SPIRIT AEROSYSTEMS HOLDINGS, INC. WICHITA, Kan., Aug. 3, 2016 /PRNewswire/ --
Second Quarter 2016 Highlights
-- Spirit reaches comprehensive long-term agreement with Airbus and extends
A350 XWB block size to 800 shipsets
-- Revises earnings per share (EPS) guidance to $3.45 - $3.65, reflecting
$0.86 per share impact for one-time items which includes an additional
net forward-loss of $135.7 million on the A350 XWB program
-- Raises free cash flow guidance to $350 - $400 million*
-- Continues to execute on previously announced $600 million share
repurchase program with $152 million purchased in 2Q 2016
Second Quarter 2016 Consolidated Results
-- Total Revenue of $1.8 billion, up 8% y/y
-- Fully diluted EPS of $0.35, Adjusted EPS of $1.21* excluding one-time
items
-- Strong free cash flow of $161 million*
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Spirit AeroSystems Holdings, Inc., [NYSE: SPR] reported second quarter 2016 financial results driven by strong operating performance of mature programs. Spirit's second quarter 2016 revenue was $1.8 billion, up eight percent compared to the same period of 2015, primarily driven by higher production deliveries on the A350 XWB and A320 programs, one-time claim settlements, and higher Global Customer Support and Services activity.
During the quarter, Spirit concluded long-standing negotiations with Airbus and reached a comprehensive agreement on the A350 XWB program. As a result of the agreement, Spirit extended the block to 800 shipsets and recorded an additional net forward-loss of $135.7 million in the second quarter.
"We are very pleased to reach this resolution with Airbus. The comprehensive agreement strengthens our partnership with Airbus and positions Spirit to extend our collaboration with them in the future," said new Spirit President and Chief Executive Officer Tom Gentile.
Operating income for the second quarter of 2016 was $83 million, compared to $230 million in the second quarter of 2015, reflecting the impact of the charge associated with the Airbus settlement and other one-time items (former CEO retirement costs and debt refinancing charges). Reported earnings per share was $0.35, or $1.21* per share excluding the one-time items, compared to $1.11 per share (or $1.09* adjusted) in the same period of 2015. (Table 1)
Table 1. Summary Financial Results (unaudited)
----------------------------------------------
2nd Quarter Six Months
----------- ----------
($ in millions,
except per
share data) 2016 2015 Change 2016 2015 Change
--------------- ---- ---- ------ ---- ---- ------
Revenues $1,830 $1,699 8% $3,512 $3,441 2%
Operating
Income $83 $230 (64%) $350 $466 (25%)
Operating
Income as a %
of Revenues 4.6% 13.6% (900) BPS 10.0% 13.5% (350) BPS
Net Income $45 $155 (71%) $216 $337 (36%)
Net Income as a
% of Revenues 2.4% 9.1% (670) BPS 6.2% 9.8% (360) BPS
Earnings Per
Share (Fully
Diluted) $0.35 $1.11 (68%) $1.65 $2.41 (32%)
Adjusted
Earnings Per
Share (Fully
Diluted)* $1.21 $1.09 11% $2.51 $2.09 20%
Fully Diluted
Weighted Avg
Share Count 129.3 140.1 130.9 140.0
"We are revising our earnings per share guidance to $3.45 - $3.65, which includes $0.86 per share impact of the one-time items. Adjusted for the one-time items, this translates into EPS guidance of $4.30 - $4.50*. We are also increasing our free cash flow guidance to a new range of $350 - $400 million. We continue to support the guidance we provided last quarter for revenue to be between $6.6 and $6.7 billion," Gentile added.
"With regard to capital deployment, we remain committed to our strategy of utilizing an opportunistic and disciplined approach. In the second quarter, we purchased 3.3 million shares for $152 million, which brings the total year to date to 6.9 million shares for $318 million. We plan to continue to execute on the current repurchase program of up to $600 million through December 2017," Gentile concluded.
