WICHITA, Kan., July 31, 2019 /PRNewswire/ -- Spirit AeroSystems
Holdings, Inc. [NYSE: SPR] reported second quarter 2019 financial
results.
Table 1.
Summary Financial Results (unaudited)
|
|
|
|
|
2nd
Quarter
|
|
Six
Months
|
|
($ in millions,
except per share data)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Revenues
|
$2,016
|
$1,837
|
10%
|
$3,984
|
$3,573
|
12%
|
Operating
Income
|
$226
|
$218
|
4%
|
$459
|
$377
|
22%
|
Operating Income
as a % of Revenues
|
11.2%
|
11.8%
|
(60)
BPS
|
11.5%
|
10.6%
|
90
BPS
|
Net
Income
|
$168
|
$145
|
16%
|
$331
|
$271
|
22%
|
Net Income as a %
of Revenues
|
8.3%
|
7.9%
|
40
BPS
|
8.3%
|
7.6%
|
70
BPS
|
Earnings Per Share
(Fully Diluted)
|
$1.61
|
$1.31
|
23%
|
$3.16
|
$2.40
|
32%
|
Adjusted Earnings
Per Share (Fully Diluted)*
|
$1.71
|
$1.63
|
5%
|
$3.39
|
$2.72
|
25%
|
Fully Diluted
Weighted Avg Share Count
|
104.5
|
111.0
|
|
104.8
|
112.6
|
|
737 MAX Program Update
As a result of the 737 MAX
grounding and subsequent Memorandum of Agreement with Boeing in
April 2019, Spirit implemented
cost-reduction plans to mitigate the impact of the lower 737
production schedule. These actions include reduced levels of
overtime and contractors, a voluntary retirement plan, shortened
work weeks for certain employees, a hiring freeze, deferred capital
spend, and working capital improvements.
"While we implemented these cost-reduction actions in the second
quarter and are tracking to plan, the financial benefits will be
realized beginning in the second half of the year. These financial
benefits will carry into the future as our resources become better
aligned with our production rate and future schedule," said
Spirit's President and Chief Executive Officer Tom Gentile.
"The second quarter was a transition quarter because we had
prepared for 57 aircrafts per month and the factory was loaded for
that level of production when we made the change to remain at rate
52. Making such a quick adjustment to the production schedule
creates significant disruption in a complex production system like
the 737," Gentile said. "Having costs for rate 57 but producing at
a lower rate had a short-term negative impact on margins. As we
restructure our costs to align with the current outlook and benefit
from a longer period of rate stability, we expect to see improved
quality and production efficiency, as well as margin improvement,
back toward our target of 16.5 percent.
We will continue to take full advantage of this pause in rate
increases to focus on improving quality, factory efficiency, and
supply chain health."
Asco Acquisition Update
In June
2019, Asco experienced a cyberattack leading to the shutdown
of its facilities in Belgium,
Germany, the U.S., and
Canada. Asco is working to restore
its operations and systems back to full capacity. The attack caused
delays in Asco's ability to continue the process of data
segregation required by the European Commission to close the
transaction. As a result, the purchase agreement was amended on
July 14, 2019. The long-stop date for
the transaction is now October 29,
2019. The amendment also requires the sellers to keep Spirit
informed on developments relating to the cyberattack and indemnify
Spirit for up to $150 million in
damages resulting from the cyberattack. Spirit remains confident
about the strategic fit of Asco.
Revenue
Spirit's second quarter 2019 revenue was
$2.0 billion, up from the same period
of 2018. This increase was primarily driven by higher production
volumes on the Boeing 777 and 787 programs, favorable model mix on
the Boeing 737 program and higher revenue recognized on the Boeing
787 program. (Table 1)
Spirit's backlog at the end of the second quarter of 2019 was
approximately $46 billion, with work
packages on all commercial platforms in the Boeing and Airbus
backlog.
