SPIRIT AEROSYSTEMS HOLDINGS, INC. WICHITA, Kan., Aug. 1, 2014 /PRNewswire/ -- Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported second quarter 2014 financial results including continued healthy demand for large commercial aircraft and strong mature program operating performance. Spirit's second quarter 2014 revenues were $1.8 billion, up from $1.5 billion for the same period of 2013 on higher deliveries.
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Operating income was $216 million, up from a loss of ($239) million for the same period in 2013. Net income for the quarter was $143 million, or $1.01 per fully diluted share.
Table 1. Summary Financial Results (unaudited)
----------------------------------------------
2nd Quarter Six Months
----------- ----------
($ in millions,
except per
share data) 2014 2013 Change 2014 2013 Change
--------------- ---- ---- ------ ---- ---- ------
Revenues $1,803 $1,521 19% $3,532 $2,963 19%
Operating
Income (Loss) $216 ($239) 191% $411 ($94) 537%
Operating
Income (Loss)
as a % of
Revenues 12.0% (15.7%) 2,770 BPS 11.6% (3.2%) 1,480 BPS
Net Income
(Loss) $143 ($209) 168% $297 ($128) 332%
Net Income
(Loss) as a %
of Revenues 8.0% (13.7%) 2,170 BPS 8.4% (4.3%) 1,270 BPS
Earnings (Loss)
Per Share
(Fully
Diluted) $1.01 ($1.47) 169% $2.07 ($0.90) 330%
Fully Diluted
Weighted Avg
Share Count 142.4 141.3 143.2 141.1
"Spirit continues to grow with the commercial aerospace upcycle and realize improved operational performance," said President and Chief Executive Officer Larry Lawson. "In the second quarter our team delivered the 5,000(th) Next Generation 737 fuselage. We continued to execute at all-time high production rates while improving our quality. Also this quarter, we made significant progress on the A350 program," Lawson continued.
"Other notable events include the initiation of Spirit's first ever share repurchase in our nine year history. We also redefined and further energized our aftermarket business model with new senior leadership, Bill Brown, and a name change to Global Customer Support and Services. These actions are all part of the disciplined transformation processes occurring at the company."
"Looking to the future, Spirit's value proposition is attractive as the commercial aerospace cycle remains strong and program execution and operational performance continue to be our focus," Lawson continued.
Spirit's backlog at the end of the second quarter of 2014 was approximately $41 billion.
Spirit updated its contract profitability estimates during the second quarter of 2014 to reflect improved performance and reduced risks, resulting in net pre-tax $19 million, or $0.09 per share(#), favorable cumulative catch-up adjustments on mature programs.
In comparison, the second quarter of 2013 included net pre-tax charges of ($448) million and net pre-tax favorable cumulative catch-up adjustments of $41 million.
Free cash flow was a $128 million* source of cash for the second quarter of 2014, compared to a $5 million* source of cash for the second quarter of 2013 reflecting improved operational performance, timing of cash tax payments, and lower capital expenditures. (Table 2)
Table 2. Cash
Flow and
Liquidity
(unaudited)
2nd Quarter Six Months
----------- ----------
($ in millions) 2014 2013 2014 2013
-------------- ---- ---- ---- ----
Cash Flow from
Operations $165 $60 $210 $14
Purchases of
Property, Plant &
Equipment ($37) ($55) ($90) ($135)
Free Cash Flow* $128 $5 $120 ($121)
July 3, December 31,
Liquidity 2014 2013
---- ----
Cash $382 $421
Total Debt $1,160 $1,167
Cash balances at the end of the quarter were $382 million and debt balances were $1,160 million. At the end of the second quarter of 2014, the company's $650 million credit facility remained undrawn.
On June 4, 2014, Spirit, Onex and certain other stockholders entered into an underwriting agreement for the sale by the stockholders of 8,168,351 shares of Spirit's class A common stock in a secondary public offering. In connection with the offering, Spirit repurchased 4 million shares of its class A common stock from the underwriters with $129.2 million of cash on hand. Following the transaction, Onex holds approximately 6 percent of total stockholder voting power and no longer maintains majority voting power of the company.
The company's credit rating remained unchanged at the end of the second quarter of 2014.
