 billion
-- Reports fully diluted EPS of $1.30, adjusted EPS of $1.00* excluding the
impact for the partial release of the deferred tax valuation allowance
-- Free Cash Flow of $384 million*
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Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported first quarter financial results driven by positive operating performance of mature programs. Spirit's first quarter 2015 revenues were $1.7 billion up one percent compared to the same period of 2014.
Table 1. Summary Financial Results (unaudited)
----------------------------------------------
1st Quarter
-----------
($ in millions, except per
share data) 2015 2014 Change
-------------------------- ---- ---- ------
Revenues $1,742 $1,729 1%
Operating Income $235 $194 21%
Operating Income as a % of
Revenues 13.5% 11.2% 230 BPS
Net Income $182 $154 18%
Net Income as a % of Revenues 10.4% 8.9% 150 BPS
Earnings Per Share (Fully
Diluted) $1.30 $1.07 21%
Fully Diluted Weighted Avg
Share Count 140.4 143.7
-------------------------- ----- -----
Operating income was $235 million, up from $194 million for the same period in 2014. Net income for the quarter was $182 million, or $1.30 per fully diluted share, compared to net income of $154 million, or $1.07 per fully diluted share, in the same period of 2014. The current quarter includes $0.30 earnings per share for the partial release of the deferred tax valuation allowance as compared to $0.22 for same period of 2014. (Table 1)
"We are making good progress on our operational delivery, quality and productivity. We are aligning and strengthening what we do best to ensure we're fully maximizing our value proposition," said President and Chief Executive Officer Larry Lawson.
"We continue to drive the enterprise to find the most efficient and productive approaches for the rate increases on 737, A320, 787, and A350. In addition to investments to support rate, we are investing in automation projects of over $100 million. These automation projects will return our investment in three to four years and continue to differentiate our manufacturing capability," Lawson concluded.
Spirit's backlog at the end of the first quarter was $46 billion driven by strong commercial aerospace demand.
Free cash flow was a $384 million* source of cash for the first quarter of 2015, compared to a ($8) million* use of cash in the first quarter of 2014 due to tax refunds associated with the Gulfstream divestiture and reduction in accounts receivable. (Table 2)
Table 2. Cash Flow and Liquidity
(unaudited)
1st Quarter
-----------
($ in millions) 2015 2014
-------------- ---- ----
Cash Flow from Operations $424 $45
Purchases of Property, Plant &
Equipment ($40) ($53)
Free Cash Flow* $384 ($8)
April 2, December 31,
Liquidity 2015 2014
---- ----
Cash $750 $378
Total Debt $1,145 $1,154
---------- ------ ------
Cash balances at the end of the first quarter were $750 million and debt balances were $1.1 billion. The company's $650 million revolving credit facility was undrawn at the end of the first quarter.
During the first quarter the company's credit rating was upgraded to Ba1 from Ba2 by Moody's Investor Services and upgraded to BB positive outlook from BB- by Standard and Poor's.
On March 18, 2015, Spirit entered into an amendment to its senior secured credit agreement that provided for a new $535 million senior secured term loan A with a maturity date of March 18, 2020, which replaced the term loan B with an outstanding amount of $535 million.
Financial Outlook and Risk to Future Financial Results
Spirit revenue for the full-year 2015 remains unchanged and is expected to be between $6.6 billion and $6.7 billion. Fully diluted earnings per share for 2015 remains unchanged and is expected to be between $3.60 and $3.80 per share, which does not include the year-to-date impact or potential future adjustments to the deferred tax asset valuation allowance. Free cash flow for 2015 remains unchanged and is expected to be between $600 million and $700 million*, which includes higher capital expenditures of $325 million to $375 million as compared to 2014. The effective tax rate for 2015 is forecasted to be between 32.0 percent and 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.
Table 3. Financial Outlook
Reaffirmed April 29, 2015 2015 Guidance
--------------------------- -------------
Revenues $6.6 - $6.7 billion
Earnings Per Share (Fully
Diluted) $3.60 - $3.80
Effective Tax Rate** ~32.0% - 33.0%
Free Cash Flow* $600 - $700 million
* Non-GAAP financial measure, see
Appendix for reconciliation.