Earnings
Operating income for the second quarter of
2019 was $226 million, up compared to
$218 million in the same period of
2018. This increase was primarily due to favorable model mix on the
Boeing 737 program, partially offset by the absence of favorable
changes in estimates recognized during the same period in the prior
year. The current quarter also included a favorable litigation
settlement of approximately $14
million reported in Other income. The second quarter EPS was
$1.61, up compared to $1.31 in the same period of 2018. Second quarter
2019 adjusted EPS* was $1.71,
excluding the impact of the planned Asco acquisition and the
expenses related to the voluntary retirement program (VRP) offered
during the second quarter of 2019 in response to the 737 MAX
grounding, compared to $1.63 in the
same period of 2018, adjusted to exclude the impact of the planned
Asco acquisition and debt financing costs. (Table 1)
Cash
Cash from operations in the second quarter of
2019 was $230 million, compared to
$231 million in the same quarter last
year. Adjusted free cash flow* in the second quarter of 2019 was
$193 million, up compared to
$171 million in the same period of
2018. Cash balance at the end of the quarter was $1.3 billion, which includes the funds necessary
to complete the acquisition of Asco. (Table 2)
As discussed during the first quarter 2019 earnings review,
share repurchases are paused pending further clarity surrounding
the timing of the 737 MAX returning to service.
Table 2.
Cash Flow and Liquidity (unaudited)
|
|
|
|
|
|
|
2nd
Quarter
|
|
Six
Months
|
|
($ in
millions)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Cash from
Operations
|
$230
|
$231
|
-
|
$472
|
$397
|
19%
|
Purchases of
Property, Plant & Equipment
|
($37)
|
($61)
|
(39%)
|
($78)
|
($109)
|
(29%)
|
Free Cash
Flow*
|
$192
|
$169
|
14%
|
$394
|
$288
|
37%
|
Adjusted Free Cash
Flow*
|
$193
|
$171
|
13%
|
$403
|
$290
|
39%
|
|
|
|
|
|
|
|
|
|
|
|
June
27,
|
December
31,
|
|
Liquidity
|
|
|
|
2019
|
2018
|
|
Cash
|
|
|
|
$1,301
|
$774
|
|
Total
Debt
|
|
|
|
$2,147
|
$1,895
|
|
Segment Results
Fuselage Systems
Fuselage
Systems segment revenue in the second quarter of 2019 increased by
seven percent from the same period last year to $1.1 billion. This increase was primarily due to
higher production volumes on the Boeing 787 and Airbus A350
programs in addition to higher revenue recognized on the Boeing 787
program. Operating margin for the second quarter of 2019 decreased
to 12.4 percent, compared to 15.8 percent during the same period of
2018, primarily due to higher costs related to the Boeing 737
program, largely resulting from the impacts of the Boeing 737 MAX
grounding, in addition to the absence of favorable changes in
estimates recognized during the same period of the prior year. In
the second quarter of 2019, the segment recorded pretax
$(8.3) million of unfavorable
cumulative catch-up adjustments and $1.3
million of favorable changes in estimates on forward loss
programs. In the second quarter of 2018, the segment recorded
pretax $5.7 million of favorable
cumulative catch-up adjustments and $10.1
million of favorable changes in estimates on forward loss
programs.
Propulsion Systems
Propulsion Systems segment revenue
in the second quarter of 2019 increased 23 percent from the same
period last year to $519 million,
primarily driven by favorable model mix on the Boeing 737 program,
higher production volume on the Boeing 777 program and higher
revenue recognized on the Boeing 787 program. Operating margin for
the second quarter of 2019 increased to 18.8 percent, compared to
17.7 percent during the same period of 2018, primarily due to
favorable model mix on the Boeing 737 program. In the second
quarter of 2019, the segment recorded pretax $(6.6) million of unfavorable cumulative catch-up
adjustments and $0.4 million of
favorable changes in estimates on forward loss programs. In the
second quarter of 2018, the segment recorded pretax $3.4 million of favorable cumulative catch-up
adjustments and $4.3 million of
favorable changes in estimates on forward loss programs.
Wing Systems
Wing Systems segment revenue in the
second quarter of 2019 increased four percent from the same period
last year to $399 million, primarily
due to higher production volume on the Boeing 777 and 787 programs.
Operating margin for the second quarter of 2019 decreased slightly
to 14.4 percent, compared to 14.8 percent during the same period of
2018, primarily driven by performance on the Airbus A320 program.
In the second quarter of 2019, the segment recorded pretax
$1.7 million of favorable cumulative
catch-up adjustments and $0.6 million
of favorable changes in estimates on forward loss programs. In the
second quarter of 2018, the segment recorded pretax $(1.6) million of unfavorable cumulative catch-up
adjustments and $3.0 million of
favorable changes in estimates on forward loss programs.
