Spirit AeroSystems Holdings, Inc. Reports Second Quarter 2014 Financial Results; Revenues of $1.8 billion and EPS of $1.01; Raises 2014 Guidance

WICHITA, Kan., Aug. 1, 2014 /CNW/ — 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.

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.

“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 5,000th 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)

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.

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.