Spirit AeroSystems Holdings, Inc. Reports Third Quarter 2008 Financial Results; Includes Impact of Machinists Strike at Boeing



    
    - Third quarter 2008 revenues grew 6 percent to $1.027 billion

    - Operating Income grew 4 percent to $111 million

    - Fully Diluted Earnings Per Share were $0.53

    - Cash and Cash Equivalents were $178 million

    - Total backlog increased 35 percent to approximately $31.8 billion

    
    WICHITA, Kan., Oct. 29 /CNW/ -- Spirit AeroSystems Holdings, Inc. (NYSE:  
SPR) reported third quarter 2008 financial results reflecting revenue growth
and solid double-digit operating margins while winning new business and
responding to a labor strike at its largest customer.
    Spirit's third quarter 2008 revenues increased to $1.027 billion, up 6
percent from the same period last year.  Operating income increased 4 percent
to $111 million, up from $107 million in the same period a year ago as
revenues increased and lower period expenses were realized.  Net income was
$74 million, or $0.53 per fully diluted share, compared to $84 million, or
$0.60 per fully diluted share, in the same period of 2007.



    
    Table 1.  Summary Financial Results
                                         3rd Quarter          Nine Months
    ($'s in Millions, except
     per share data)               2008    2007  Change  2008    2007  Change
    

    
    Revenues                      $1,027   $968    6%  $3,126  $2,880     9%
    Operating Income                $111   $107    4%    $378    $313    21%
    Operating Income as a % of
     Revenues                      10.8%  11.0% (20) BPS  2.1%   10.8% 130 BPS
    Net Income                       $74    $84  (11%)   $246    $221    11%
    Net Income as a % of Revenues   7.2%   8.6% (140)BPS  7.9%    7.7% 20 BPS
    Earnings per Share (Fully
     diluted)                      $0.53  $0.60  (12%)  $1.76   $1.59    11%
    Fully Diluted Weighted Avg
     Share Count (Millions)        139.1  139.5         139.2   139.2
    
