Spirit AeroSystems Holdings, Inc. Reports Third Quarter 2014 Financial Results; Revenues of $1.7 billion and EPS of $1.20; Raises 2014 Guidance

WICHITA, Kan., Oct. 31, 2014 /CNW/ — Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported third quarter 2014 financial results reflecting continued healthy demand for large commercial aircraft and strong mature program operating performance. Spirit’s third quarter 2014 revenues were $1.7 billion, up from $1.5 billion for the same period in 2013 on higher deliveries.

Operating income was $216 million, up from $51 million for the same period in 2013. Net income for the quarter was $168 million, or $1.20 per fully diluted share.

“It has been a good quarter for the industry as aerospace has seen a number of significant milestones. Boeing announced an increase in the 737 production rate to an all-time high of 52 per month beginning in 2018 following a previous announcement of 47 per month in 2017,” said President and Chief Executive Officer Larry Lawson.

“Another significant highlight this quarter was Airbus’ achievement of two important milestones. These milestones include type certification of the Airbus A350 by EASA and first flight of the Airbus A320neo. We would like to congratulate Airbus on these accomplishments and we are proud to be on the team,” Lawson continued.

“We are maximizing our internal capabilities more effectively. This quarter we continued to consolidate our global engineering resources to have better workforce stability, improved domain expertise and lower cost. We’re in the final stages of centralizing our procurement activities which is already yielding improvement in performance and cost,” Lawson continued.

Spirit’s backlog grew to a new record of approximately $44 billion at the end of the third quarter compared to $41 billion at the end of the second quarter.

Spirit updated its contract profitability estimates during the third quarter of 2014 due to improved performance and reduced risks, resulting in net pre-tax $33 million, or $0.16 per share#, favorable cumulative catch-up adjustments on mature programs.

In comparison, the third quarter of 2013 included net pre-tax charges of ($124) million and net pre-tax favorable cumulative catch-up adjustments of $28 million.

Free cash flow was a $75 million* source of cash for the third quarter of 2014, compared to a $128 million* source of cash for the third quarter of 2013 reflecting higher cash tax payments, partially offset by improved operational performance and lower capital expenditures. Year-to-date free cash flow was a $194 million* source of cash compared to a $7 million* source of cash in 2013. (Table 2)

Cash balances at the end of the quarter were $453 million and debt balances were $1,157 million. At the end of the third quarter of 2014, the company’s $650 million credit facility remained undrawn. The company’s credit rating remained unchanged at the end of the third quarter of 2014.

On August 7, 2014, Spirit, Onex and certain current and former members of Spirit management entered into an underwriting agreement for the sale by such stockholders of 8,577,155 shares of Spirit’s Class A common stock in a secondary public offering. Following the completion of the offering, which closed on August 13, 2014, Onex no longer owned any shares of the company.

Financial Outlook and Risk to Future Financial Results

Spirit revenue guidance for the full-year 2014 is expected to be $6.8 to $6.9 billion based on Boeing’s 2014 projected deliveries of 715 to 725 aircraft; projected Airbus deliveries in 2014 at a similar level to those in 2013; internal Spirit forecasts for other customer production activities; and expected non-production revenues.

Fully diluted earnings per share guidance for 2014 is increased and is expected to be $3.35 to $3.45 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 by $25 million and is now expected to be approximately $275 million* from previous guidance of $250 million*.

The effective tax rate for 2014 is forecasted to be approximately 30.0 to 31.0 percent, including 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 in the third quarter of 2014 were $804 million, up from $710 million for the same period last year due to higher production deliveries. Operating margin for the third quarter of 2014 was 17.7 percent as compared to 4.2(1) (2) percent during the same period of 2013. In the third quarter of 2014 the segment recorded pre-tax $10 million favorable cumulative catch-up adjustments on mature programs. In comparison, the segment realized pre-tax forward loss charges of ($117) million and pre-tax $20 million favorable cumulative catch-up adjustments in the third quarter of 2013.

Propulsion Systems

Propulsion Systems segment revenues in the third quarter of 2014 rose to $442 million, from $389 million for the same period last year on higher production deliveries. Operating margin for the third quarter of 2014 was 18.5 percent as compared to 18.8(1) (2) percent in the third quarter of 2013. In the third quarter of 2014 the segment realized pre-tax $8 million favorable cumulative catch-up adjustments on mature programs. In comparison, the segment reported a pre-tax forward loss charge of ($1) million and pre-tax 4 million favorable cumulative catch-up adjustments in the third quarter of 2013.

Wing Systems

Wing Systems segment revenues in the third quarter of 2014 increased to $446 million, from $398 million for the same period last year on higher production deliveries. Operating margin for the third quarter of 2014 was 14.1 percent as compared to 9.5 (1) (2) percent during the same period of 2013. In the third quarter of 2014 the segment recorded pre-tax $15 million favorable cumulative catch-up adjustments on mature programs. In comparison, in the third quarter of 2013 the segment recorded a pre-tax forward loss charge of ($6) million and pre-tax $4 million favorable cumulative catch-up adjustments.