Spirit's backlog at the end of the second quarter of 2016 was approximately $47 billion, with work packages on all platforms in the Boeing and Airbus backlog of approximately 12,500 aircraft.
Free cash flow from operations in the second quarter of 2016 was $161 million*, compared to adjusted free cash flow of $163 million* in the same quarter last year, adjusted for the impact of the 787 interim pricing agreement. (Table 2)
Table 2. Cash Flow and
Liquidity (unaudited)
2nd Quarter Six Months
----------- ----------
($ in millions) 2016 2015 2016 2015
-------------- ---- ---- ---- ----
Cash Flow from Operations $215 $305 $309 $729
Purchases of Property,
Plant & Equipment ($54) ($75) ($105) ($115)
Free Cash Flow* $161 $230 $204 $614
Adjusted Free Cash Flow* $161 $163 $161 $531
June 30, December 31,
Liquidity 2016 2015
---- ----
Cash $801 $957
Total Debt $1,198 $1,120
Cash balance at the end of the quarter was $801 million, reflecting the purchase of 3.3 million shares for $152 million during the quarter. The company's $650 million revolving credit facility remained undrawn at the end of the quarter.
Financial Outlook and Risk to Future Financial Results
Spirit revenue guidance for the full-year 2016 remains unchanged and is expected to be between $6.6 - $6.7 billion. Fully diluted EPS guidance for 2016 is revised to be $3.45 - $3.65 per share, reflecting the $0.86 per share impact of one-time items. Free cash flow guidance is increased to $350 - $400 million*, with capital expenditures ranging between $250 million and $300 million. The effective tax rate for 2016 is now forecasted to be approximately 31 percent. (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.
2016 Guidance
Table 3.
Financial
Outlook
Updated August
3, 2016 Prior New
--------------- ----- ---
Revenues $6.6 - $6.7 billion $6.6 - $6.7 billion
Earnings Per
Share (Fully
Diluted) $4.15 - $4.35 $3.45 - $3.65(1)
Effective Tax
Rate ~31.5% - 32.5% ~31%
Free Cash Flow* $325 - $375 million $350 - $400 million
1 - Excluding one-time items, EPS guidance is increased to $4.30
- $4.50
Segment Results
Fuselage Systems
Fuselage Systems segment revenue in the second quarter of 2016 was up 3 percent to $915 million due to higher production deliveries on the A350 XWB program, higher revenue recognized on certain non-recurring Boeing programs and increased Global Customer Support and Service activity, offset by lower production deliveries on the 747 program and decreased non-recurring production activity on the Sikorsky CH-53K. Operating margin for the second quarter of 2016 was 2.1 percent as compared to 18.9 percent during the same period of 2015, primarily driven by the $135.7 million net forward-loss on the A350 XWB program. In the second quarter of 2015, the company recorded pretax $11 million favorable cumulative catch-up adjustments on mature programs and a favorable change in estimates on forward-loss programs of $4 million.
Propulsion Systems
Propulsion Systems segment revenue in the second quarter of 2016 increased 9 percent to $482 million driven by higher revenue recognized on certain non-recurring Boeing programs, increased propulsion activity on the 787 program and increased Global Support and Services activity. Operating margin for the second quarter of 2016 was 15.4 percent as compared to 20.0 percent in the second quarter of 2015. In the second quarter of 2016, the segment realized pretax ($8.8) million unfavorable cumulative catch-up adjustments on mature programs and a ($2.4) million unfavorable change in estimates on forward-loss programs. In comparison, the segment realized pretax $7 million favorable cumulative catch-up adjustments on mature programs and a ($1) million unfavorable change in estimates on forward-loss programs in the second quarter of 2015.
