- Full-year 2006 revenues $3.2 billion. Full-year 2007 revenues
expected to be between $4.0 - $4.1 billion WICHITA, Kan., Feb. 8
/PRNewswire-FirstCall/ -- Spirit AeroSystems Holdings, Inc. [NYSE:
SPR] reported fourth quarter revenues of $852 million, up 53
percent from the same period last year. Full-year 2006 revenues
were $3.2 billion, reflecting the continued strong demand for
commercial aircraft and included nine months of revenues from
Spirit Europe, or $313 million, which was acquired on April 1,
2006. Overall operating performance for the fourth quarter exceeded
expectations after consideration of costs related to the Initial
Public Offering (IPO) for Spirit stock which occurred on November
21, 2006. IPO costs reduced pre-tax earnings by $334 million for
the quarter and year, creating a pre-tax loss of ($245) million and
($72) million, respectively (Table 1). Adjusted pre-tax
earnings*(1) for the fourth quarter, excluding IPO related costs,
were $89 million yielding an adjusted pre-tax margin* of 10.4
percent. Adjusted pre- tax margins* for the full year 2006
excluding IPO related costs were 8.2 percent. (1) * Non-GAAP
Measure. A complete definition of Spirit's use of non-GAAP
measures, identified by an asterisk (*) is found on page 7-8 of
this release, "Non-GAAP Measure Disclosure". Table 1. Summary
Financial Results Period from June 17, 2005 through 4th Quarter
December 29, ($'s in millions, 2005 Full Year 2005 except per share
data) 2006 Restated(1) 2006(2) Restated(1) Revenues $852 $557
$3,208 $1,208 Pre-tax Earnings/(Loss) ($245) ($44) ($72) ($77)
Pre-tax Margins (28.8%) (7.9%) (2.2%) (6.4%) Reported Net Income/
(Loss) ($69) ($47) $17 ($90) Reported Earnings/(Loss) per Share
($0.58) ($0.41) $0.15 ($0.80) Basic Weighted Avg Share Count
(Million) 120.4 113.8 115.6 113.5 NOTE: The items detailed below
for IPO related costs and the tax valuation allowance reversal are
included in the results above. IPO Related Costs Pre-Tax ($334)
($334) After Tax ($209) ($209) Basic EPS ($1.74) ($1.81) Tax
Valuation Allowance Tax Provision and After Tax $75 $42 Basic EPS
$0.62 $0.36 (1) Does not include Spirit Europe acquired on April 1,
2006; Includes impact of 2005 IAM strike at Boeing Commercial
Airplanes. (2) Includes nine months of Spirit Europe Full-year 2006
net income was $17 million, or $0.15 per basic share. IPO related
costs reduced net income by $209 million, or $1.74 per share in the
fourth quarter and $1.81 per share for the full year 2006 as basic
weighted average share counts for the quarter and the full year
varied. Partially offsetting the IPO costs was the release of a
previously established tax valuation allowance of $75 million, or
$0.62 per share in the fourth quarter, and $42 million, or $0.36
per share for the full year. During the fourth quarter, Spirit
updated its contract profitability estimates resulting in a
favorable change in contract estimates of $22 million recorded in
the quarter. These changes were driven by favorable cost trends and
higher production activity within the current contract blocks.
Because Spirit recognizes changes in contract estimates utilizing
the cumulative catch up method of accounting under Statement of
Position 81-1, approximately $8 million of the $22 million
favorable adjustment relates to revenues recognized in 2005. For
the full-year 2006, approximately $59 million of favorable changes
in contract estimates related to 2005 revenues has been recognized.