Table 4.
Segment Reporting (unaudited)
|
|
|
|
2nd
Quarter
|
Six
Months
|
($ in
millions)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Segment
Revenues
|
|
|
|
|
|
|
Fuselage
Systems
|
$1,096.8
|
$1,029.7
|
6.5%
|
$2,166.4
|
$1,992.4
|
8.7%
|
Propulsion Systems
|
518.9
|
422.7
|
22.8%
|
1,004.6
|
817.2
|
22.9%
|
Wing
Systems
|
398.5
|
383.0
|
4.0%
|
806.4
|
760.0
|
6.1%
|
All
Other
|
1.9
|
1.5
|
26.7%
|
6.5
|
3.4
|
91.2%
|
Total Segment
Revenues
|
$2,016.1
|
$1,836.9
|
9.8%
|
$3,983.9
|
$3,573.0
|
11.5%
|
|
|
|
|
|
|
|
Segment Earnings
from Operations
|
|
|
|
|
|
|
Fuselage
Systems
|
$135.8
|
$163.2
|
(16.8%)
|
$274.7
|
$282.9
|
(2.9%)
|
Propulsion Systems
|
97.7
|
74.8
|
30.6%
|
193.2
|
127.7
|
51.3%
|
Wing
Systems
|
57.4
|
56.7
|
1.2%
|
123.2
|
107.5
|
14.6%
|
All
Other
|
-
|
-
|
**
|
1.2
|
(1.0)
|
**
|
Total Segment
Operating Earnings
|
$290.9
|
$294.7
|
(1.3%)
|
$592.3
|
$517.1
|
14.5%
|
|
|
|
|
|
|
|
Unallocated
Expense
|
|
|
|
|
|
|
SG&A
|
($56.4)
|
($61.0)
|
7.5%
|
($120.0)
|
($117.2)
|
(2.4%)
|
Research &
Development
|
(10.5)
|
(11.1)
|
5.4%
|
(23.4)
|
(20.5)
|
(14.1%)
|
Cost of
Sales
|
2.0
|
(5.0)
|
**
|
10.1
|
(2.3)
|
**
|
Total Earnings
from Operations
|
$226.0
|
$217.6
|
3.9%
|
$459.0
|
$377.1
|
21.7%
|
|
|
|
|
|
|
|
Segment Operating
Earnings as % of Revenues
|
|
|
|
|
|
|
Fuselage
Systems
|
12.4%
|
15.8%
|
(340)
BPS
|
12.7%
|
14.2%
|
(150)
BPS
|
Propulsion Systems
|
18.8%
|
17.7%
|
110
BPS
|
19.2%
|
15.6%
|
360
BPS
|
Wing
Systems
|
14.4%
|
14.8%
|
(40)
BPS
|
15.3%
|
14.1%
|
120
BPS
|
All
Other
|
**
|
**
|
**
|
**
|
**
|
**
|
Total Segment
Operating Earnings as % of Revenues
|
14.4%
|
16.0%
|
(160)
BPS
|
14.9%
|
14.5%
|
40
BPS
|
|
|
|
|
|
|
|
Total Operating
Earnings as % of Revenues
|
11.2%
|
11.8%
|
(60)
BPS
|
11.5%
|
10.6%
|
90
BPS
|
|
|
|
|
|
|
|
** Represents an amount
equal to or in excess of 100% or not meaningful.
|
Contact information:
Investor Relations: Ryan Avey
(316) 523-7040
Media: Keturah Austin (316)
523-2611
On the web: http://www.spiritaero.com
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains "forward-looking
statements" that may involve many risks and uncertainties.
