Spirit AeroSystems Holdings, Inc. Reports Third Quarter 2011 Financial Results

WICHITA, Kan., Nov. 3, 2011 /PRNewswire/ — Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported third quarter 2011 financial results reflecting solid core operating performance and strong demand for large commercial aircraft.

Spirit’s third quarter 2011 revenues were $1.130 billion, up from $1.002 billion for the same period of 2010 as the company benefited from higher production deliveries during the quarter.

Operating income was $121 million, compared to $82 million for the same period in 2010, primarily driven by increased volume and model mix. In comparison, the third quarter of 2010 operating income included a $6 million one-time expense and a $4 million unfavorable cumulative catch-up adjustment associated with new program development.

Net income for the quarter was $67 million, or $0.47 per fully diluted share, compared to $46 million, or $0.33 per fully diluted share, in the same period of 2010. Current quarter net income reflects higher interest expense associated with increased long-term debt, partially offset by a lower effective tax rate as compared to the third quarter of 2010. (Table 1)

“This quarter marked a number of important milestones, including the certification of the 787-8 and 747-8 Freighter, the initial delivery of a 787-8 to an airline customer and the announcement of the 737 MAX, where we look to play a significant role on the derivative that extends the life of this very successful platform,” said President and Chief Executive Officer Jeff Turner. “For the 747-8 and 787-8, these are notable achievements that enable us to move on to the programs’ production phase where we can begin to realize their long-term value.”

“Our other development programs continue to make progress toward important near-term milestones in testing and certification. We are focused on supporting our customers in meeting these milestones and positioning these programs for long-term success,” Turner continued.

“Our backlog of $30 billion reflects the strong global demand for commercial aircraft and positions us well to realize the long-term value of these core programs for our customers, shareholders, and employees,” Turner concluded.

Spirit’s backlog at the end of the third quarter of 2011 increased by 4 percent to $30 billion as orders exceeded deliveries. 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.

Spirit updated its contract profitability estimates during the third quarter of 2011, resulting in a net pre-tax $4 million favorable cumulative catch-up adjustment and an additional $10 million forward-loss on the CH-53K program due to a shift in the make versus buy strategy in the development phase of the program. In comparison, Spirit recognized a ($4) million unfavorable cumulative catch-up adjustment for the third quarter of 2010.

Cash flow from operations was a $66 million source of cash for the third quarter of 2011, compared to a $122 million use of cash for the third quarter of 2010. The current quarter working capital reflects increased inventory offset by favorable accounts receivable and the timing of payables.

Cash balances at the end of the quarter were $138 million while 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 third quarter were $1,204 million.

The company’s credit rating remains unchanged at the end of the third 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 is updated and expected to be approximately $4.7 billion based on Boeing’s 2011 delivery guidance of ~480 aircraft; expected B787 ship set 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 third quarter of 2011.

Fully diluted earnings per share guidance for 2011 remains unchanged at $1.40-$1.50.

Guidance for cash flow from operations, less capital expenditures, is expected to be between a $250 and $300 million use of cash in the aggregate, with capital expenditures of approximately $250 million.

The 2011 forecasted effective tax rate is updated to approximately 31 percent. (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; and our ability to achieve anticipated productivity and cost improvements.