"Our strong operating performance and progress on the 787 program
during 2006 along with our successful Initial Public Offering
underscore what Spirit can accomplish by focusing on execution,"
said President and Chief Executive Officer Jeff Turner. "During
2006, we expanded our customer base in the 100 seat plus market
through the acquisition of Spirit Europe, won yet to be announced
programs with new customers and successfully managed production
rate increases on existing programs," Turner added. "Looking
forward, we expect to deliver consistently strong financial
performance through the application of industry leading design and
build capabilities for our core products and by maintaining a
competitive cost structure." Cash flow from operations for 2006 was
$272 million including cash outflows of $191 million related to the
IPO. Cash used in investing activities for the year included $343
million in capital expenditures as the company prepares for 787
production, and $145 million used to diversify Spirit's customer
base and establish international operations through the acquisition
of Spirit Europe. Debt balances at year-end were $618 million after
reducing debt by $100 million with IPO proceeds. In conjunction
with the IPO, the company restructured its credit agreements which
increased available credit capacity from $325 million to $400
million. The restructure included the termination of the $150
million Boeing credit facility and increased the revolving credit
facility by $225 million, effectively replacing the Boeing facility
and increasing overall credit capacity by $75 million. The
restructure also resulted in lower interest rates and fewer
financial covenants. Standard & Poor's and Moody's upgraded the
company's credit ratings during the year to BB and Ba3,
respectively. Initial Public Offering Spirit conducted an Initial
Public Offering of common shares on November 21, 2006, and began
trading publicly on the NYSE. The net proceeds and the costs
associated with the IPO were recognized in the fourth quarter 2006.
Total IPO pre-tax costs were $334 million, of which $322 million
was compensation expense related to the Union Equity Plan (UEP) as
detailed in Table 2. The UEP is an incentive program established
for Spirit employees that are represented by certain collective
bargaining units and was part of the initial collective bargaining
agreements. The UEP plan obligation will be settled with cash and
stock payments to eligible employees. The cash component of $185
million was paid in the fourth quarter 2006. The remaining UEP
obligation will be settled with common stock and will be
distributed to participants on or prior to March 15, 2007. The
company received $249 million in net cash proceeds from the Initial
Public Offering of common stock. A portion of these proceeds was
used to retire $100 million of Term Loan B debt. The other $149
million of proceeds was used to fund a portion of the cash
component of the UEP plan mentioned above. The remainder of the UEP
cash component of $36 million ($185 million less $149 million) plus
other IPO related cash expenses of $6 million, or $42 million in
total, was funded from operations. Table 2. Initial Public Offering
Summary ($'s in millions, 4Q06 except per share data) Expense Cash
Non-Cash Net IPO Proceeds $249 $249 $- Term Loan B - Debt
Retirement (100) (100) - Remaining Proceeds after Debt Retirement
149 149 - IPO Related Costs Union Equity Plan (UEP) Cash (185)
(185) - Stock (137) - (137) UEP Total (Included in COGS) (322)
(185) (137) Onex Management Fee Termination (Included in SG&A)
(4) (4) - Employee Payroll Taxes and other (Included in SG&A)
(4) (2) (2) Sub-total (330) (191) (139) Write off of Deferred
Financing Fees (Included in Interest Expense) (4) - (4) Total
Pre-Tax IPO Related Costs (334) (191) (143) Total After-Tax IPO
Related Costs (209) EPS - IPO Related Costs ($1.74) Cash
Requirement In Excess of Proceeds $(42) Outlook Spirit expects 2007
revenues between $4.0 billion and $4.1 billion, approximately 25
percent higher than 2006, as increased market demand for large
commercial transport aircraft from Boeing and Airbus drives
additional ship set deliveries. This revenue projection is based on
previously issued 2007 Boeing and Airbus delivery guidance of
440-445 aircraft from each manufacturer and includes the initial
deliveries to Boeing of Spirit products on the 787 program as well
as a full year of revenue from Spirit Europe (Table 3). Table 3.
Financial Outlook 2007 Guidance Revenues $4.0B - $4.1B Operating
Earnings $400M - $420M Operating Margins 9.8% - 10.5% Depreciation
and Amortization $120M - $125M Earnings Per Share (Fully Diluted)
$1.80 - $1.90 Effective Tax Rate ~34% Cash Flow from Operations* +
/ - $280M Capital Expenditures + / - $300M Customer Advances ~$45M
Research & Development Expense + / - $60M Stock-based Incentive
Compensation Expense ~$35M Average Fully Diluted Shares Outstanding
141M * Includes $40-$50 million for capital expenditures funded by
customers Spirit's operating margins are expected to be between 9.8
percent and 10.5 percent as benefits from higher volumes, cost
reduction and productivity initiatives, as well as lower R&D,
stock compensation, and transition expenses expand operating
margins versus 2006 actual results. Spirit's 2007 fully diluted EPS
guidance is between $1.80 and $1.90 per share. Cash from operations
is expected to be +/- $280 million, which includes additional
working capital spending for the new 787 program. Fiscal 2007
capital expenditures are expected to be +/- $300 million.