Wing Systems
Wing Systems segment revenue in the second quarter of 2016 increased 15 percent to $424 million due to higher production deliveries on the A350 XWB and A320 programs and one-time claim settlements with customers, partially offset by lower net revenue recognized on certain non-recurring Boeing programs. Operating margin for the second quarter of 2016 was 15.3 percent as compared to 13.6 percent during the same period of 2015, due to favorable labor and material cost performance and a favorable impact of fixed overhead absorption as a result of higher production rates. In the second quarter of 2016, the segment recorded pretax $9.8 million favorable cumulative catch-up adjustments primarily due to customer settlements and a favorable change in estimates on forward-loss programs of $1.2 million. In comparison, the segment recorded pretax ($1) million unfavorable cumulative catch-up adjustments on mature programs in the second quarter of 2015.
Table 4. Segment
Reporting
(unaudited)
2nd Quarter Six Months
----------- ----------
($ in millions) 2016 2015 Change 2016 2015 Change
-------------- ---- ---- ------ ---- ---- ------
Segment Revenues
Fuselage Systems $915.4 $887.6 3.1% $1,789.2 $1,804.4 (0.8%)
Propulsion Systems 481.7 440.5 9.4% 920.3 886.5 3.8%
Wing Systems 424.2 367.5 15.4% 784.7 744.2 5.4%
All Other 8.6 3.1 17.3 5.8
--- --- ---- ---
Total Segment
Revenues $1,829.9 $1,698.7 7.7% $3,511.5 $3,440.9 2.1%
Segment Earnings
from Operations
Fuselage Systems $19.3 $168.0 (88.5%) $196.6 $332.5 (40.9%)
Propulsion Systems 74.3 88.2 (15.8%) 173.4 183.9 (5.7%)
Wing Systems 64.8 50.1 29.3% 123.6 95.3 29.7%
All Other 1.3 1.4 3.2 1.1
--- --- --- ---
Total Segment
Operating
Earnings $159.7 $307.7 (48.1%) $496.8 $612.8 (18.9%)
Unallocated
Expense
Corporate SG&A ($70.2) ($53.8) 30.5% ($120.2) ($105.4) 14.0%
Research &
Development (4.4) (6.7) (34.3%) (10.5) (13.7) (23.4%)
Cost of Sales (1.8) (16.9) (89.3%) (16.3) (28.1) (42.0%)
Total Earnings
from Operations $83.3 $230.3 (63.8%) $349.8 $465.6 (24.9%)
Segment Operating
Earnings as % of
Revenues
Fuselage Systems 2.1% 18.9% (1,680) BPS 11.0% 18.4% (740) BPS
Propulsion Systems 15.4% 20.0% (460) BPS 18.8% 20.7% (190) BPS
Wing Systems 15.3% 13.6% 170 BPS 15.8% 12.8% 300 BPS
All Other 15.1% 45.2% 18.5% 19.0%
---- ---- ---- ----
Total Segment
Operating
Earnings as % of
Revenues 8.7% 18.1% (940) BPS 14.1% 17.8% (370) BPS
Total Operating
Earnings as % of
Revenues 4.6% 13.6% (900) BPS 10.0% 13.5% (350) BPS
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," and other similar words, or phrases, 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 aircraft demand and build rates of 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 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 our two major customers, Boeing and Airbus, 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 and Quarterly Reports on Form 10-Q.