Financial Outlook and Risk to Future Financial Results
Spirit revenue guidance is increased for the full-year 2014 and is expected to be between $6.7 - $6.9 billion based on Boeing's 2014 delivery guidance of 715 to 725 aircraft; expected Airbus deliveries in 2014 at a similar level to those in 2013; internal Spirit forecasts for other customer production activities; expected non-production revenues; and foreign exchange rates generally consistent with those for the second quarter of 2014.
Fully diluted earnings per share guidance for 2014 is increased and is expected to be between $2.90 and $3.05 per share and does not include the impact of the year-to-date and potential future adjustments to the deferred tax asset valuation allowance.
Free cash flow guidance is increased and is now expected to be approximately $250 million*.
The effective tax rate for 2014 is forecast to be approximately 30.0 - 31.0 percent, reflecting the expected benefit of the U.S. Research Tax Credit for 2014, and excluding any potential adjustment to the valuation allowance recorded against the U.S. net deferred tax assets at the end of 2013. (Table 3)
Risks to our financial guidance are described in the Cautionary Statement Regarding Forward-Looking Statements contained in this release and in the "Risk Factors" section of our filings with the Securities and Exchange Commission.
Table 3. Financial Outlook
Updated August 1, 2014 Previous 2014 Guidance 2014 Guidance
--------------------------- ---------------------- -------------
Revenues $6.5 - $6.7 billion $6.7 - $6.9 billion
Earnings Per Share (Fully
Diluted) $2.50 - $2.65 $2.90 - $3.05
Effective Tax Rate** ~31.0% - 32.0% ~30.0% - 31.0%
Free Cash Flow* ~$200 million ~$250 million
Segment Results
Fuselage Systems
Fuselage Systems segment revenues for the second quarter of 2014 were $905 million, up from $732 million for the same period last year due to higher production deliveries. Operating margin for the second quarter of 2014 was 14.6 percent as compared to 21.2((1) (2)) percent during the same period of 2013. In the second quarter of 2014 the segment recorded pre-tax $3 million favorable cumulative catch-up adjustments on mature programs. In comparison, the segment realized a pre-tax ($5) million forward loss charge and pre-tax $28 million favorable cumulative catch-up adjustments in the second quarter of 2013.
Propulsion Systems
Propulsion Systems segment revenues in the second quarter of 2014 rose to $461 million, from $419 million for the same period last year on higher production deliveries. Operating margin for the second quarter of 2014 was 18.7 percent as compared to 20.3((1) (2)) percent in the second quarter of 2013. In the second quarter of 2014 the segment realized pre-tax $5 million favorable cumulative catch-up adjustments on mature programs. In comparison, the segment reported a pre-tax forward loss charge of ($4) million, a pre-tax benefit of $8 million due to a reversal of previously recognized forward loss, and pre-tax $12 million favorable cumulative catch-up adjustments in the second quarter of 2013.
Wing Systems
Wing Systems segment revenues in the second quarter of 2014 increased to $438 million from $369 million for the same period last year on higher production deliveries. Operating margin for the second quarter of 2014 was 16.2 percent as compared to (109.1)( (1) (2)) percent during the same period of 2013. In the second quarter of 2014 the segment recorded pre-tax $11 million favorable cumulative catch-up adjustments on mature programs. In comparison, in the second quarter of 2013 the segment recorded pre-tax forward loss charges of ($448) million and pre-tax $1 million favorable cumulative catch-up adjustments.
(1) For the three months ended June
27, 2013, corporate SG&A of
$1.8 million, $0.9 million and
$1.2 million was reclassified
from segment operating income
for Fuselage, Propulsion, and
Wing Systems, respectively, to
conform to current year
presentation.
(2) For the three months ended June
27, 2013, research and
development of $3.2 million,
$2.5 million and $0.9 million
was reclassified from segment
operating income for Fuselage,
Propulsion, and Wing Systems,
respectively, to conform to
current year presentation.
# The earnings per share amount is presented
net of income taxes of 31.0%.
* 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 an impact for any
potential adjustment to the valuation
allowance recorded against the U.S. net
deferred tax assets at the end of 2013.
