WICHITA, Kan., May 5, 2011 /CNW/ -- -- First Quarter 2011 Revenues
of $1.050 billion -- Operating Income of $70 million -- Fully
Diluted Earnings Per Share of $0.24 per share; includes ($0.14) per
share impact for CH-53K charge -- Cash and Cash Equivalents were
$311 million --Total backlog of approximately $28.2 billion --
Financial Guidance for 2011 remains unchanged Spirit AeroSystems
Holdings, Inc. (NYSE: SPR) reported first quarter 2011 financial
results reflecting solid core operating performance as demand for
large commercial aircraft remains strong. Spirit's first quarter
2011 revenues were $1.050 billion, slightly up from $1.043 billion
for the same period of 2010 primarily driven by model mix.
Operating income was $70 million, compared to $93 million for the
same period in 2010, as the company recognized a $28 million ($0.14
per share) pre-tax charge on the CH-53K program and realized higher
R&D expense associated with 787-9 development in the current
quarter. Net income for the quarter was $35 million, or $0.24 per
fully diluted share, compared to $56 million, or $0.40 per fully
diluted share, in the same period of 2010, as the current period
also included increased interest expense associated with increased
debt outstanding and a higher effective tax rate. (Table 1) Table
1. Summary Financial Results (unaudited)
--------------------------- 1st Quarter ----------- ($ in millions,
except per share data) 2011 2010 Change
-------------------------------- ---- ---- ------ Revenues $1,050
$1,043 1% Operating Income $70 $93 (25%) Operating Income as a % of
Revenues 6.6% 8.9% (230) BPS Net Income $35 $56 (38%) Net Income as
a % of Revenues 3.3% 5.3% (200) BPS Earnings per Share (Fully
Diluted) $0.24 $0.40 (40%) Fully Diluted Weighted Avg Share Count
142.1 140.4 -------------------------------- ----- ----- "Our core
businesses continue to perform well and the market for large
commercial airplanes remains strong," said President and Chief
Executive Officer Jeff Turner. "During the first quarter, we
delivered ship sets for more than 250 aircraft to our various
customers, including six 787 forward fuselages to Boeing Commercial
Airplanes." "While the additional cost growth on the CH-53K program
is disappointing, getting it right for the future is our focus. Our
approach was to adapt some of our commercial manufacturing
practices to this military product and to-date we have been
unsuccessful," Turner said. "As we move through 2011 and 2012 we
will continue to invest in additional capacity for our core
business while we move new programs through the development cycle
and into early production. Moving forward we expect to benefit from
expanding demand for our core products as we help bring the next
generation of large commercial airplanes and business jets to
market," Turner concluded. Spirit's backlog at the end of the first
quarter of 2011 remained stable at $28.2 billion. Spirit calculates
its backlog based on contractual prices for products and volumes
from the published firm order backlogs of Airbus and Boeing, along
with firm orders from other customers. The company realized a
pre-tax charge of $28 million ($0.14 per share) on the CH-53K
program, moving the development contract on the program into a loss
position. The additional cost on this program is associated with
the decision to proceed with a more traditional design and build
approach to manufacture the remaining six test units. Spirit
updated its contract profitability estimates during the first
quarter of 2011, resulting in a net pre-tax $3 million ($0.02 per
share) unfavorable cumulative catch-up adjustment primarily
associated with changes in contract profitability estimates on the
A350 wing development effort, partially offset by improved
productivity and efficiencies in the Propulsion segment. In
comparison, Spirit recognized an $8 million unfavorable cumulative
catch-up adjustment for the first quarter of 2010. Cash flow from
operations was a $128 million use of cash for the first quarter of
2011, compared to a $110 million use of cash for the first quarter
of 2010. The current quarter compared to the same period of 2010
reflects increased working capital primarily driven by inventory
growth on development programs, partially offset by deferred
revenue, timing of liabilities, and favorable tax impacts. (Table
2) Table 2. Cash Flow and Liquidity 1st Quarter ----------- ($ in
millions) 2011 2010 --------------- ---- ---- Cash Flow from
Operations ($128) ($110) Purchases of Property, Plant &
Equipment ($42) ($69) March December 31, 31, Liquidity 2011 2010
---- ---- Cash $311 $482 Total Debt $1,196 $1,197 ---------- ------
------ Cash balances at the end of the quarter were $311 million,
down $171 million from year-end 2010, largely reflecting the
increase in inventory associated with increased production rates
and continuing investments in new programs. At the end of the first
quarter of 2011, the company's $650 million revolving credit
facility remained undrawn. Approximately $20 million of the credit
facility is reserved for financial letters of credit. Debt balances
at the end of the first quarter were $1,196 million, relatively
flat from year-end. The company's credit rating remains unchanged
at the end of the first quarter 2011 with a BB rating, stable
outlook by Standard & Poor's and a Ba2 rating, stable outlook
by Moody's Investor Services. Financial Outlook Spirit revenue
guidance for the full-year 2011 remains unchanged and is expected
to be between $4.5 and $4.7 billion based on Boeing's 2011 delivery