Forward-looking statements generally can be identified by the use
of forward-looking terminology such as "aim," "anticipate,"
"believe," "could," "continue," "estimate," "expect," "goal,"
"forecast," "intend," "may," "might," "objective," "outlook,"
"plan," "predict," "project," "should," "target," "will," "would,"
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 under our new and maturing commercial,
business aircraft, and military development programs, and the
related recurring production, including our ability to meet
contractually required production rate increases; 3) our ability to
accurately estimate and manage performance, cost, and revenue under
our contracts, including our ability to achieve certain cost
reductions with respect to the B787 program and other programs; 4)
margin pressures and the potential for additional forward losses on
new and maturing programs; 5) our ability and our suppliers'
ability to accommodate, and the cost of accommodating, announced
increases in the build rates of certain aircraft and expanding
model mixes; 6) 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; 7) customer
cancellations or deferrals as a result of global economic
uncertainty or otherwise; 8) 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; 9) the success and timely execution of key
milestones such as the receipt of necessary regulatory approvals,
including our ability to obtain in a timely fashion any required
regulatory or other third party approvals for the consummation of
our announced acquisition of Asco, and customer adherence to their
announced schedules; 10) our ability to successfully negotiate, or
re-negotiate, future pricing under our supply agreements with
Boeing and our other customers; 11) our ability to enter into
profitable supply arrangements with additional customers; 12) the
ability of all parties to satisfy their performance requirements,
including our ability to timely deliver quality products, under
existing supply contracts with our two major customers, Boeing and
Airbus, and other customers, and the risk of non-payment by such
customers; 13) 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, domestic
or international hostilities, acts of terrorism, or government
action such as mandatory aircraft fleet grounding; 14) any adverse
impact on the demand for air travel or our operations from the
outbreak of diseases or epidemic or pandemic outbreaks; 15) our
ability to avoid or recover from cyber-based or other security
attacks, information technology failures, or other disruptions; 16)
returns on pension plan assets and the impact of future discount
rate changes on pension obligations; 17) our ability to borrow
additional funds or refinance debt; 18) competition from or
in-sourcing by commercial aerospace original equipment
manufacturers and competition from other aerostructures suppliers;
19) 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; 20) the effect of changes in tax law, such as the effect of
The Tax Cuts and Jobs Act that was enacted on December 22, 2017, and changes to the
interpretations of or guidance related thereto, and the Company's
ability to accurately calculate and estimate the effect of such
changes; 21) any reduction in our credit ratings; 22) our
dependence on our suppliers, as well as the cost and availability
of raw materials and purchased components; 23) our ability to
recruit and retain a critical mass of highly skilled employees and
our relationships with the unions representing many of our
employees, including our ability to avoid labor disputes and work
stoppages with respect to our union employees; 24) spending by the
U.S. and other governments on defense; 25) the possibility that our
cash flows and our credit facility may not be adequate for our
additional capital needs or for payment of interest on, and
principal of, our indebtedness; 26) our exposure under our
revolving credit facility to higher interest payments should
interest rates increase substantially; 27) the effectiveness of any
interest rate hedging programs; 28) the effectiveness of our
internal control over financial reporting; 29) the outcome or
impact of ongoing or future litigation, claims, and regulatory
actions; 30) our exposure to potential product liability and
warranty claims; 31) our ability to effectively assess, manage and
integrate acquisitions that we pursue, including our ability to
successfully integrate the Asco business and generate synergies and
other cost savings; 32) the consummation of our announced
acquisition of Asco while avoiding any unexpected costs, charges,
expenses, and adverse changes to business relationships and other
business disruptions for ourselves and Asco as a result of the
acquisition; 33) our ability to continue selling certain
receivables through our supplier financing programs; 34) the risks
of doing business internationally, including fluctuations in
foreign currency exchange rates, impositions of tariffs or
embargoes, trade restrictions, compliance with foreign laws, and
domestic and foreign government policies; 35) prolonged periods of
inflation where we do not have adequate inflation protection in our
customer contracts, among other things; and 36) the timing and
conditions surrounding the return to service of the 737 MAX fleet
and related impacts on our production rate. 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.
* Non-GAAP financial measure, see Appendix for
reconciliation
Spirit Shipset
Deliveries
|
(one shipset
equals one aircraft)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd
Quarter
|
|
Six Months
|
|
|
|
2019
|
2018
|
|
2019
|
2018
|
|
B737
|
|
147
|
169
|
|
299
|
297
|
|
B747
|
|
2
|
2
|
|
3
|
3
|
|
B767
|
|
8
|
7
|
|
16
|
15
|
|
B777
|
|
16
|
12
|
|
29
|
21
|
|
B787
|
|
42
|
38
|
|
84
|
75
|
|
Total
Boeing
|
|
215
|
228
|
|
431
|
411
|
|
|
|
|
|
|
|
|
|
A220(1)
|
|
10
|
-
|
|
18
|
-
|
|
A320
Family
|
|
172
|
161
|
|
350
|
323
|
|
A330
|
|
9
|
17
|
|
18
|
33
|
|
A350
|
|
30
|
24
|
|
58
|
52
|
|
A380
|
|
-
|
1
|
|
1
|
3
|
|
Total
Airbus
|
|
221
|
203
|
|
445
|
411
|
|
|
|
|
|
|
|
|
|
Business/Regional Jet
(1)
|
|
13
|
22
|
|
26
|
42
|
|
|
|
|
|
|
|
|
|
Total
|
|
449
|
453
|
|
902
|
864
|
|
|
|
|
|
|
|
|
|
(1) Airbus acquired
majority ownership in the C-Series program (subsequently renamed to
the A220 program) in July 2018; all C-Series deliveries prior to Q3
2018 are included in Business/Regional Jet and all subsequent A220
deliveries are included in A220.