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 "may," "will," "should," "expect," "anticipate," "intend," "estimate," "believe," "project," "continue," "plan," "forecast," 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; 2) our ability to perform our obligations and manage costs related to our new and maturing programs; 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 changing customer preferences, global economic conditions, conflicts in the Middle East or Asia, and the impact of continuing instability in global financial and credit markets; 6) the success and timely execution of key milestones, such as certification and first delivery of Airbus' A350 XWB aircraft program, receipt of necessary regulatory approvals and customer adherence to their announced schedules; 7) our ability to successfully negotiate future pricing under our agreements with Boeing; 8) our ability to enter into profitable supply arrangements with additional customers; 9) the ability of all parties to satisfy their performance requirements under existing supply contracts with our customers and the risk of nonpayment by such customers; 10) our ability to secure work for replacement programs; 11) any adverse impact on Boeing's and Airbus' production of aircraft; 12) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 13) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 14) our ability to borrow additional funds or refinance debt; 15) our ability to sell all or any portion of our Oklahoma sites on terms acceptable to us; 16) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 17) 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 United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 18) the cost and availability of raw materials and purchased components; 19) any reduction in our credit ratings; 20) our ability to recruit and retain highly skilled employees and our relationships with the unions representing many of our employees; 21) spending by the U.S. and other governments on defense; 22) the possibility that our cash flows and borrowing facilities may not be adequate; 23) our exposure under our existing senior secured revolving credit facility to higher interest payments should interest rates increase substantially; 24) the effectiveness of our interest rate and foreign currency hedging programs; 25) the effectiveness of our internal control over financial reporting; 26) the outcome or impact of ongoing or future litigation, claims and regulatory actions; and 27) our 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 and Quarterly Reports on Form 10-Q.
Appendix
Table 4. Segment
Reporting (unaudited) (unaudited)
2nd Quarter Six Months
----------- ----------
($ in millions) 2014 2013 Change 2014 2013 Change
-------------- ---- ---- ------ ---- ---- ------
Segment Revenues
Fuselage Systems $905.0 $732.1 23.6% $1,763.3 $1,450.0 21.6%
Propulsion Systems 460.5 418.6 10.0% 910.7 793.9 14.7%
Wing Systems 438.3 368.6 18.9% 852.5 711.9 19.7%
All Other (0.5) 1.4 5.3 7.1
---- --- --- ---
Total Segment
Revenues $1,803.3 $1,520.7 18.6% $3,531.8 $2,962.9 19.2%
Segment Earnings
(Loss) from
Operations
Fuselage Systems $132.2 $155.0 (14.7%) $274.2 $281.4 (2.6%)
Propulsion Systems 86.2 85.0 1.4% 166.4 153.4 8.5%
Wing Systems 71.0 (402.3) 117.6% 121.0 (381.8) 131.7%
All Other 0.2 1.8 0.3 3.4
--- --- --- ---
Total Segment
Operating Earnings
(Loss)(1) (2) $289.6 ($160.5) 280.4% $561.9 $56.4 896.3%
Unallocated Expense
Corporate SG&A(1) ($54.4) ($54.1) 0.6% ($114.9) ($98.4) 16.8%
Impact From Severe
Weather Event - (6.3) - (15.1)
Research &
Development(2) (6.8) (8.6) (20.9%) (13.1) (16.1) (18.6%)
Cost of Sales (12.2) (9.0) 35.6% (23.3) (20.8) 12.0%
----- ---- ----- ----
Total Earnings
(Loss) from
Operations $216.2 ($238.5) 190.6% $410.6 ($94.0) 536.8%
Segment Operating
Earnings (Loss) as
% of Revenues
Fuselage Systems 14.6% 21.2% (660) BPS 15.6% 19.4% (380) BPS
Propulsion Systems 18.7% 20.3% (160) BPS 18.3% 19.3% (100) BPS
Wing Systems 16.2% (109.1%) 12,530 BPS 14.2% (53.6%) 6,780 BPS
All Other (40.0%) 128.6% 5.7% 47.9%
------ ----- --- ----
Total Segment
Operating Earnings
(Loss) as % of
Revenues 16.1% (10.6%) 2,670 BPS 15.9% 1.9% 1,400 BPS
Total Operating
Earnings (Loss) as
% of Revenues 12.0% (15.7%) 2,770 BPS 11.6% (3.2%) 1,480 BPS
(1) For the three months ended June
27, 2013, corporate SG&A of
$1.8 million, $0.9 million and
$1.2 million was reclassified
from segment operating income
for Fuselage, Propulsion, and
Wing Systems, respectively, to
conform to current year
presentation. For the six
months ended June 27, 2013,
corporate SG&A of $4.1 million,
$2.1 million and $2.4 million
was reclassified from segment
operating income for Fuselage,
Propulsion, and Wing Systems,
respectively, to conform to
current year presentation.
