Spirit AeroSystems Holdings, Inc. Reports First Quarter 2015 Financial Results; Revenues of $1.7 Billion and EPS of $1.30

WICHITA, Kan., April 29, 2015 /CNW/ -- 

First Quarter 2015 Consolidated Results

  • Total Revenues of $1.7 billion
  • Reports fully diluted EPS of $1.30, adjusted EPS of $1.00* excluding the impact for the partial release of the deferred tax valuation allowance
  • Free Cash Flow of $384 million*

 

Spirit AeroSystems Holdings, Inc. (NYSE: SPR) reported first quarter financial results driven by positive operating performance of mature programs. Spirit's first quarter 2015 revenues were $1.7 billion up one percent compared to the same period of 2014.


Table 1.  Summary Financial Results (unaudited)



1st Quarter


($ in millions, except per share data)

2015

2014

Change





Revenues

$1,742

$1,729

1%

Operating Income 

$235

$194

21%

Operating Income as a % of Revenues

13.5%

11.2%

 230  BPS

Net Income 

$182

$154

18%

Net Income as a % of Revenues

10.4%

8.9%

 150  BPS

Earnings Per Share (Fully Diluted)

$1.30

$1.07

21%

Fully Diluted Weighted Avg Share Count

140.4

143.7


Operating income was $235 million, up from $194 million for the same period in 2014. Net income for the quarter was $182 million, or $1.30 per fully diluted share, compared to net income of $154 million, or $1.07 per fully diluted share, in the same period of 2014. The current quarter includes $0.30 earnings per share for the partial release of the deferred tax valuation allowance as compared to $0.22 for same period of 2014. (Table 1)

"We are making good progress on our operational delivery, quality and productivity.  We are aligning and strengthening what we do best to ensure we're fully maximizing our value proposition," said President and Chief Executive Officer Larry Lawson

"We continue to drive the enterprise to find the most efficient and productive approaches for the rate increases on 737, A320, 787, and A350. In addition to investments to support rate, we are investing in automation projects of over $100 million. These automation projects will return our investment in three to four years and continue to differentiate our manufacturing capability," Lawson concluded.

Spirit's backlog at the end of the first quarter was $46 billion driven by strong commercial aerospace demand.

Free cash flow was a $384 million* source of cash for the first quarter of 2015, compared to a ($8) million* use of cash in the first quarter of 2014 due to tax refunds associated with the Gulfstream divestiture and reduction in accounts receivable. (Table 2)

Table 2.  Cash Flow and Liquidity (unaudited)



1st Quarter

($ in millions)

2015

2014




Cash Flow from Operations

$424

$45

Purchases of Property, Plant & Equipment

($40)

($53)

Free Cash Flow*

$384

($8)





April 2,

December 31,

Liquidity

2015

2014




Cash

$750

$378

Total Debt

$1,145

$1,154

Cash balances at the end of the first quarter were $750 million and debt balances were $1.1 billion. The company's $650 million revolving credit facility was undrawn at the end of the first quarter.

During the first quarter the company's credit rating was upgraded to Ba1 from Ba2 by Moody's Investor Services and upgraded to BB positive outlook from BB- by Standard and Poor's.

On March 18, 2015, Spirit entered into an amendment to its senior secured credit agreement that provided for a new $535 million senior secured term loan A with a maturity date of March 18, 2020, which replaced the term loan B with an outstanding amount of $535 million.

Financial Outlook and Risk to Future Financial Results

Spirit revenue for the full-year 2015 remains unchanged and is expected to be between $6.6 billion and $6.7 billion. Fully diluted earnings per share for 2015 remains unchanged and is expected to be between $3.60 and $3.80 per share, which does not include the year-to-date impact or potential future adjustments to the deferred tax asset valuation allowance.  Free cash flow for 2015 remains unchanged and is expected to be between $600 million and $700 million*, which includes higher capital expenditures of $325 million to $375 million as compared to 2014.  The effective tax rate for 2015 is forecasted to be between 32.0 percent and 33.0 percent, including the expected benefit of the U.S. Research Tax Credit for 2015, and excluding any potential adjustment to the valuation allowance against U.S. net deferred tax assets. (Table 3)

Risks to our financial guidance are described more fully in the Cautionary Statement Regarding Forward-Looking Statements in this release and in the "Risk Factors" section of our filings with the Securities and Exchange Commission.