** Effective tax rate guidance,
among other factors, assumes the
benefit attributable to the
extension of the U.S. Research
Tax Credit and does not assume
the year-to-date impact or
potential future adjustments to
the valuation allowance against
the U.S. net deferred tax assets.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains "forward-looking statements" that may involve many risks and uncertainties. Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "should," "will," or other similar words, or the negative thereof, unless the context requires otherwise. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements. Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability to perform our obligations and manage costs related to our new and maturing commercial, business aircraft and military development programs and the related recurring production; 3) margin pressures and the potential for additional forward losses on new and maturing programs; 4) our ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft; 5) the effect on business and commercial aircraft demand and build rates of the following factors: changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 6) customer cancellations or deferrals as a result of global economic uncertainty; 7) the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange rates; 8) the success and timely execution of key milestones such as receipt of necessary regulatory approvals and customer adherence to their announced schedules; 9) our ability to successfully negotiate future pricing under our supply agreements with Boeing, Airbus and our other customers; 10) our ability to enter into profitable supply arrangements with additional customers; 11) the ability of all parties to satisfy their performance requirements under existing supply contracts with Boeing and Airbus, our two major customers, and other customers and the risk of nonpayment by such customers; 12) any adverse impact on Boeing's and Airbus' production of aircraft resulting from cancellations, deferrals or reduced orders by their customers or from labor disputes or acts of terrorism; 13) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 14) our ability to avoid or recover from cyber-based or other security attacks, information technology failures or other disruptions; 15) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 16) our ability to borrow additional funds or refinance debt; 17) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 18) the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 19) any reduction in our credit ratings; 20) our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components; 21) our ability to recruit and retain highly-skilled employees and our relationships with the unions representing many of our employees; 22) spending by the U.S. and other governments on defense; 23) the possibility that our cash flows and borrowing facilities may not be adequate for our additional capital needs or for payment of interest on and principal of our indebtedness; 24) our exposure under our existing senior secured revolving credit facility to higher interest payments should interest rates increase substantially; 25) the effectiveness of any interest rate hedging programs; 26) the effectiveness of our internal control over financial reporting; 27) the outcome or impact of ongoing or future litigation, claims and regulatory actions; and 28) exposure to potential product liability and warranty claims. These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.
Segment Results
Fuselage Systems
Fuselage Systems segment revenues in the first quarter of 2015 were $917 million, up from $858 million for the same period last year due to higher deliveries. Operating margin for the first quarter of 2015 was 17.9 percent as compared to 16.5 percent during the same period of 2014. In the first quarter of 2015, the segment recorded pretax $3 million favorable cumulative catch-up adjustments on mature programs and a $3 million favorable change in estimate on the 747-8 program which is in a loss position. In comparison, the segment recorded pretax $9 million favorable cumulative catch-up adjustments in the first quarter of 2014.
Propulsion Systems
Propulsion Systems segment revenues in the first quarter of 2015 were $446 million compared to $450 million for the same period last year driven by lower non-recurring engineering design revenues. Operating margin for the first quarter of 2015 was 21.5 percent as compared to 17.8 percent in the first quarter of 2014. In the first quarter of 2015, the segment realized pretax $9 million favorable cumulative catch-up adjustments on mature programs. In comparison, the segment recorded pretax $5 million favorable cumulative catch-up adjustments in the first quarter of 2014.
Wing Systems
Wing Systems segment revenues in the first quarter of 2015 were $377 million, down from $414 million for the same period last year due to the Gulfstream wing divestiture. Operating margin for the first quarter of 2015 was 12.0 percent as compared to 12.1 percent during the same period of 2014. The segment recorded pretax $3 million favorable cumulative catch-up adjustments in the first quarter of 2014.