Approximately 50 percent of the capital expenditures will be
utilized to complete the installation of production capacity for
the new 787 program. Partially offsetting these capital
expenditures is approximately $45 million of anticipated customer
financing. Depreciation and amortization expenses are forecasted to
be between $120 and $125 million as new capital equipment is placed
into service. Cautionary Statement Regarding Forward-Looking
Statements This press release includes forward-looking statements
that reflect the plans and expectations of Spirit AeroSystems
Holdings, Inc. To the extent that statements in this press release
do not relate to historical or current facts, they constitute
forward-looking statements. Forward-looking statements can
generally be identified by the use of forward-looking terminology
such as "may," "will," "expect," "intend," "estimate,"
"anticipate," "believe," "project," "continue," or other similar
words. These statements reflect Spirit AeroSystems Holdings, Inc.'s
current view with respect to future events and are subject to risks
and uncertainties, both known and unknown. Such risks and
uncertainties may cause the actual results of Spirit AeroSystems
Holdings, Inc. to vary materially from those anticipated in
forward-looking statements, and therefore we caution investors not
to place undue reliance on them. Potential risks and uncertainties
include, but are not limited to: our customers' aircraft build
rates; the ability to enter into supply arrangements with
additional customers and satisfy performance requirements under
existing contracts; any adverse impact on our customers' production
of aircraft; the success and timely progression of our customers'
new programs including, but not limited to The Boeing Company's
B787 aircraft program; future levels of business in the aerospace
and commercial transport industries; competition from original
equipment manufacturers and other aerostructures suppliers; the
effect of governmental laws; the effect of new commercial and
business aircraft development programs; the cost and availability
of raw materials; the ability to recruit and retain highly skilled
employees and relationships with unions; spending by the United
States and other governments on defense; the continuing ability to
operate successfully as a stand alone company; the outcome of
ongoing or future litigation and regulatory actions; and exposure
to potential product liability claims. Additional information as to
factors that may cause actual results to differ materially from our
forward-looking statements can be found in Spirit AeroSystems
Holdings, Inc.'s filings with the United States Securities and
Exchange Commission. Spirit AeroSystems Holdings, Inc. undertakes
no obligation and does not intend to update publicly any
forward-looking statements after the date of this press release,
except as required by law. Non-GAAP Measure Disclosure Management
believes that the non-GAAP (Generally Accepted Accounting
Principles) measures (indicated by an asterisk*) used in this
report provide investors with important perspectives into the
company's ongoing business performance. The company does not intend
for the information to be considered in isolation or as a
substitute for the related GAAP measure. Other companies may define
the measure differently. The following definitions are provided:
Adjusted Pre-Tax Earnings Adjusted Pre-Tax Earnings is defined as
GAAP pre-tax earnings excluding the $334 million expense related to
the Initial Public Offering that occurred in the fourth quarter of
2006. Management believes adjusted pre-tax earnings are important
to understanding the company's on-going operations and provide
additional insights into underlying business performance.
Management derived the adjusted pre-tax earnings by adding the $334
million IPO expense in fourth quarter to GAAP pre-tax earnings. The
calculation for the fourth quarter 2006 is (($245) + $334) = $89.
The calculation for the full year 2006 is (($72) + $334) = $262.
Adjusted pre-tax earnings for third quarter 2006 are the same as
GAAP. Adjusted Pre-Tax Margins Adjusted Pre-Tax Margins is defined
as GAAP pre-tax margins excluding the $334 million expense related
to the Initial Public Offering that occurred in the fourth quarter
of 2006. Management believes adjusted pre-tax margins are important
to understanding the company's on-going operations and provide
additional insights into underlying business performance.
Management derived the adjusted pre-tax margins by dividing GAAP
revenues into GAAP pre-tax earnings adjusted for the $334 million
in fourth quarter 2006. The calculation for the fourth quarter 2006
is (($245) + $334)/$852 = 10.4%. The calculation for the full year
2006 is (($72) + $334) / $3,208 = 8.2%. Adjusted pre-tax margins
for third quarter 2006 are the same as GAAP. Adjusted Segment
Earnings Adjusted Segment Earnings is defined as GAAP segment
earnings excluding the portion of the expense related to the Union
Equity Plan (UEP) that occurred in the fourth quarter of 2006.