guidance of 485 to 500 aircraft; expected B787 deliveries; expected
Airbus deliveries in 2011 of approximately 520 to 530 aircraft;
internal Spirit forecasts for other customer production activities;
expected non-production revenues; and foreign exchange rates
consistent with those in the second half of 2010. Fully diluted
earnings per share guidance for 2011 remains unchanged and is
expected to be between $1.70 and $1.90 per share, reflecting
increased volumes on certain core programs and productivity and
efficiency gains. Guidance for cash flow from operations, less
capital expenditures, remains unchanged and is expected to be
approximately a $250 million use of cash in the aggregate, with
capital expenditures of approximately $325 million. The effective
tax rate, forecast to be between 31 and 32 percent for 2011,
remains unchanged. (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; mid-range business jet market risks; our ability to
achieve anticipated productivity and cost improvements; and our
ability to complete the 787 contract amendment. Table 3. Financial
2010 Outlook Actual 2011 Guidance ------------------- ------
------------- Revenues $4.2 billion $4.5 - $4.7 billion Earnings
Per Share (Fully Diluted) $1.55 $1.70 - $1.90 Effective Tax Rate
26.3% 31% - 32% Cash Flow from Operations $125 million ~$75 million
Capital Expenditures $288 million ~$325 million
-------------------- ------------- ------------- Cautionary
Statement Regarding Forward-Looking Statements This press release
contains "forward-looking statements." 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," "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: our ability to
continue to grow our business and execute our growth strategy,
including the timing and execution of new programs; our ability to
perform our obligations and manage costs related to our new
commercial and business aircraft development programs and the
related recurring production; potential reduction in the build
rates of certain Boeing aircraft including, but not limited to, the
B737 program, the B747 program, the B767 program and the B777
program, and build rates of the Airbus A320 and A380 programs,
which could be negatively impacted by continuing weakness in the
global economy and economic challenges facing commercial airlines,
and by a lack of business and consumer confidence and the impact of
continuing instability in the global financial and credit markets,
including, but not limited to, sovereign debt concerns in Europe;
the inability to resolve significant claims with Boeing related to
non-recurring and recurring costs on the B787 program; declining
business jet manufacturing rates and customer cancellations or
deferrals as a result of the weakened global economy; the success
and timely execution of key milestones such as certification and
delivery of Boeing's new B787 and Airbus' new A350 XWB aircraft
programs, including first flight for the Airbus A350 XWB, receipt
of necessary regulatory approvals and customer adherence to their
announced schedules; our ability to enter into supply arrangements
with additional customers and 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; 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; any adverse impact on the
demand for air travel or our operations from the outbreak of
diseases or epidemic or pandemic outbreaks; returns on pension plan
assets and impact of future discount rate changes on pension
obligations; our ability to borrow additional funds or refinance
debt; competition from original equipment manufacturers and other
aerostructures suppliers; the effect of governmental laws, such as
U.S. export control laws and anti-bribery laws such as the Foreign
Corrupt Practices Act, environmental laws and agency regulations,
both in the U.S. and abroad; the cost and availability of raw
materials and purchased components; our ability to successfully
extend or renegotiate our primary collective bargaining contracts
with our labor unions; our ability to recruit and retain highly
skilled employees and our relationships with the unions
representing many of our employees; spending by the U.S. and other
governments on defense; 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 and the possibility that we may be unable to borrow
additional funds or refinance debt; our exposure under our existing
senior secured revolving credit facility to higher interest
payments should interest rates increase substantially; the
effectiveness of our interest rate and foreign currency hedging
programs; the outcome or impact of ongoing or future litigation and
regulatory actions; and 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. You should review carefully the section
captioned "Risk Factors" in our 2010 Form 10-K for a more complete
discussion of these and other factors that may affect our business.
Appendix Segment Results Fuselage Systems Fuselage Systems segment
revenues for the first quarter of 2011 were $528 million, up 2.3
percent from the same period last year, largely driven by model
mix. Operating margin for the first quarter of 2011 was 8.9 percent
as compared to 14.7 percent during the same period of 2010. During
the first quarter of 2011, the segment realized an unfavorable $28
million pre-tax charge on the CH-53K program. In comparison, a
pre-tax $5 million unfavorable cumulative catch-up adjustment was
realized during the first quarter of 2010. Propulsion Systems
Propulsion Systems segment revenues for the first quarter of 2011
were $273 million, relatively flat from the same period last year.