Appendix
Table 4. Segment Reporting (unaudited)
1st Quarter
-----------
($ in millions) 2015 2014 Change
-------------- ---- ---- ------
Segment Revenues
Fuselage Systems $916.8 $858.3 6.8%
Propulsion Systems 446.0 450.2 (0.9%)
Wing Systems 376.7 414.2 (9.1%)
All Other 2.7 5.8
--- ---
Total Segment Revenues $1,742.2 $1,728.5 0.8%
Segment Earnings (Loss) from
Operations
Fuselage Systems $164.5 $142.0 15.8%
Propulsion Systems 95.7 80.2 19.3%
Wing Systems 45.2 50.0 (9.6%)
All Other (0.3) 0.1
---- ---
Total Segment Operating
Earnings $305.1 $272.3 12.0%
Unallocated Expense
Corporate SG&A ($51.6) ($60.5) (14.7%)
Research & Development (7.0) (6.3) 11.1%
Cost of Sales (11.2) (11.1) 0.9%
Total Earnings from
Operations $235.3 $194.4 21.0%
Segment Operating Earnings
(Loss) as % of Revenues
Fuselage Systems 17.9% 16.5% 140 BPS
Propulsion Systems 21.5% 17.8% 370 BPS
Wing Systems 12.0% 12.1% (10) BPS
All Other (11.1%) 1.7%
------ ---
Total Segment Operating
Earnings as % of Revenues 17.5% 15.8% 170 BPS
Total Operating Earnings as
% of Revenues 13.5% 11.2% 230 BPS
Spirit Ship Set Deliveries
(one ship set equals one aircraft)
1st Quarter
-----------
2015 2014
---- ----
B737 134 125
B747 4 5
B767 5 3
B777 26 26
B787 32 31
--- ---
Total 201 190
A320 Family 135 128
A330/340 27 30
A350 6 2
A380 6 7
--- ---
Total 174 167
Business/Regional Jet 17 35
--- ---
Total Spirit 392 392
=== ===
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months
Ended
---------------------
April 2, 2015 April 3, 2014
------------- -------------
($ in millions, except
per share data)
Net revenues $1,742.2 $1,728.5
Operating costs and expenses:
Cost of
sales 1,448.3 1,467.3
Selling,
general and
administrative 51.6 60.5
Research and
development 7.0 6.3
--- ---
Total
operating
costs and
expenses 1,506.9 1,534.1
Operating
income 235.3 194.4
Interest
expense and
financing
fee
amortization (17.9) (35.4)
Other
(expense)
income, net (6.4) 1.3
---- ---
Income
before
income
taxes and
equity in
net income
of
affiliate 211.0 160.3
Income tax
provision (29.4) (6.9)
----- ----
Income
before
equity in
net income
of
affiliate 181.6 153.4
Equity in
net income
of
affiliate 0.3 0.2
--- ---
Net income $181.9 $153.6
====== ======
Earnings per share
Basic $1.31 $1.08
Shares 138.9 141.6
Diluted $1.30 $1.07
Shares 140.4 143.7
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
April 2, 2015 December 31, 2014
------------- -----------------
($ in millions)
Current assets
Cash and cash equivalents $749.5 $377.9
Accounts receivable, net 601.0 605.6
Inventory, net 1,702.4 1,753.0
Other current assets 108.1 315.6
----- -----
Total current assets 3,161.0 3,052.1
Property, plant and equipment,
net 1,776.7 1,783.6
Pension assets 210.5 203.4
Other assets 124.5 123.6
----- -----
Total assets $5,272.7 $5,162.7
======== ========
Current liabilities
Accounts payable $679.2 $611.2
Accrued expenses 256.9 329.1
Current portion of long-term
debt 30.2 9.4
Advance payments, short-term 145.5 118.6
Deferred revenue, short-term 39.3 23.4
Other current liabilities 76.7 167.1
---- -----
Total current liabilities 1,227.8 1,258.8
Long-term debt 1,115.1 1,144.1
Advance payments, long-term 643.3 680.4
Deferred revenue and other
deferred credits 67.3 27.5
Pension/OPEB obligation 74.7 73.0
Other liabilities 350.1 356.9
Equity
Preferred stock, par value
$0.01, 10,000,000 shares
authorized, no shares issued - -
Common stock, Class A par value
$0.01, 200,000,000 shares
authorized, 141,678,165 and
141,084,378 shares issued,
respectively 1.4 1.4
Common stock, Class B par value
$0.01, 150,000,000 shares
authorized, 121 and 4,745
shares issued, respectively - -