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Statements of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the Six Months
Ended
|
|
|
|
June 27,
2019
|
|
June 28,
2018
|
|
June 27,
2019
|
|
June 28,
2018
|
|
|
($ in millions,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$2,016.1
|
|
$1,836.9
|
|
$3,983.9
|
|
$3,573.0
|
Operating costs
and expenses:
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
1,723.2
|
|
1,547.2
|
|
3,381.5
|
|
3,058.2
|
Selling, general and
administrative
|
|
56.4
|
|
61.0
|
|
120.0
|
|
117.2
|
Research and
development
|
|
10.5
|
|
11.1
|
|
23.4
|
|
20.5
|
|
Total operating
costs and expenses
|
|
1,790.1
|
|
1,619.3
|
|
3,524.9
|
|
3,195.9
|
|
Operating
income
|
|
226.0
|
|
217.6
|
|
459.0
|
|
377.1
|
Interest expense and
financing fee amortization
|
|
(23.7)
|
|
(24.8)
|
|
(42.5)
|
|
(36.1)
|
Other income
(expense), net
|
|
8.6
|
|
(12.3)
|
|
(2.4)
|
|
(8.2)
|
|
Income before
income taxes and equity in net income of affiliate
|
|
210.9
|
|
180.5
|
|
414.1
|
|
332.8
|
Income tax
provision
|
|
(42.9)
|
|
(35.3)
|
|
(83.0)
|
|
(62.8)
|
|
Income before
equity in net income of affiliate
|
|
168.0
|
|
145.2
|
|
331.1
|
|
270.0
|
Equity in net income
of affiliate
|
|
-
|
|
-
|
|
-
|
|
0.6
|
|
Net
income
|
|
$168.0
|
|
$145.2
|
|
$331.1
|
|
$270.6
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
Basic
|
|
$1.62
|
|
$1.32
|
|
$3.19
|
|
$2.43
|
Shares
|
|
103.5
|
|
110.0
|
|
103.7
|
|
111.4
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$1.61
|
|
$1.31
|
|
$3.16
|
|
$2.40
|
Shares
|
|
104.5
|
|
111.0
|
|
104.8
|
|
112.6
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
|
$0.12
|
|
$0.12
|
|
$0.24
|
|
$0.22
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(unaudited)
|
|
|
|
June 27,
2019
|
|
December 31,
2018
|
|
|
($ in
millions)
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$1,301.4
|
|
$773.6
|
Restricted
cash
|
|
0.3
|
|
0.3
|
Accounts receivable,
net
|
|
595.5
|
|
545.1
|
Contract assets,
short-term
|
|
613.9
|
|
469.4
|
Inventory,
net
|
|
970.7
|
|
1,012.6
|
Other current
assets
|
|
62.1
|
|
48.3
|
Total current assets
|
|
3,543.9
|
|
2,849.3
|
Property, plant and
equipment, net
|
|
2,161.8
|
|
2,167.6
|
Right of use
assets
|
|
50.4
|
|
-
|
Contract assets,
long-term
|
|
10.7
|
|
54.1
|
Pension
assets
|
|
324.8
|
|
326.7
|
Other
assets
|
|
253.5
|
|
288.2
|
Total assets
|
|
$6,345.1
|
|
$5,685.9
|
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$1,116.4
|
|
$902.6
|
Accrued
expenses
|
|
316.1
|
|
313.1
|
Profit
sharing
|
|
37.9
|
|
68.3
|
Current portion of
long-term debt
|
|
33.3
|
|
31.4
|
Operating lease
liabilities, short-term
|
|
5.6
|
|
-
|
Advance payments,
short-term
|
|
19.8
|
|
2.2
|
Contract liabilities,
short-term
|
|
160.7
|
|
157.9
|
Forward loss
provision, short-term
|
|
21.9
|
|
12.4
|
Deferred revenue and
other deferred credits, short-term
|
|
20.0
|
|
20.0
|
Deferred grant income
liability - current
|
|
7.7
|
|
16.0
|
Other current
liabilities
|
|
70.7
|
|
58.2
|
Total current liabilities
|
|
1,810.1
|
|
1,582.1
|
Long-term
debt
|
|
2,113.3
|
|
1,864.0
|
Operating lease
liabilities, long-term
|
|
44.8
|
|
-
|
Advance payments,
long-term
|
|
212.1
|
|
231.9
|
Pension/OPEB
obligation