(2) For the three months ended June
27, 2013, research and
development of $3.2 million,
$2.5 million and $0.9 million
was reclassified from segment
operating income for Fuselage,
Propulsion, and Wing Systems,
respectively, to conform to
current year presentation. For
the six months ended June 27,
2013, research and development
of $5.9 million, $4.4 million
and $2.0 million was
reclassified from segment
operating income for Fuselage,
Propulsion, and Wing Systems,
respectively, to conform to
current year presentation.
Spirit Ship Set Deliveries
(one ship set equals one aircraft)
2nd Quarter Six Months
----------- ----------
2014 2013 2014** 2013
---- ---- ----- ----
B737 130 115 255 221
B747 4 4 9 10
B767 3 5 6 11
B777 26 25 52 49
B787 33 14 64 31
--- --- --- ---
Total 196 163 386 322
A320 Family* 121 131 249 260
A330/340 30 30 60 57
A350 5 1 7 3
A380 7 10 14 17
--- --- --- ---
Total 163 172 330 337
Business/Regional Jet 33 19 68 39
--- --- --- ---
Total Spirit 392 354 784 698
=== === === ===
* 2013 A320 deliveries have
been updated for the
purpose of measuring wing
ship set deliveries, from
weighted average to total
ship set.
** Includes four additional
workdays as compared to
prior year period.
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months
Ended For the Six Months Ended
--------------------- ------------------------
July 3, 2014 June 27, 2013 July 3, 2014 June 27, 2013
------------ ------------- ------------ -------------
($ in millions, except per share data)
Net revenues $1,803.3 $1,520.7 $3,531.8 $2,962.9
Operating costs and expenses:
Cost of sales 1,525.9 1,690.2 2,993.2 2,927.3
Selling, general and
administrative 54.4 54.1 114.9 98.4
Impact from severe weather event - 6.3 - 15.1
Research and development 6.8 8.6 13.1 16.1
--- --- ---- ----
Total operating costs and
expenses 1,587.1 1,759.2 3,121.2 3,056.9
Operating income (loss) 216.2 (238.5) 410.6 (94.0)
Interest expense and financing
fee amortization (20.8) (17.3) (56.2) (34.9)
Interest income 0.1 - 0.2 0.1
Other income (expense), net 5.8 1.3 7.0 (8.6)
--- --- --- ----
Income (loss) before income
taxes and equity in net
income (loss) of affiliate 201.3 (254.5) 361.6 (137.4)
Income tax (provision) benefit (58.1) 45.0 (65.0) 9.3
----- ---- ----- ---
Income (loss) before equity
in net income (loss) of
affiliate 143.2 (209.5) 296.6 (128.1)
Equity in net income (loss) of
affiliate 0.2 0.1 0.4 (0.1)
--- --- --- ----
Net income (loss) $143.4 ($209.4) $297.0 ($128.2)
Earnings (loss) per share
Basic $1.01 ($1.47) $2.09 ($0.90)
Shares 140.8 141.3 141.2 141.1
Diluted $1.01 ($1.47) $2.07 ($0.90)
Shares 142.4 141.3 143.2 141.1
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
July 3, 2014 December 31, 2013
------------ -----------------
($ in millions)
Current assets
Cash and cash equivalents $381.6 $420.7
Accounts receivable, net 729.1 550.8
Inventory, net 1,875.4 1,842.6
Other current assets 51.6 130.1
---- -----
Total current assets 3,037.7 2,944.2
Property, plant and equipment, net 1,793.0 1,803.3
Pension assets 270.1 252.6
Other assets 120.6 107.1
----- -----
Total assets $5,221.4 $5,107.2
======== ========
Current liabilities
Accounts payable $654.8 $753.7
Accrued expenses 258.5 220.6
Current portion of long-term debt 9.9 16.8
Advance payments, short-term 71.4 133.5
Deferred revenue, short-term 27.0 19.8
Other current liabilities 213.4 191.2
----- -----
Total current liabilities 1,235.0 1,335.6
Long-term debt 1,150.4 1,150.5
Advance payments, long-term 750.6 728.9
Deferred revenue and other deferred
credits 29.2 30.9