Table 3.  Financial Outlook Reaffirmed April 29, 2015


2015 Guidance





Revenues



$6.6 - $6.7 billion





Earnings Per Share (Fully Diluted)



$3.60 - $3.80 





Effective Tax Rate**



~32.0% - 33.0%





Free Cash Flow*



$600 - $700 million






* Non-GAAP financial measure, see Appendix for reconciliation.

** Effective tax rate guidance, among other factors, assumes the benefit attributable to the extension of the U.S. Research Tax Credit and does not assume the year-to-date impact or potential future adjustments to the valuation allowance against the U.S. net deferred tax assets.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains "forward-looking statements" that may involve many risks and uncertainties. Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "should," "will," or other similar words, or the negative thereof, unless the context requires otherwise. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements. Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability to perform our obligations and manage costs related to our new and maturing commercial, business aircraft and military development programs and the related recurring production; 3) margin pressures and the potential for additional forward losses on new and maturing programs; 4) our ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft; 5) the effect on business and commercial aircraft demand and build rates of the following factors: changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 6) customer cancellations or deferrals as a result of global economic uncertainty; 7) the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange rates; 8) the success and timely execution of key milestones such as receipt of necessary regulatory approvals and customer adherence to their announced schedules; 9) our ability to successfully negotiate future pricing under our supply agreements with Boeing, Airbus and our other customers; 10) our ability to enter into profitable supply arrangements with additional customers; 11) the ability of all parties to satisfy their performance requirements under existing supply contracts with Boeing and Airbus, our two major customers, and other customers and the risk of nonpayment by such customers; 12) any adverse impact on Boeing's and Airbus' production of aircraft resulting from cancellations, deferrals or reduced orders by their customers or from labor disputes or acts of terrorism; 13) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 14) our ability to avoid or recover from cyber-based or other security attacks, information technology failures or other disruptions; 15) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 16) our ability to borrow additional funds or refinance debt; 17) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 18) the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 19) any reduction in our credit ratings; 20) our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components; 21) our ability to recruit and retain highly-skilled employees and our relationships with the unions representing many of our employees; 22) spending by the U.S. and other governments on defense; 23) the possibility that our cash flows and borrowing facilities may not be adequate for our additional capital needs or for payment of interest on and principal of our indebtedness; 24) our exposure under our existing senior secured revolving credit facility to higher interest payments should interest rates increase substantially; 25) the effectiveness of any interest rate hedging programs; 26) the effectiveness of our internal control over financial reporting; 27) the outcome or impact of ongoing or future litigation, claims and regulatory actions; and 28) exposure to potential product liability and warranty claims. These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.

Segment Results

Fuselage Systems
Fuselage Systems segment revenues in the first quarter of 2015 were $917 million, up from $858 million for the same period last year due to higher deliveries.  Operating margin for the first quarter of 2015 was 17.9 percent as compared to 16.5 percent during the same period of 2014. In the first quarter of 2015, the segment recorded pretax $3 million favorable cumulative catch-up adjustments on mature programs and a $3 million favorable change in estimate on the 747-8 program which is in a loss position. In comparison, the segment recorded pretax $9 million favorable cumulative catch-up adjustments in the first quarter of 2014. 

Propulsion Systems
Propulsion Systems segment revenues in the first quarter of 2015 were $446 million compared to $450 million for the same period last year driven by lower non-recurring engineering design revenues. Operating margin for the first quarter of 2015 was 21.5 percent as compared to 17.8 percent in the first quarter of 2014. In the first quarter of 2015, the segment realized pretax $9 million favorable cumulative catch-up adjustments on mature programs.  In comparison, the segment recorded pretax $5 million favorable cumulative catch-up adjustments in the first quarter of 2014.

Wing Systems
Wing Systems segment revenues in the first quarter of 2015 were $377 million, down from $414 million for the same period last year due to the Gulfstream wing divestiture.  Operating margin for the first quarter of 2015 was 12.0 percent as compared to 12.1 percent during the same period of 2014. The segment recorded pretax $3 million favorable cumulative catch-up adjustments in the first quarter of 2014.