Spirit Shipset Deliveries
(one shipset equals one aircraft)
2nd Quarter Six Months
----------- ----------
2016 2015 2016 2015
---- ---- ---- ----
B737 128 128 258 262
B747 2 4 5 8
B767 7 5 13 10
B777 25 25 51 51
B787 36 34 69 66
--- --- --- ---
Total 198 196 396 397
A320 Family 145 120 292 255
A330/340 17 19 33 46
A350 20 9 34 15
A380 6 6 13 12
--- --- --- ---
Total 188 154 372 328
Business/Regional Jet 22 16 37 33
--- --- --- ---
Total Spirit 408 366 805 758
=== === === ===
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months
Ended For the Six Months Ended
--------------------- ------------------------
June 30, 2016 July 2, 2015 June 30, 2016 July 2, 2015
------------- ------------ ------------- ------------
($ in millions, except per share data)
Net revenues $1,829.9 $1,698.7 $3,511.5 $3,440.9
Operating costs and expenses:
Cost of sales 1,672.0 1,407.9 3,031.0 2,856.2
Selling, general and
administrative 70.2 53.8 120.2 105.4
Research and
development 4.4 6.7 10.5 13.7
--- --- ---- ----
Total operating costs and
expenses 1,746.6 1,468.4 3,161.7 2,975.3
Operating income 83.3 230.3 349.8 465.6
Interest expense and
financing fee
amortization (23.9) (12.1) (35.3) (30.0)
Other income (expense),
net (6.2) 8.1 (8.4) 1.7
---- --- ---- ---
Income before income taxes
and equity in net income of
affiliate 53.2 226.3 306.1 437.3
Income tax provision (8.6) (71.7) (90.5) (101.1)
---- ----- ----- ------
Income before equity in net
income of affiliate 44.6 154.6 215.6 336.2
Equity in net income of
affiliate 0.2 0.3 0.8 0.6
--- --- --- ---
Net income $44.8 $154.9 $216.4 $336.8
=====
Earnings per share
Basic $0.35 $1.11 $1.66 $2.42
Shares 128.6 139.2 130.1 139.0
Diluted $0.35 $1.11 $1.65 $2.41
Shares 129.3 140.1 130.9 140.0
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 30, 2016 December 31, 2015
------------- -----------------
($ in millions)
Current assets
Cash and cash
equivalents $800.5 $957.3
Restricted
cash 86.4 -
Accounts
receivable,
net 756.3 537.0
Inventory,
net 1,546.6 1,774.4
Other current
assets 56.9 30.4
---- ----
Total current
assets 3,246.7 3,299.1
Property,
plant and
equipment,
net 1,936.8 1,950.7
Pension
assets 249.1 246.9
Other assets 250.1 267.8
----- -----
Total assets $5,682.7 $5,764.5
======== ========
Current liabilities
Accounts
payable $653.9 $618.2
Accrued
expenses 235.7 230.2
Profit
sharing 45.3 61.6
Current
portion of
long-term
debt 126.8 34.9
Advance
payments,
short-term 189.7 178.3
Deferred
revenue,
short-term 304.3 285.5
Deferred
grant income
liability -
current 13.2 11.9
Other current
liabilities 38.4 37.7
---- ----
Total current
liabilities 1,607.3 1,458.3
Long-term
debt 1,071.6 1,085.3
Advance
payments,
long-term 425.6 507.4
Pension/OPEB
obligation 70.7 67.7
Deferred
revenue and
other
deferred
credits 177.3 170.0
Deferred
grant income
liability -
non-current 73.0 82.3
Other
liabilities 258.2 273.5
Equity
Preferred
stock, par
value $0.01,
10,000,000
shares
authorized,
no shares
issued - -
Common stock,
Class A par outstanding,
value $0.01, respectively
200,000,000
shares
authorized,
129,051,833
and
135,617,589
shares
issued and 1.3 1.4
Common stock,
Class B par
value $0.01,
150,000,000
shares
authorized,
121 shares
issued and
outstanding
each period,
respectively - -
Additional
paid-in
capital 1,066.3 1,051.6
Accumulated
other
comprehensive
loss (194.9) (160.5)
Retained
earnings 1,872.6 1,656.2
Treasury
stock, at
cost
(16,582,310
and
9,691,865
shares,
respectively) (746.8) (429.2)
------ ------
Total
shareholders'
equity 1,998.5 2,119.5
Noncontrolling
interest 0.5 0.5
--- ---
Total equity 1,999.0 2,120.0
------- -------
Total
liabilities
and equity $5,682.7 $5,764.5
======== ========
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months