|
|
33.2
|
|
34.6
|
Contract liabilities,
long-term
|
|
361.4
|
|
369.8
|
Forward loss
provision, long-term
|
|
135.8
|
|
170.6
|
Deferred revenue and
other deferred credits
|
|
39.0
|
|
31.2
|
Deferred grant income
liability - non-current
|
|
28.9
|
|
28.0
|
Other
liabilities
|
|
97.8
|
|
135.6
|
Stockholders'
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,
104,855,210 and 105,461,817 shares issued and outstanding,
respectively
|
|
1.0
|
|
1.1
|
Additional paid-in
capital
|
|
1,105.5
|
|
1,100.9
|
Accumulated other
comprehensive loss
|
|
(209.6)
|
|
(196.6)
|
Retained
earnings
|
|
3,027.3
|
|
2,713.2
|
Treasury stock, at
cost (41,515,847 and 40,719,438 shares, respectively)
|
|
(2,456.0)
|
|
(2,381.0)
|
Total stockholders' equity
|
|
1,468.2
|
|
1,237.6
|
Noncontrolling
interest
|
|
0.5
|
|
0.5
|
Total equity
|
|
1,468.7
|
|
1,238.1
|
Total liabilities and equity
|
|
$6,345.1
|
|
$5,685.9
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
|
|
For the Six Months
Ended
|
|
|
June 27,
2019
|
|
June 28,
2018
|
|
|
($ in
millions)
|
Operating
activities
|
|
|
|
|
Net income
|
|
$331.1
|
|
$270.6
|
Adjustments to
reconcile net income to net cash provided by operating
activities
|
|
|
|
|
Depreciation
expense
|
|
123.4
|
|
113.5
|
Amortization
expense
|
|
0.1
|
|
0.3
|
Amortization of deferred
financing fees
|
|
1.7
|
|
11.2
|
Accretion of customer supply
agreement
|
|
2.3
|
|
2.2
|
Employee stock compensation
expense
|
|
15.1
|
|
13.6
|
Loss from derivative
instruments
|
|
7.8
|
|
19.2
|
Gain from foreign currency
transactions
|
|
(0.1)
|
|
(2.2)
|
(Gain) loss on impairment
and disposition of assets
|
|
(0.2)
|
|
4.5
|
Deferred
taxes
|
|
24.5
|
|
(16.9)
|
Pension and other
post-retirement benefits, net
|
|
2.2
|
|
(16.9)
|
Grant liability
amortization
|
|
(11.4)
|
|
(10.2)
|
Equity in net income of
affiliate
|
|
-
|
|
(0.6)
|
Forward loss
provision
|
|
(25.3)
|
|
(102.5)
|
Changes in assets and
liabilities
|
|
|
|
|
Accounts receivable,
net
|
|
(50.1)
|
|
(117.0)
|
Contract assets
|
|
(101.4)
|
|
(36.5)
|
Inventory, net
|
|
39.0
|
|
58.4
|
Accounts payable and accrued
liabilities
|
|
157.2
|
|
247.6
|
Profit sharing/deferred
compensation
|
|
(30.4)
|
|
(80.9)
|
Advance payments
|
|
(2.2)
|
|
(49.9)
|
Income taxes
receivable/payable
|
|
(9.6)
|
|
(42.9)
|
Contract
liabilities
|
|
(5.5)
|
|
157.5
|
Deferred revenue and other
deferred credits
|
|
9.0
|
|
-
|
Other
|
|
(5.5)
|
|
(24.9)
|
Net
cash provided by operating activities
|
|
$471.7
|
|
$397.2
|
Investing
activities
|
|
|
|
|
Purchase of property, plant
and equipment
|
|
(77.9)
|
|
(109.4)
|
Other
|
|
0.1
|
|
0.3
|
Net
cash used in investing activities
|
|
($77.8)
|
|
($109.1)
|
Financing
activities
|
|
|
|
|
Principal payments of
debt
|
|
(4.9)
|
|
(3.3)
|
Payments on term
loan
|
|
(2.6)
|
|
(256.2)
|
Proceeds from revolving
credit facility
|
|
100.0
|
|
-
|
Payments on revolving credit
facility
|
|
(100.0)
|
|
-
|
Payments on bonds
|
|
-
|
|
(202.6)
|
Proceeds from issuance of
debt
|
|
250.0
|
|
-
|
Proceeds from issuance of
bonds
|
|
-
|
|
1,300.0
|
Proceeds from issuance of
ESPP
|
|
1.3
|
|
-
|
Taxes paid related to net
share settlement awards
|
|
(11.8)
|
|
(15.4)
|
Debt issuance and financing
costs
|
|
