- Second quarter 2009 Revenues of $1.06 billion
- EPS of ($0.06) per share after unusual items
- Cash and Cash Equivalents were $89 million
- Total backlog of approximately $28.2 billion
WICHITA, Kan., July 30 /PRNewswire-FirstCall/ -- Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported second quarter financial results reflecting $1.06 billion in revenue and a loss of ($0.06) per share. Included in the EPS results are several unusual items that, in the aggregate, reduced pre-tax income by ($137) million and net income by ($95) million, or ($0.67) per share. (Table 1)
Unusual items in the quarter include the recognition of a forward-loss on the Gulfstream G250 wing program and tooling contract that reduced pre-tax income by ($93) million, or ($0.46) per share; an unusually large unfavorable cumulative catch-up adjustment related to the residual effects of the strike and nutplate rework along with the ERP systems transition that reduced pre-tax income by ($33) million, or ($0.16) per share; and Spirit's estimate of the impact of Textron's decision to terminate the Cessna Citation Columbus business jet program that reduced pre-tax income by ($11) million, or ($0.05) per share.
Table 1. Summary Financial Results
($ in Millions, 2nd Quarter Six Months
except per ----------- ----------
share data) 2009 2008 Change 2009 2008 Change
--------------- ---- ---- ------ ---- ---- ------
Revenues $1,060 $1,062 (0.2%) $1,947 $2,099 (7%)
Operating
Income (Loss) ($10) $136 (108%) $87 $266 (67%)
Operating
Income (Loss)
as a % of
Revenues (1.0%) 12.8% (1,380) BPS 4.5% 12.7% (820) BPS
Net Income
(Loss) ($8) $86 (110%) $54 $172 (68%)
Net Income
(Loss) as a %
of Revenues (0.8%) 8.1% (890) BPS 2.8% 8.2% (540) BPS
Earnings per
Share (Fully
Diluted) ($0.06) $0.62 (110%) $0.39 $1.23 (68%)
Fully Diluted
Weighted Avg
Share Count
(Millions) 138.0 139.8 139.9 139.8
Revenue for the second quarter of 2009 of $1.06 billion was essentially unchanged from the same period in 2008 as fewer 747 ship set deliveries related to the transition to the 747-8 model and $29 million of unfavorable foreign exchange impact due to the strengthening dollar were offset by higher volumes on Airbus products and increased revenue on development programs.
"This is obviously a disappointing quarter for us financially," said President and Chief Executive Officer Jeff Turner. "Our Wichita operations were disrupted as residual effects from the strike and the nutplate rework along with the implementation of a new ERP system reduced operating efficiencies. Despite these disruptions, the company continued to meet customer deliveries and made good progress in returning to pre-strike operating performance levels," Turner said. "We also encountered additional challenges during our development efforts on the G250 wing program at our Tulsa facility. While we believe the G250 program will be successful over the long-term, several factors culminated in the second quarter that indicated the program was likely in a loss position. These factors included a re-assessment of both market and execution risk, the cumulative cost impact of late design and engineering changes, and increased cost forecasts for vendor supplied parts and internal manufacturing," Turner continued. "We have taken the necessary steps to improve our performance in Tulsa, including implementation of a more robust program management process including aggressive engineering change control, and making a number of management changes at the Tulsa division. We believe these changes will get the G250 program back on track and we expect the other Tulsa programs to deliver solid long-term financial performance," Turner concluded.
Spirit's backlog at the end of the second quarter 2009 was $28.2 billion, a slight decrease from the end of the first quarter 2009, as Airbus and Boeing second quarter deliveries exceeded orders. During the quarter, Spirit was selected to design and manufacture engine pylons for the Bombardier CSeries airplane, which is now included in Spirit's backlog. The company continues to pursue new business opportunities in commercial aerospace and defense markets. 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.
The company realized a pre-tax charge of approximately $93 million, or $0.46 per fully diluted share, to recognize a forward-loss for the Gulfstream G250 business jet program. While early in its product lifecycle, Spirit now believes its G250 wing production and tooling contracts are both in a loss position due to significant overruns in expected development costs, uncertainty in recurring cost estimates versus negotiated selling prices, and continued softening in the business jet market. Spirit expects to recognize zero gross margin on the program going forward while it continues to develop plans for production cost savings and working contractual issues with the customer. The development effort on the G250 wing production contract is now approaching completion and the tooling contract is complete.