    Third quarter 2008 net income and earnings per share benefited from a
lower effective tax rate of 29.5 percent resulting largely from higher federal
research and experimention (R&E) credits that increased earnings by $0.02 per
fully diluted share.  Spirit also benefited from a lower effective tax rate
during the prior year period due to higher state Investment Tax Credits and
R&E credits.  The lower tax rate contributed $0.09 per fully diluted share to
third quarter 2007 results.
    In early September, Spirit responded to a labor strike at The Boeing
Company, its largest customer.  The work stoppage by the International
Association of Machinists and Aerospace Workers (IAM) resulted in Spirit
taking immediate action to implement a reduced work week schedule for all
employees supporting certain Boeing programs.  This action resulted in
continued employment for Spirit employees while helping the company maintain
production efficiencies at lower volumes during the work stoppage.  As a
result of the work stoppage, third quarter 2008 ship set deliveries to Boeing
were nine units less than previously expected, resulting in a revenue
reduction for the quarter of $53 million and a reduction in earnings per share
of $0.13.   The earnings per share impact includes $0.09 per share from an $18
million unfavorable cumulative catch-up adjustment attributable to the strike.
    "We continue to execute well and remain focused on our long-term strategy
as we respond to the work stoppage at our largest customer," said President
and Chief Executive Officer Jeff Turner.  "Revenues increased and company-wide
operating profitability continued to grow modestly compared to the third
quarter of 2007 as we reduced deliveries to Boeing Commercial Airplanes during
the last three weeks of September," Turner continued.  "We are working hard to
minimize the impact of the strike on our employees and shareholders while
balancing the needs and requirements of all of our customers.  I am very proud
of our team's performance and resilience during this challenging period,"
Turner added.
    During the quarter, Spirit accomplished several milestones on key
projects and continued to expand its customer base in the aftermarket.  Also
during the quarter, the company announced the expansion of its Wichita factory
to accommodate the development and production of the Cessna Citation Columbus
Fuselage; opened Spirit's European Repair Station in Prestwick, Scotland; and
broke ground on the A350 factory in North Carolina. In October, Spirit also
announced spare parts supply agreements with both Southwest and Continental
Airlines, and announced a new development and production contract for the
Mitsubishi Regional Jet pylon. At the recent NBAA tradeshow, Spirit was
announced as the wing supplier for Gulfstream's new super mid-size G250
business jet, a contract previously disclosed as being with an unidentified
customer.
    "As for the outlook of the commercial aerospace market," Turner
maintained, "we absolutely believe that we operate in a global market which
will continue to see long-term growth.  However, we are closely monitoring the
recent developments in the global financial markets and assessing the
potential near-term impact on the commercial aerospace segment."
    Spirit's backlog at quarter-end increased 35 percent from $23.5 billion
in the year-ago period to $31.8 billion, as combined 2008 year-to-date net
orders for 1,360 aircraft at Boeing and Airbus outpaced their combined
deliveries of 674 aircraft.  Spirit's backlog is calculated based on
contractual prices for products and volumes from the published firm order
backlogs of Boeing and Airbus, along with firm orders from other customers.
    Spirit updated its contract profitability estimates during the third
quarter of 2008 to reflect continued operating efficiency improvements and the
impact of the IAM strike at Boeing Commercial Airplanes.  The company's
continued focus on improving operating efficiency resulted in a $5 million
favorable cumulative catch-up adjustment which partially offset an $18 million
unfavorable cumulative catch-up adjustment caused by the IAM work stoppage at
Boeing.  The unfavorable adjustment reflects the impact of the strike on
current contract block profitability. The adjustment assumes a favorable
ratification vote and a return to work by early next week, followed by an
approximately ninety day transition period at Spirit to absorb units built
ahead of customer requirements.  The net impact to Spirit's third quarter 2008
results was a $13 million net unfavorable cumulative catch-up adjustment
reflected primarily in the Fuselage Systems segment.  During the third quarter
of 2007, no net changes to contract estimates were realized.
    Cash flow from operations was $68 million for the third quarter 2008,
compared to $41 million for third quarter 2007. The company's continued
investment in new development programs, reflected largely as pre-production
inventory balances, was more than offset by earnings, customer advances, and
accounts receivable performance. The timing lag in reducing incoming supplier
material, driven by the Boeing IAM strike, also contributed to higher
inventory balances in the quarter.



    
    Table 2.  Cash Flow and Liquidity
                                             3rd Quarter      Nine Months
    ($'s in Millions)                       2008    2007     2008     2007
    

    
    Cash Flow from Operations                $68     $41     $147     $105
    Purchases of Property, Plant &
     Equipment                              ($56)   ($69)   ($175)   ($228)
    


    
                                                     Sept 25,     December 31,
    Liquidity                                         2008          2007
    

    
    Cash                                              $178          $133
    Current Portion of Long-term Debt
     plus Long-term Debt                              $592          $595
    
    Cash balances at the end of the third quarter were $178 million and debt
balances were $592 million.  At the end of the third quarter 2008,
approximately $636 million of the $650 million revolving credit facility was
undrawn.  Approximately $14 million of the credit facility was used for
financial letters of credit associated with workers compensation insurance.
The company's credit ratings remained unchanged with a BB rating at Standard &
Poor's and a Ba3 rating at Moody's.
    
    Outlook
    
    Spirit continues to operate well across business segments and remains
financially healthy with a solid balance sheet and strong liquidity.  The
company anticipates the continuation of reduced work weeks or other production
adjustments throughout the duration of the strike at Boeing and beyond, while
fully meeting its obligations to non-Boeing customers.  At the conclusion of
the work stoppage, Spirit anticipates working closely with Boeing to establish
a revised production plan and delivery schedule.  The company intends to
provide an updated financial outlook at the conclusion of that process, which
we now anticipate to be no later than the end of November.
    