Management believes adjusted segment earnings are important to
understanding the company's on-going operations and provide
additional insights into underlying business performance.
Management derived the adjusted segment earnings by adding the
respective segment's portion of the $322 million UEP expense
incurred in fourth quarter 2006 to each segment's GAAP segment
earnings. The calculation for the fourth quarter 2006 for each
segment is (GAAP segment earnings + segment portion of the UEP
expense). The calculation for the full 2006 is (GAAP segment
earnings + segment portion of the UEP expense). A full
reconciliation of adjusted segment earnings is presented in Table 4
in the appendix of this press release. Adjusted Segment Margins
Adjusted Segment Margins is defined as GAAP segment margins
excluding the portion of the expense related to the UEP that
occurred in the fourth quarter of 2006. Management believes
adjusted segment margins are important to understanding the
company's on-going operations and provide additional insights into
underlying business performance. Management derived the adjusted
segment operating margins by dividing GAAP segment revenues into
GAAP segment earnings adjusted for the respective segment's portion
of the $322 million UEP expense incurred in fourth quarter 2006.
The calculation for the fourth quarter 2006 for each segment is
(GAAP segment earnings + segment portion of the UEP expense) / GAAP
segment Revenues. The calculation for the full 2006 is (GAAP
segment earnings + segment portion of the UEP expense) / GAAP
segment Revenues. A full reconciliation of adjusted segment margins
is presented in Table 4 of this press release. Appendix Segment
Results Fuselage Systems Fuselage Systems segment fourth quarter
2006 revenue grew 37.5 percent over the same period last year as
production volumes increased in support of primary customer
deliveries. Fourth quarter 2005 revenues were negatively impacted
by the IAM strike at Boeing Commercial Airplanes. Fuselage Systems
revenue for the full year 2006 was $1.6 billion as its primary
customer, Boeing, increased overall deliveries by 37 percent
between 2005 and 2006 with deliveries of 737 and 777 aircraft
increasing 42 percent and 63 percent, respectively. Fuselage
Systems posted strong double-digit adjusted segment margins* of
19.4 percent for the fourth quarter 2006 and 18.2 percent for the
full year, excluding the impact of the UEP plan. Margins improved
in the third and fourth quarters versus the first half of 2006 as
R&D expense on the 787 program declined and favorable cost
trends and higher production rates were realized. Propulsion
Systems Propulsion Systems segment fourth quarter 2006 revenue grew
28.8 percent over the same period last year and delivered 16.9
percent adjusted segment margins* (excluding the impact of the UEP
plan) as production volumes increased in support of primary
customer deliveries. Revenues for the full year 2006 were $888
million as Propulsion Systems won new business from our current
customer on the 747-8 program. Additionally, the team successfully
competed and won new business from a new customer during the year.
The new business did not impact 2006 revenues. Margins improved in
the third and fourth quarters versus the first half of 2006 as
R&D expense on the 787 program declined and favorable cost
trends and higher production rates were realized. Fourth quarter
2005 revenues were impacted by the IAM strike at Boeing Commercial
Airplanes. Wing Systems Wing Systems segment reported fourth
quarter 2006 revenue of $229 million and full year revenue of $720
million. The Spirit Europe acquisition was completed on April 1,
2006 and significantly increased the revenues and operating
earnings in this segment versus 2005 results. Fourth quarter and
full-year adjusted segment margins* (excluding the impact of UEP