Operating margin for the first quarter of 2011 was 14.9 percent as
compared to 12.2 percent in the first quarter of 2010, driven by
productivity and efficiency improvements and additional aftermarket
volume. During the first quarter of 2011, the segment realized a
favorable pre-tax $3 million cumulative catch-up adjustment. Wing
Systems Wing Systems segment revenues for the first quarter of 2011
were $245 million, down 1.6 percent from the same period last year,
primarily driven by model mix. Operating margin for the first
quarter of 2011 was 7.1 percent as compared to 7.6 percent during
the same period of 2010. During the first quarter of 2011, the
segment realized an unfavorable pre-tax $6 million cumulative
catch-up adjustment primarily driven by additional engineering
costs on the A350 wing development contract block. In comparison, a
pre-tax $3 million unfavorable cumulative catch-up adjustment was
realized during the first quarter of 2010. Table 4. Segment
Reporting (unaudited) 1st Quarter ----------- ($ in millions) 2011
2010 Change --------------- ---- ---- ------ Segment Revenues
Fuselage Systems $528.0 $516.2 2.3% Propulsion Systems $273.0
$274.4 (0.5%) Wing Systems $244.9 $248.9 (1.6%) All Other $3.7 $3.8
---- ---- Total Segment Revenues $1,049.6 $1,043.3 0.6% Segment
Earnings from Operations Fuselage Systems $47.0 $75.9 (38.1%)
Propulsion Systems $40.8 $33.6 21.4% Wing Systems $17.4 $18.9
(7.9%) All Other $0.0 $0.3 ---- ---- Total Segment Operating
Earnings $105.2 $128.7 (18.3%) Unallocated Corporate SG&A
Expense ($35.1) ($35.0) 0.3% Unallocated Research & Development
Expense ($0.5) ($0.7) (28.6%) ----- ----- ------- Total Earnings
from Operations $69.6 $93.0 (25.2%) Segment Operating Earnings as %
of Revenues Fuselage Systems 8.9% 14.7% (580) BPS Propulsion
Systems 14.9% 12.2% 270 BPS Wing Systems 7.1% 7.6% (50) BPS All
Other 0.0% 7.9% --- --- Total Segment Operating Earnings as % of
Revenues 10.0% 12.3% (230) BPS Total Operating Earnings as % of
Revenues 6.6% 8.9% (230) BPS -------------------------------- ---
--- --------- Spirit Ship Set Deliveries (One Ship Set equals One
Aircraft) 2010 Spirit AeroSystems Deliveries 1st 2nd 3rd 4th Total
Qtr Qtr Qtr Qtr 2010 --- --- --- --- ------ B737 94 96 93 89 372
B747 3 1 2 4 10 B767 3 4 3 5 15 B777 21 18 14 14 67 B787 5 4 4 3 16
--- --- --- --- --- Total 126 123 116 115 480 A320 Family 102 95 75
96 368 A330/340 25 23 5 19 72 A380 1 5 7 5 18 --- --- --- --- ---
Total 128 123 87 120 458 Business/ Regional Jet* 5 6 6 10 27 ---
--- --- --- --- Total Spirit 259 252 209 245 965 === === === ===
=== 2011 Spirit AeroSystems Deliveries 1st 2nd 3rd 4th Qtr Qtr Qtr
Qtr YTD 2011 ---- ---- ---- ---- -------- B737 93 93 B747 4 4 B767
5 5 B777 16 16 B787 6 6 --- --- Total 124 124 A320 Family 103 103
A330/340 18 18 A380 6 6 --- --- Total 127 127 Business/ Regional
Jet 8 8 --- --- Total Spirit 259 259 === === * Previously included
Hawker-Beechcraft products only. Now includes Spirit deliveries
associated with business and regional jets. Spirit AeroSystems
Holdings, Inc. Condensed Consolidated Statements of Operations
(unaudited) For the Three Months Ended -------------------- March
31, April 1, 2011 2010 ---------- --------- ($ in millions, except
per share data) Net revenues $1,049.6 $1,043.3 Operating costs and
expenses: Cost of sales 928.0 901.1 Selling, general and
administrative 39.0 39.3 Research and development 13.0 9.9 ---- ---
Total operating costs and expenses 980.0 950.3 Operating income
69.6 93.0 Interest expense and financing fee amortization (20.9)
(14.0) Interest income 0.1 0.1 Other income (expense), net 1.5
(5.5) --- ---- Income before income taxes and equity in net loss of
affiliate 50.3 73.6 Income tax provision (15.3) (17.8) ----- -----