Pension/OPEB obligation 73.2 69.8
Other liabilities 320.9 310.5
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,
132,215,419 and 120,946,429 shares
issued, respectively 1.3 1.2
Common stock, Class B par value $0.01,
150,000,000 shares authorized, 8,988,344
and 23,851,694 shares issued,
respectively 0.1 0.2
Additional paid-in capital 1,028.1 1,025.0
Accumulated other comprehensive (loss) (44.4) (54.6)
Retained earnings 805.7 508.7
Treasury stock, at cost (4,000,000 and
zero shares, respectively) (129.2) -
------ ---
Total shareholders' equity 1,661.6 1,480.5
Noncontrolling interest 0.5 0.5
--- ---
Total equity 1,662.1 1,481.0
------- -------
Total liabilities and equity $5,221.4 $5,107.2
======== ========
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months
Ended
-------------------
July 3, 2014 June 27, 2013
------------ -------------
($ in millions)
Operating activities
Net income (loss) $297.0 ($128.2)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation expense 83.5 78.5
Amortization expense 24.4 5.8
Accretion of customer supply agreement 0.5 0.2
Employee stock compensation expense 8.0 12.0
Excess tax benefits from share-based payment
arrangements (2.3) (0.4)
Loss on disposition of assets - 0.4
(Gain) from hedge contracts (1.3) (1.4)
(Gain) loss from foreign currency
transactions (5.7) 10.1
Deferred taxes 1.9 (40.0)
Long-term tax provision - 0.6
Pension and other post-retirement benefits,
net (12.8) (6.7)
Grant income (3.9) (3.3)
Equity in net (income) loss of affiliate (0.4) 0.1
Changes in assets and liabilities
Accounts receivable (172.4) (184.3)
Inventory, net (73.6) 276.2
Accounts payable and accrued liabilities (41.8) 35.2
Advance payments (40.4) (19.4)
Income taxes receivable/payable 121.8 (31.0)
Deferred revenue and other deferred credits 6.3 5.0
Other 20.7 4.9
Net cash provided by operating activities 209.5 14.3
----- ----
Investing activities
Purchase of property, plant and equipment (89.6) (119.3)
Purchase of property, plant and equipment -
severe weather related expenses - (15.7)
Other 0.4 2.6
Net cash (used in) investing activities (89.2) (132.4)
----- ------
Financing activities
Proceeds from issuance of bonds 300.0 -
Principal payments of debt (11.9) (4.0)
Payment on bonds (300.0) -
Excess tax benefits from share-based payment
arrangements 2.3 0.4
Debt issuance and financing costs (20.8) -
Purchase of treasury stock (129.2) -
Net cash (used in) financing activities (159.6) (3.6)
------ ----
Effect of exchange rate changes on cash and
cash equivalents 0.2 (2.0)
--- ----
Net (decrease) in cash and cash equivalents
for the period (39.1) (123.7)
Cash and cash equivalents, beginning of the
period 420.7 440.7
----- -----
Cash and cash equivalents, end of the period $381.6 $317.0
====== ======
Management believes the non-GAAP (Generally Accepted Accounting Principles) measures (indicated by *) used in this report provide investors with important perspectives into the company's ongoing business performance. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measure. Other companies may define the measure differently.
Free Cash Flow
($ in millions)
2nd Quarter Six Months Guidance
----------- ---------- --------
2014 2013 2014 2013 2014
---- ---- ---- ---- ----
Cash
Provided
by
Operating
Activities $164.5 $59.7 $209.5 $14.3 $460 - $485
Capital
Expenditures (36.6) (54.8) (89.6) (135.0) (210) - (235)
----- ----- ----- ------
Free Cash
Flow $127.9 $4.9 $119.9 ($120.7) ~$250
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SOURCE Spirit AeroSystems Holdings, Inc.