costs) were 11.4 percent and 7.9 percent, respectively. Margins
improved in the third and fourth quarters versus the first half of
2006 as R&D expense on the 787 program declined, favorable cost
trends and higher production rates were realized, and improved
fringe benefit rates generated $8 million of favorable changes in
contract estimates during the fourth quarter. Table 4. Segment
Reporting Period from June 17, 2005 through 4th Quarter December
29, (Millions, 2005 2005 Full Year 2005 except margin percent) 2006
Restated(1) 2006(2) Restated(1) Segment Revenues Fuselage Systems
$396 $288 $1,570 $638 Propulsion Systems $219 $170 $888 $372 Wing
Systems $229 $85 $720 $170 All Other $8 $14 $30 $28 Total Segment
Revenues $852 $557 $3,208 $1,208 Segment Earnings (Loss) from
Operations(3) Fuselage Systems ($96) $32 $112 $44 Propulsion
Systems ($66) $12 $34 $24 Wing Systems ($19) ($7) $12 $5 All Other
$1 $1 $4 ($1) Total Segment Operating Earnings ($180) $37 $162 $72
Segment Earnings (Loss) from Operations % of Sales Fuselage Systems
(24.2%) 11.1% 7.1% 6.9% Propulsion Systems (30.1%) 7.1% 3.8% 6.5%
Wing Systems (8.3%) (8.2%) 1.7% 2.9% All Other 12.5% 7.1% 13.3%
(3.6%) Total Segment Operating Margins (21.1%) 6.6% 5.0% 6.0% (3)
Earnings (Loss) from Operations includes Union Equity Participation
plan charges of $322 million. Union Equity Participation (UEP) Plan
Related Costs by Segment Fuselage Systems ($173) ($173) Propulsion
Systems ($103) ($103) Wing Systems ($45) ($45) All Other ($1) ($1)
Total Segment UEP Costs ($322) ($322) Adjusted Segment Earnings*
Fuselage Systems $77 $32 $285 $44 Propulsion Systems $37 $12 $137
$24 Wing Systems $26 ($7) $57 $5 All Other $2 $1 $5 ($1) Total
Adjusted Segment Earnings $142 $37 $484 $72 Adjusted Segment
Margins* Fuselage Systems 19.4% 11.0% 18.2% 6.9% Propulsion Systems
16.9% 6.9% 15.4% 6.5% Wing Systems 11.4% (8.7%) 7.9% 2.9% All Other
25.0% 7.1% 16.7% (3.6%) Total Adjusted Segment Margins 16.7% 6.6%
15.1% 6.0% (1) Does not include Spirit Europe acquired on April 1,
2006; Includes impact of 2005 IAM strike at Boeing Commercial
Airplanes. (2) Includes nine months of Spirit Europe * Non-GAAP
Measure. A complete definition of Spirit's use of non-GAAP
measures, identified by an asterisk(*) is found on page 7-8 of this
release, "Non-GAAP Measure Disclosure". Spirit AeroSystems
Holdings, Inc. Consolidated Statements of Income (Loss) (Amounts in
millions, except per share data) For the Three For the Three Months
Ended Months Ended December 31, 2006 December 29, 2005 (unaudited)
(restated) Net revenues $851.8 $557.4 Operating costs and expenses
Cost of sales 1,007.6 476.3 Selling, general and administrative
65.0 77.6 Research and development 19.6 42.5 Total costs and
expenses $1,092.2 $596.4 Operating loss $(240.4) $(39.0) Interest
expense and financing fee amortization (15.3) (12.3) Interest
income 8.1 8.0 Other income, net 2.3 (0.9) Loss from continuing
operations before income taxes $(245.3) $(44.2) Income tax
provision 175.9 (2.7) Net income (loss) $(69.4) $(46.9) Earnings
(loss) per share Basic $(0.58) $(0.41) Diluted $(0.58) $(0.41)
Spirit AeroSystems Holdings, Inc. Consolidated Statements of Income
(Loss) (Amounts in millions, except per share data) For the Twelve
Period from June Months Ended 17, 2005 through December 31, 2006
December 29, 2005 (unaudited) (restated) Net revenues $3,207.7
$1,207.6 Operating costs and expenses Cost of sales 2,934.3 1,056.4
Selling, general and administrative 225.0 140.7 Research and
development 104.7 78.3 Total costs and expenses $3,264.0 $1,275.4
Operating loss $(56.3) $(67.8) Interest expense and financing fee
amortization (50.1) (25.5) Interest income 29.0 15.4 Other income,
net 5.9 1.3 Loss from continuing operations before income taxes
$(71.5) $(76.6) Income tax provision 88.3 (13.7) Net income (loss)
$16.8 $(90.3) Earnings (loss) per share Basic $0.15 $(0.80) Diluted