Spirit updated its contract profitability estimates during the second quarter of 2009 that resulted in a $33 million unfavorable cumulative catch-up adjustment. The unfavorable cumulative catch-up adjustment was driven by the higher than forecasted disruption related to the post-strike ramp-up of production after the Machinists' strike at Boeing, the residual effects of the nutplate rework, and the simultaneous transition to a new ERP system, all of which drove inefficiencies in our Wichita operations. Spirit believes these disruptions were largely resolved by the end of the second quarter and normal operations have now resumed. Spirit recognized a $4 million favorable cumulative catch-up adjustment during the second quarter of 2008.
The company's second quarter financial results also include the estimated impact of Textron's announced decision on July 8, 2009, to terminate the Cessna Citation Columbus business jet program. Spirit expensed $11 million pre-tax, or $0.05 per fully diluted share, of inventory related to development work on the airplane's fuselage and empennage.
Cash flow from operations was ($67) million for the second quarter of 2009, compared to $7 million for the second quarter 2008 as $20 million of net customer advances were liquidated in the second quarter of 2009 compared to the net receipt of $95 million in advance payments during the second quarter of 2008. (Table 2)
Table 2. Cash Flow and Liquidity
2nd Quarter Six Months
----------- ----------
($ in Millions) 2009 2008 2009 2008
--------------- ---- ---- ---- ----
Cash Flow from Operations ($67) $7 ($216) $78
Purchases of Property, Plant &
Equipment ($52) ($54) ($107) ($119)
July 2, December 31,
Liquidity 2009 2008
---- ----
Cash $89 $217
Total Debt $736 $588
Cash balances at the end of the second quarter of 2009 were $89 million and debt balances were $736 million. During the second quarter of 2009, the company utilized its credit-line as it continued to invest in development programs. Spirit ended the quarter with $150 million borrowed from its revolving credit facility while $579 million remained unused. Approximately $17 million of the credit facility is reserved for financial letters of credit.
During the second quarter Spirit extended its revolving credit facility to June 2012. The new facility temporarily increases total borrowing capacity from $650 million to $729 million, as new and existing lenders provide additional capacity, with a step down from $729 million to $409 million in capacity in June 2010.
The company's credit ratings remained unchanged at the end of the second quarter 2009 with a BB rating at Standard & Poor's and a Ba3 rating at Moody's.
2009 Outlook
Spirit revenue guidance for the full-year 2009 has been lowered slightly to reflect the termination of the Cessna Citation Columbus program. Revenue is now expected to be between $4.2 and $4.3 billion based on Boeing's 2009 delivery guidance of 480-485 aircraft; anticipated ramp-up of 787 deliveries; 2009 expected Airbus deliveries of approximately 483 aircraft; internal Spirit forecasts for non-OEM production activity and non-Boeing and Airbus customers; and foreign exchange rates consistent with year-end 2008 levels.
Fully diluted earnings per share for 2009 are now expected to be between $1.45 and $1.55, reflecting the impact of the unusual items booked in the second quarter of 2009.
Cash flow from operations less capital expenditures, net of customer reimbursements, is not expected to exceed a ($100) million use of cash in the aggregate for the full-year 2009, with capital expenditures expected to be approximately $250 million. (Table 3)
Table 3. Financial Outlook 2008 Actual 2009 Guidance Change
--------------------------- ----------- ------------- ------
Revenues $3.8 billion $4.2 - 11% - 13%
$4.3 billion
Earnings Per Share
(Fully Diluted) $1.91 $1.45 - $1.55 (24%) - (19%)
Effective Tax Rate (%
Pre-Tax Earnings) 30.9% 31% - 32%
Cash Flow From Operations $211 million*
Capital Expenditures $236 million*
Customer Reimbursement $116 million*
*($100M) with ~$250 million of Capital Expenditures
Cautionary Statement Regarding Forward-Looking Statements
This press release contains "forward-looking statements." Forward-looking statements reflect our current expectations or forecasts of future events.