Appendix


Table 4.  Segment Reporting

(unaudited)


1st Quarter

($ in millions)

2015

2014

Change





Segment Revenues




   Fuselage Systems

$916.8

$858.3

6.8%

   Propulsion Systems

446.0

450.2

(0.9%)

   Wing Systems

376.7

414.2

(9.1%)

   All Other

2.7

5.8


Total Segment Revenues

$1,742.2

$1,728.5

0.8%





Segment Earnings (Loss) from Operations




   Fuselage Systems

$164.5

$142.0

15.8%

   Propulsion Systems

95.7

80.2

19.3%

   Wing Systems

45.2

50.0

(9.6%)

   All Other

(0.3)

0.1


Total Segment Operating Earnings 

$305.1

$272.3

12.0%





Unallocated Expense




Corporate SG&A

($51.6)

($60.5)

(14.7%)

Research & Development

(7.0)

(6.3)

11.1%

Cost of Sales

(11.2)

(11.1)

0.9%

Total Earnings from Operations

$235.3

$194.4

21.0%





Segment Operating Earnings (Loss) as % of Revenues




   Fuselage Systems

17.9%

16.5%

  140  BPS 

   Propulsion Systems

21.5%

17.8%

  370  BPS 

   Wing Systems

12.0%

12.1%

  (10) BPS 

   All Other

(11.1%)

1.7%


Total Segment Operating Earnings as % of Revenues

17.5%

15.8%

  170  BPS 





Total Operating Earnings as % of Revenues

13.5%

11.2%

  230  BPS 





 

Spirit Ship Set Deliveries


(one ship set equals one aircraft)














1st Quarter



2015

2014


B737


134

125


B747


4

5


B767


5

3


B777


26

26


B787


32

31


Total


201

190







A320 Family


135

128


A330/340


27

30


A350


6

2


A380


6

7


Total


174

167







Business/Regional Jet


17

35







Total Spirit


392

392


 

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Operations

(unaudited)



For the Three Months Ended




April 2, 2015


April 3, 2014


($ in millions, except per share data)





Net revenues

$1,742.2


$1,728.5

Operating costs and expenses:




Cost of sales

1,448.3


1,467.3

Selling, general and administrative

51.6


60.5

Research and development

7.0


6.3

     Total operating costs and expenses

1,506.9


1,534.1

     Operating income

235.3


194.4

Interest expense and financing fee amortization

(17.9)


(35.4)

Other (expense) income, net

(6.4)


1.3

     Income before income taxes and equity in net income of affiliate

211.0


160.3

Income tax provision

(29.4)


(6.9)

     Income before equity in net income of affiliate

181.6


153.4

Equity in net income of affiliate

0.3


0.2

     Net income

$181.9


$153.6





Earnings per share




Basic

$1.31


$1.08

Shares

138.9


141.6





Diluted

$1.30


$1.07

Shares

140.4


143.7

 

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Balance Sheets

(unaudited)



April 2, 2015


December 31, 2014


($ in millions)

Current assets




Cash and cash equivalents 

$749.5


$377.9

Accounts receivable, net 

601.0


605.6

Inventory, net 

1,702.4


1,753.0

Other current assets 

108.1


315.6

    Total current assets 

3,161.0


3,052.1

Property, plant and equipment, net

1,776.7


1,783.6

Pension assets

210.5


203.4

Other assets

124.5


123.6

    Total assets 

$5,272.7


$5,162.7

Current liabilities




Accounts payable

$679.2


$611.2

Accrued expenses

256.9


329.1

Current portion of long-term debt 

30.2


9.4

Advance payments, short-term 

145.5


118.6

Deferred revenue, short-term 

39.3


23.4

Other current liabilities 

76.7


167.1

    Total current liabilities 

1,227.8


1,258.8

Long-term debt 

1,115.1


1,144.1

Advance payments, long-term 

643.3


680.4

Deferred revenue and other deferred credits

67.3


27.5

Pension/OPEB obligation 

74.7


73.0

Other liabilities 

350.1


356.9

Equity




Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued 

-


-

Common stock, Class A par value $0.01, 200,000,000 shares authorized, 141,678,165  and 141,084,378 shares issued, respectively 