$0.15 $(0.80) Spirit AeroSystems Holdings, Inc. Consolidated
Balance Sheets (Amounts in millions) December 31, 2006 December 29,
2005 (unaudited) (restated) Current assets Cash and cash
equivalents $184.3 $241.3 Accounts receivable-net 200.2 98.8
Long-term receivable-current 43.0 - Inventory-net 882.2 510.7
Prepaids-net 20.8 10.2 Deferred tax assets-current 90.0 1.1 Total
current assets $1,420.5 $862.1 Property, plant and equipment, net
773.8 518.8 Long-term receivable 191.5 212.5 Pension assets 207.3 -
Other assets 129.1 63.2 Total assets $2,722.2 $1,656.6 Current
liabilities Accounts payable $322.9 $173.7 Accrued expenses 214.7
125.6 Current portion of long-term debt 23.9 11.6 Deferred revenue
liability 8.2 - Income taxes - 0.6 Total current liabilities $569.7
$311.5 Long-term debt 594.3 710.0 Advance payments 587.4 200.0
Other liabilities 111.8 108.2 Deferred tax liability- non-current -
1.1 Shareholders' equity Preferred stock, par value $0.01,
10,000,000 shares authorized, no shares issued and outstanding - -
Common stock, Class A par value $0.01, 200,000,000 shares
authorized, 63,345,834 issued and outstanding 0.6 - Common stock,
Class B par value $0.01, 150,000,000 shares authorized, 71,351,347
(unaudited) and 122,670,336 shares issued and outstanding,
respectively 0.7 1.2 Additional paid-in capital 858.7 410.7
Accumulated other comprehensive income 72.5 4.2 Accumulated deficit
(73.5) (90.3) Total shareholders' equity $859.0 $325.8 Total
liabilities and shareholders' equity $2,722.2 $1,656.6 Spirit
AeroSystems Holdings, Inc. Consolidated Statements of Cash Flow
(Amounts in millions) For the Twelve Period from June Months Ended
17, 2005 through December 31, 2006 December 29, 2005 (unaudited)
(restated) Operating activities Net income (loss) $16.8 $(90.3)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities Depreciation expense 52.8 28.6 Amortization
expense 10.3 3.3 Accretion of long-term receivable (22.0) (9.7)
Employee stock compensation expense 182.3 34.7 Loss on disposition
of assets 0.9 - Deferred and long-term taxes (134.1) 8.4 Pension,
net (33.2) (8.9) Other 13.9 12.8 Changes in assets and liabilities,
net of acquisition Accounts receivable (41.9) (88.4) Inventories
(317.7) (31.4) Other current assets (10.5) 1.3 Accounts payable and
accrued liabilities 154.4 163.4 Customer advance from Boeing 400.0
200.0 Net cash provided by operating activities $272.0 $223.8
Investing Activities Purchase of property, plant and equipment
$(343.2) $(144.6) Acquisition of business, net of cash acquired
(145.4) (885.7) Financial derivatives 4.7 - Transition payments
10.0 - Proceeds from sale of assets 0.2 - Net cash (used in)
investing activities $(473.7) $(1,030.3) Financing Activities
Proceeds from short-term debt $85.0 $- Payments on short-term debt
(85.0) - Proceeds from long-term debt - 700.0 Principal payments on
debt (124.0) (5.0) Debt issuance costs 0.8 (21.4) Pool of windfall
tax benefits, net 15.4 - Equity contributions from shareholders -
370.0 Proceeds from IPO 249.3 - Executive stock investments 1.1 4.2
Net cash provided by financing activities $142.6 $1,047.8 Effect of
exchange rate changes on cash and cash equivalents 2.1 - Net
(decrease) increase in cash and cash equivalents for the period
$(57.0) $241.3 Cash and cash equivalents, beginning of the period
241.3 - Cash and cash equivalents, end of the period $184.3 $241.3
Supplemental Information Interest paid $55.1 $28.1 Income taxes
paid $29.3 $8.5 Appreciation of financial instruments $11.4 $4.2
Property acquired through capital leases $11.5 $26.7 DATASOURCE:
Spirit AeroSystems Holdings, Inc. CONTACT: Philip Anderson,
Investor Relations, +1-316-523-1700, or Sam Marnick, Corporate
Communications, +1-316-526-3153, both for Spirit AeroSystems
Holdings, Inc. Web site: http://www.spiritaero.com/
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