-
|
|
(16.9)
|
Purchase of treasury
stock
|
|
(75.0)
|
|
(805.8)
|
Dividends paid
|
|
(25.4)
|
|
(22.8)
|
Net
cash provided by (used in) financing activities
|
|
$131.6
|
|
($23.0)
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
|
(1.5)
|
|
0.2
|
Net
increase in cash, cash equivalents, and restricted
cash
|
|
$524.0
|
|
$265.3
|
Cash, cash
equivalents, and restricted cash, beginning of the
period
|
|
794.1
|
|
445.5
|
Cash, cash
equivalents, and restricted cash, end of the period
|
|
$1,318.1
|
|
$710.8
|
|
|
|
|
|
Reconciliation of
Cash and Cash Equivalents and Restricted Cash:
|
|
June 27,
2019
|
|
June 28,
2018
|
Cash and cash
equivalents, beginning of the period
|
|
$773.6
|
|
$423.3
|
Restricted cash,
short-term, beginning of the period
|
|
0.3
|
|
2.2
|
Restricted cash,
long-term, beginning of the period
|
|
20.2
|
|
20.0
|
Cash, cash
equivalents, and restricted cash, beginning of the
period
|
|
$794.1
|
|
$445.5
|
|
|
|
|
|
Cash and cash
equivalents, end of the period
|
|
$1,301.4
|
|
$593.0
|
Restricted cash,
short-term, end of the period
|
|
0.3
|
|
97.8
|
Restricted cash,
long-term, end of the period
|
|
16.4
|
|
20.0
|
Cash, cash
equivalents, and restricted cash, end of the period
|
|
$1,318.1
|
|
$710.8
|
Appendix
In addition to reporting our financial information using U.S.
Generally Accepted Accounting Principles (GAAP), management
believes that certain non-GAAP measures (which are indicated by *
in this report) provide investors with important perspectives into
the company's ongoing business performance. The non-GAAP measures
we use in this report are (i) adjusted diluted earnings per share,
(ii) free cash flow, and (iii) adjusted free cash flow, which are
described further below. 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 and calculate
the measures differently than we do, limiting the usefulness of the
measures for comparison with other companies.
Adjusted Diluted Earnings Per Share. To provide additional
transparency, we have disclosed non-GAAP adjusted diluted earnings
per share (Adjusted EPS). This metric excludes various items that
are not considered to be directly related to our operating
performance. Management uses Adjusted EPS as a measure of business
performance and we believe this information is useful in providing
period-to-period comparisons of our results. The most comparable
GAAP measure is diluted earnings per share.
Free Cash Flow. Free Cash Flow is defined as GAAP cash from
operating activities (generally referred to herein as "cash from
operations"), less capital expenditures for property, plant and
equipment. Management believes Free Cash Flow provides investors
with an important perspective on the cash available for
stockholders, debt repayments including capital leases, and
acquisitions after making the capital investments required to
support ongoing business operations and long term value creation.
Free Cash Flow does not represent the residual cash flow available
for discretionary expenditures as it excludes certain mandatory
expenditures. The most comparable GAAP measure is cash provided by
operating activities. Management uses Free Cash Flow as a measure
to assess both business performance and overall liquidity.