Income before equity in net loss of affiliate 35.0 55.8 Equity in
net loss of affiliate (0.4) (0.3) ---- ---- Net income $34.6 $55.5
Earnings per share Basic $0.25 $0.40 Shares 138.6 137.3 Diluted
$0.24 $0.40 Shares 142.1 140.4 Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets (unaudited) March December
31, 31, ------ --------- 2011 2010 --- --- ($ in millions) Current
assets Cash and cash equivalents $310.9 $481.6 Accounts receivable,
net 285.4 200.2 Inventory, net 2,652.5 2,507.9 Other current assets
84.7 105.0 ---- ----- Total current assets 3,333.5 3,294.7
Property, plant and equipment, net 1,479.8 1,470.0 Pension assets
178.2 172.4 Other assets 141.6 164.9 ----- ----- Total assets
$5,133.1 $5,102.0 ======== ======== Current liabilities Accounts
payable $481.5 $443.5 Accrued expenses 213.0 220.3 Current portion
of long-term debt 9.7 9.5 Advance payments, short-term 115.9 169.4
Deferred revenue, short-term 297.0 302.6 Other current liabilities
17.1 19.5 ---- ---- Total current liabilities 1,134.2 1,164.8
Long-term debt 1,186.1 1,187.3 Advance payments, long-term 671.7
655.2 Deferred revenue and other deferred credits 28.5 29.0
Pension/OPEB obligation 74.5 72.5 Other liabilities 181.2 182.3
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, 1.1 1.1 107,589,410 and
107,201,314 shares issued, respectively Common stock, Class B par
value $0.01, 150,000,000 shares authorized, 0.4 0.3 34,737,911 and
34,897,388 shares issued, respectively Additional paid-in capital
986.0 983.6 Accumulated other comprehensive loss (66.4) (75.3)
Retained earnings 935.3 900.7 ----- ----- Total shareholders'
equity 1,856.4 1,810.4 Noncontrolling interest 0.5 0.5 --- ---
Total equity 1,856.9 1,810.9 ------- ------- Total liabilities and
equity $5,133.1 $5,102.0 ======== ======== Spirit AeroSystems
Holdings, Inc. Condensed Consolidated Statements of Cash Flows
(unaudited) For the Three Months Ended -------------------- March
31, April 1, 2011 2010 ---------- --------- ($ in millions)
Operating activities Net income $34.6 $55.5 Adjustments to
reconcile net income to net cash (used in) operating activities
Depreciation expense 32.0 27.3 Amortization expense 3.5 3.1
Employee stock compensation expense 2.2 2.3 Excess tax benefits
from share- based payment arrangements (0.3) - Gain from the
effectiveness of hedge contracts (0.1) - (Gain) Loss from foreign
currency transactions (0.9) 8.1 Deferred taxes 6.3 6.0 Long-term
tax benefit 0.7 (17.6) Pension and other post- retirement benefits,
net (1.5) (2.3) Grant income (1.3) (0.5) Equity in net loss of
affiliate 0.4 0.3 Changes in assets and liabilities Accounts
receivable (81.5) (78.9) Inventory, net (140.4) (88.1) Accounts
payable and accrued liabilities 30.5 (11.8) Advance payments (37.0)
(38.6) Deferred revenue and other deferred credits (5.9) (24.2)
Other 30.6 49.2 Net cash (used in) operating activities (128.1)
(110.2) ------ ------ Investing activities Purchase of property,
plant and equipment (41.5) (69.2) Other 0.3 (0.8) Net cash (used
in) investing activities (41.2) (70.0) ----- ----- Financing
activities Principal payments of debt (2.2) (2.0) Excess tax
benefits from share- based payment arrangements 0.3 - Net cash
(used in) financing activities (1.9) (2.0) ---- ---- Effect of
exchange rate changes on cash and cash equivalents 0.5 (0.2) ---
---- Net increase in cash and cash equivalents for the period
(170.7) (182.4) Cash and cash equivalents, beginning of the period
481.6 369.0 Cash and cash equivalents, end of the period $310.9
$186.6 ====== ====== www.spiritaero.com Investors, Alan Hermanson
or Coleen Tabor, both at +1-316-523-7040, or Media, Debbie Gann,
+1-316-526-3910, all for Spirit AeroSystems Holdings, Inc. Web
Site: http://www.spiritaero.com
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