Ended
-------------------
June 30, 2016 July 2, 2015
------------- ------------
($ in millions)
Operating activities
Net income $216.4 $336.8
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation
expense 98.9 88.8
Amortization
expense 0.1 0.6
Amortization of
deferred
financing fees 14.7 5.1
Accretion of
customer supply
agreement 2.4 1.1
Employee stock
compensation
expense 28.9 11.9
Excess tax
benefits from
share-based
payment
arrangements - (10.1)
Loss from hedge
contracts - 1.6
Loss from foreign
currency
transactions 11.2 2.7
Loss on
disposition of
assets 3.1 2.2
Deferred taxes 25.4 4.4
Pension and other
post-retirement
benefits, net 0.8 (13.1)
Grant liability
amortization (5.4) (4.8)
Equity in net
income of
affiliate (0.8) (0.6)
Changes in assets and liabilities
Accounts
receivable, net (224.1) 40.1
Inventory, net 184.9 (1.3)
Accounts payable
and accrued
liabilities 39.5 (12.0)
Profit sharing/
deferred
compensation (16.1) (70.0)
Advance payments (70.4) (43.2)
Income taxes
receivable/
payable (29.9) 181.5
Deferred revenue
and other
deferred credits 28.0 185.7
Other 1.2 21.6
Net cash provided
by operating
activities $308.8 $729.0
------ ------
Investing activities
Purchase of
property, plant
and equipment (104.7) (115.4)
Net cash used in
investing
activities ($104.7) ($115.4)
------- -------
Financing activities
Proceeds from
issuance of debt - 535.0
Proceeds from
issuance of
bonds 299.8 -
Principal
payments of debt (9.8) (17.4)
Payments on term
loan - (534.9)
Payments on bonds (213.6) -
Taxes paid
related to net
share settlement
awards (14.3) (20.2)
Excess tax
benefit from
share-based
payment
arrangements - 10.1
Debt issuance and
financing costs (13.7) (4.7)
Purchase of
treasury stock (317.6) -
Change in
restricted cash (86.4) -
Net cash used in
financing
activities ($355.6) ($32.1)
------- ------
Effect of
exchange rate
changes on cash
and cash
equivalents (5.3) (0.7)
---- ----
Net (decrease)
increase in cash
and cash
equivalents for
the period ($156.8) $580.8
Cash and cash
equivalents,
beginning of the
period 957.3 377.9
Cash and cash
equivalents, end
of the period $800.5 $958.7
====== ======
Appendix
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 measures. Other companies may define the measures differently.
Adjusted EPS
2nd Quarter Six Months Guidance
---------- --------
2016 2015 2016 2015 2016
---- ---- ---- ---- ----
GAAP Diluted
Earnings Per
Share $0.35 $1.11 $1.65 $2.41 $3.45 - $3.65
Impact of
Airbus
Agreement, CEO
Retirement,
and Debt
Refinancing 0.86 a - 0.86 a - 0.86 a
Impact of
Partial
Release of
Deferred Tax
Asset
Valuation
Allowance - (0.02) b - (0.32) c -
--- ----- ----- ---
Adjusted
Diluted
Earnings Per
Share $1.21 $1.09 $2.51 $2.09 ~ $4.30 - $4.50
Diluted Shares 129.3 140.1 130.9 140.0
a Represents the net earnings
per share impact of the
Airbus agreement ($0.68), CEO
retirement costs ($0.11) and
debt refinancing charge
($0.07)
b Represents the net earnings
per share impact of deferred
tax asset valuation allowance
of $2.1 million in 2015
c Represents the net earnings
per share impact of deferred
tax asset valuation allowance
of $42.0 million in 1Q 2015
and $2.1 million in 2Q 2015
Free Cash Flow
($ in millions)
2nd Quarter Six Months Guidance
----------- ---------- --------
2016 2015 2016 2015 2016
---- ---- ---- ---- ----
Cash Provided by
Operating
Activities $215 $305 $309 $729 $600 - $700
Capital
Expenditures (54) (75) (105) (115) (250 - 300)
--- --- ---- ---- ----------
Free Cash Flow $161 $230 $204 $614 $350 - $400
Cash Received
under 787
Interim Pricing
Agreement - (67) (43) (83)
--- --- --- ---
Adjusted Free
Cash Flow $161 $163 $161 $531
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