Additional paid-in capital 1,040.1 1,035.6
Accumulated other comprehensive
loss (167.8) (153.8)
Retained earnings 1,049.4 867.5
Treasury stock, at cost
(4,000,000 shares each period,
respectively) (129.2) (129.2)
------ ------
Total shareholders' equity 1,793.9 1,621.5
Noncontrolling interest 0.5 0.5
--- ---
Total equity 1,794.4 1,622.0
------- -------
Total liabilities and equity $5,272.7 $5,162.7
======== ========
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Three Months
Ended
---------------------
April 2, 2015 April 3, 2014
------------- -------------
($ in millions)
Operating activities
Net income $181.9 $153.6
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation expense 43.6 41.3
Amortization expense 4.7 20.4
Accretion of customer supply agreement 0.4 0.1
Employee stock compensation expense 6.9 3.7
Excess tax benefits from share-based
payment arrangements - (0.5)
Loss (gain) on effectiveness of hedge
contracts 1.6 (0.6)
Loss from foreign currency
transactions 6.4 1.8
Deferred taxes 1.2 (0.3)
Pension and other post-retirement
benefits, net (6.1) (8.0)
Grant income (2.6) (2.0)
Equity in net income of affiliate (0.3) (0.2)
Changes in assets and liabilities
Accounts receivable, net 0.3 (196.7)
Inventory, net 33.8 (51.6)
Accounts payable and accrued
liabilities (101.3) 28.9
Advance payments (10.2) (30.6)
Income taxes receivable/payable 198.0 72.5
Deferred revenue and other deferred
credits 56.7 4.8
Other 8.7 8.4
Net cash provided by operating
activities $423.7 $45.0
------ -----
Investing activities
Purchase of property, plant and
equipment (40.3) (53.0)
Other - 0.1
Net cash used in investing activities ($40.3) ($52.9)
------ ------
Financing activities
Proceeds from issuance of debt 535.0 -
Proceeds from issuance of bonds - 300.0
Principal payments of debt (7.5) (9.5)
Payments on term loan (534.9) -
Payments on bonds - (227.2)
Debt issuance and financing costs (4.7) (19.2)
Change in restricted cash - (72.8)
Excess tax benefit from share-based
payment arrangements - 0.5
Net cash used in financing activities ($12.1) ($28.2)
------ ------
Effect of exchange rate changes on
cash and cash equivalents 0.3 (2.5)
--- ----
Net increase (decrease) in cash and
cash equivalents for the period $371.6 ($38.6)
Cash and cash equivalents, beginning
of the period 377.9 420.7
Cash and cash equivalents, end of the
period $749.5 $382.1
====== ======
Management believes that the non-
GAAP (Generally Accepted
Accounting Principles) measures
(indicated by *) used in this
report provide investors with
important perspectives into the
company's ongoing business
performance. The company does
not intend for the information
to be considered in isolation or
as a substitute for the related
GAAP measure. Other companies
may define the measure
differently.
Adjusted EPS
1st Quarter
2015 2014
---- ----
GAAP Diluted
Earnings Per
Share $1.30 $1.07
Impact of
Partial
Release of
Deferred Tax
Asset
Valuation
Allowance (0.30) a (0.22) b
----- --- -----
Adjusted
Diluted
Earnings Per
Share $1.00 $0.85
Diluted Shares 140.4 143.7
a Represents the net earnings per share impact of deferred
tax asset valuation allowance of $42.0 million.
b Represents the net earnings per share impact of deferred
tax asset valuation allowance of $31.5 million.
Free Cash Flow
($ in millions)
1st Quarter Guidance
----------- --------
2015 2014 2015
---- ---- ----
Cash Provided by Operating
Activities $424 $45 $925 - $1,075
Capital Expenditures (40) (53) (325 - 375)
Free Cash Flow $384 ($8) $600 - $700
On the web: http://www.spiritaero.com
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SOURCE Spirit AeroSystems Holdings, Inc.