1.4


1.4

Common stock, Class B par value $0.01, 150,000,000 shares authorized, 121 and 4,745 shares issued, respectively 

-


-

Additional paid-in capital 

1,040.1


1,035.6

Accumulated other comprehensive loss

(167.8)


(153.8)

Retained earnings 

1,049.4


867.5

Treasury stock, at cost (4,000,000 shares each period, respectively)

(129.2)


(129.2)

    Total shareholders' equity 

1,793.9


1,621.5

Noncontrolling interest

0.5


0.5

    Total equity

1,794.4


1,622.0

    Total liabilities and equity 

$5,272.7


$ 5,162.7

 

Spirit AeroSystems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)








For the Three Months Ended






April 2, 2015


April 3, 2014






($ in millions)

Operating activities





Net income


$181.9


$153.6

Adjustments to reconcile net income to net cash provided by operating activities



     Depreciation expense


43.6


41.3

     Amortization expense


4.7


20.4

     Accretion of customer supply agreement


0.4


0.1

     Employee stock compensation expense


6.9


3.7

     Excess tax benefits from share-based payment arrangements


-


(0.5)

     Loss (gain) on effectiveness of hedge contracts


1.6


(0.6)

     Loss from foreign currency transactions


6.4


1.8

     Deferred  taxes 


1.2


(0.3)

     Pension and other post-retirement benefits, net


(6.1)


(8.0)

     Grant income


(2.6)


(2.0)

     Equity in net income of affiliate


(0.3)


(0.2)

Changes in assets and liabilities





     Accounts receivable, net


0.3


(196.7)

     Inventory, net


33.8


(51.6)

     Accounts payable and accrued liabilities


(101.3)


28.9

     Advance payments


(10.2)


(30.6)

     Income taxes receivable/payable


198.0


72.5

     Deferred revenue and other deferred credits


56.7


4.8

     Other 


8.7


8.4

        Net cash provided by operating activities


$423.7


$45.0

Investing activities





Purchase of property, plant and equipment


(40.3)


(53.0)

Other


-


0.1

        Net cash used in investing activities


($40.3)


($52.9)

Financing activities





Proceeds from issuance of debt


535.0


-

Proceeds from issuance of bonds


-


300.0

Principal payments of debt


(7.5)


(9.5)

Payments on term loan


(534.9)


-

Payments on bonds


-


(227.2)

Debt issuance and financing costs


(4.7)


(19.2)

Change in restricted cash


-


(72.8)

Excess tax benefit from share-based payment arrangements


-


0.5

        Net cash used in financing activities


($12.1)


($28.2)

Effect of exchange rate changes on cash and cash equivalents


0.3


(2.5)

        Net increase (decrease) in cash and cash equivalents for the period


$371.6


($38.6)

Cash and cash equivalents, beginning of the period


377.9


420.7

Cash and cash equivalents, end of the period


$749.5


$382.1

 

Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures (indicated by *) 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.

 

Adjusted EPS









1st Quarter




2015


2014








GAAP Diluted Earnings Per Share


$1.30


$1.07


Impact of Partial Release of Deferred Tax Asset Valuation Allowance 


(0.30)

a

(0.22)

b

Adjusted Diluted Earnings Per Share


$1.00


$0.85








Diluted Shares


140.4


143.7














a      Represents the net earnings per share impact of deferred tax asset valuation allowance of $42.0 million.


b     Represents the net earnings per share impact of deferred tax asset valuation allowance of $31.5 million.


 

Free Cash Flow

($ in millions)



1st Quarter


Guidance 


2015

2014


2015






Cash Provided by Operating Activities

$424

$45


$925 - $1,075

Capital Expenditures

(40)

(53)


(325 - 375)

Free Cash Flow

$384

($8)


$600 - $700

 

On the web: http://www.spiritaero.com

Logo - http://photos.prnewswire.com/prnh/20130515/CG13652LOGO

 

SOURCE Spirit AeroSystems Holdings, Inc.

For further information: Investor Relations: Ghassan Awwad (316) 523-7040, Media: Jarrod Bartlett (316) 523-4070, http://www.spiritaero.com


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