Adjusted Free Cash Flow. Management considers certain items that
arise from time to time to be outside the ordinary course of our
operations. Management believes that excluding these items provides
a better understanding of the underlying trends in the company's
operating performance and allows more accurate comparisons of the
company's operating results to historical performance. Accordingly,
Adjusted Free Cash Flow is defined as free cash flow less these
special items. The most comparable GAAP measure is cash provided by
operating activities. Management uses Adjusted Free Cash Flow as a
measure to assess both business performance and overall
liquidity.
The tables below provide reconciliations between the GAAP and
non-GAAP measures.
Adjusted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd
Quarter
|
|
Six Months
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted Earnings
Per Share
|
|
$1.61
|
|
$1.31
|
|
$3.16
|
|
$2.40
|
|
Impact of Asco
Acquisition and Debt Financing
|
|
(0.02)
|
a
|
0.32
|
b
|
0.11
|
c
|
0.32
|
b
|
Voluntary Retirement
Program
|
|
0.12
|
d
|
-
|
|
0.12
|
d
|
-
|
|
Adjusted Diluted
Earnings Per Share
|
|
$1.71
|
|
$1.63
|
|
$3.39
|
|
$2.72
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Shares (in
millions)
|
|
104.5
|
|
111.0
|
|
104.8
|
|
112.6
|
|
|
|
|
|
|
|
|
|
|
|
a
Represents the three months ended Q2 2019 Asco acquisition impact
of $(0.02) per share, which includes:
|
|
|
|
|
|
|
|
- Loss related to foreign currency forward contract of $0.01
(included in Other income)
- Gain related to foreign currency fluctuation on Euro account of
$(0.05) (included in Other income)
- Transaction costs of $0.02 (included in SG&A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b
Represents the three and six months ended Q2 2018 net EPS impact of
$0.32 comprised of the following:
|
|
|
|
(i) Asco acquisition impact of $0.25 per share, which
includes:
- Loss related to foreign currency forward contract of $0.15
(included in Other income)
- Transaction costs of $0.09 (included in SG&A)
- Interest expense on new debt related to Asco of $0.01 (included
in Interest expense)
|
|
|
|
(ii) Debt financing costs of $0.07 per share (included in
Interest expense)
|
|
|
|
|
|
|
|
|
|
|
|
c
Represents the six months ended Q2 2019 Asco acquisition impact of
$0.11 per share, which includes:
|
|
|
|
- Loss related to foreign currency forward contract of $0.12
(included in Other income)
- Gain related to foreign currency fluctuation on Euro account of
$(0.05) (included in Other income)
- Transaction costs of $0.04 (included in SG&A)
|
|
|
|
|
|
|
|
|
|
|
|
d
Represents the three and six months ended Q2 2019 retirement
incentive expenses resulting from the VRP offered during the
second
quarter of 2019 (included in Other
income)
|
Free Cash
Flow
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
2nd
Quarter
|
|
Six Months
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Cash from
Operations
|
$230
|
|
$231
|
|
$472
|
|
$397
|
|
Capital
Expenditures
|
(37)
|
|
(61)
|
|
(78)
|
|
(109)
|
|
Free Cash
Flow
|
$192
|
|
$169
|
|
$394
|
|
$288
|
|
Costs related to
acquisition of Asco
|
1
|
a
|
2
|
b
|
9
|
c
|
2
|
b
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash
Flow
|
$193
|
|
$171
|
|
$403
|
|
$290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a Represents the three
months ended Q2 2019 Asco acquisition impact of $1 million
comprised of:
|
- Cash paid on foreign currency forward contract of $5 million
- Cash gained from foreign currency fluctuation in Euro account of
$(7) million
- Transaction payments of $3 million
|
|
|
|
|
|
|
|
|
|
b Represents the three and
six months ended Q2 2018 Asco acquisition impact of $2 million of
transaction payments
|
|
c Represents the six months
ended Q2 2019 Asco acquisition impact of $9 million comprised
of:
|
- Cash paid on foreign currency forward contract of $11 million
- Cash gained from foreign currency fluctuation in Euro account of
$(7) million
- Transaction payments of $5 million
|
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SOURCE Spirit AeroSystems Holdings, Inc.