    Cautionary Statement Regarding Forward-Looking Statements
    
    This quarterly report contains "forward-looking statements." 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 "may," "will," "expect," "anticipate,"
"intend," "estimate," "believe," "project," "continue," "plan," "forecast," or
other similar words. 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 forward-looking
statements include, but are not limited to: our ability to continue to grow
our business and execute our growth strategy; the build rates of certain
Boeing aircraft including, but not limited to, the B737 program, the B747
program, the B767 program and the B777 program, and build rates of the Airbus
A320 and A380 programs; the success and timely progression of Boeing's new
B787 and Airbus's new A350 aircraft programs, including receipt of necessary
regulatory approvals; the duration of the Boeing IAM strike, and our ability
to balance the needs of employees, customers and suppliers as we adjust to
Boeing's strike-impacted delivery schedule; the continuing turmoil in global
financial and credit markets; our ability to enter into supply arrangements
with additional customers and the ability of all parties to satisfy their
performance requirements under existing supply contracts with Boeing, Airbus,
and other customers; any adverse impact on Boeing's and Airbus's production of
aircraft resulting from cancellations or reduced orders by their customers;
the impact of continuing high jet fuel prices on the commercial aviation
market; 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, such as U.S. export
control laws, the Foreign Corrupt Practices Act, environmental laws and agency
regulations, both in the U.S. and abroad; the effect of new commercial and
business aircraft development programs, and the resulting timing and resource
requirements that may be placed on us; the cost and availability of raw
materials and purchased components; our ability to recruit and retain highly
skilled employees and our relationships with the unions representing many of
our employees; spending by the U.S. and other governments on defense; the
outcome or impact of ongoing or future litigation and regulatory actions; and
our exposure to potential product liability claims.  These factors are not
exhaustive, and new factors may emerge or changes to the foregoing factors may
occur that could impact our business. Except to the extent required by law, we
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.

    
                                   Appendix
    

    
    Segment Results
    Fuselage Systems
    
    Fuselage Systems segment revenues for the third quarter of 2008 were $485
million, up 12 percent over the same period last year due to a volume-based
pricing adjustment and higher 787 and non-recurring engineering revenues.
Operating margin for the third quarter of 2008 was 15.2 percent, down from
18.0 percent in the third quarter of 2007, largely as a result of the
unfavorable cumulative catch-up adjustment and higher segment R&D expense.
    
    Propulsion Systems
    
    Propulsion Systems segment revenues for the third quarter of 2008 were
$292 million, up 5 percent over the same period last year as aftermarket
revenues were significantly higher than in the third quarter of 2007.
Operating margin for the third quarter of 2008 was 16.2 percent compared to
16.5 percent in the third quarter of 2007.
    
    Wing Systems
    
    Wing Systems segment revenues for the third quarter of 2008 were $247
million, down 2 percent over the same period last year. Operating margin for
the third quarter of 2008 was 10.9 percent compared to 9.3 percent in the
third quarter of 2007, reflecting continued improvement in operating
efficiencies and lower segment R&D expense, more than offsetting unfavorable
cumulative catch-up adjustments.



    
    Table 3. Segment Reporting
    

    
    ($'s in Millions,
     except margin percent)       3rd Quarter             Nine Months
                           2008   2007    Change     2008      2007    Change
    

    
    Segment Revenues
      Fuselage Systems    $484.8  $434.3   11.6%   $1,470.2  $1,329.2   10.6%
      Propulsion Systems  $291.5  $278.9    4.5%     $863.1    $798.5    8.1%
      Wing Systems        $246.8  $251.5   (1.9%)    $773.5    $738.1    4.8%
      All Other             $4.1    $2.8   46.4%      $18.9     $14.6   29.5%
    Total Segment
     Revenues           $1,027.2  $967.5    6.2%   $3,125.7  $2,880.4    8.5%
    

    
    Segment Earnings from
     Operations
      Fuselage Systems     $73.5   $78.1   (5.9%)    $255.0    $243.2    4.9%
      Propulsion Systems   $47.1   $45.9    2.6%     $140.9    $130.2    8.2%
      Wing Systems         $26.9   $23.5   14.5%      $92.3     $75.1   22.9%
      All Other             $0.0    $0.3 (100.0%)      $0.1      $1.8  (94.4%)
    Total Segment
     Operating Earnings   $147.5  $147.8   (0.2%)    $488.3    $450.3    8.4%
    

    
    Unallocated Corporate
     SG&A Expense         ($35.6) ($39.9) (10.8%)   ($109.7)  ($134.3) (18.3%)
    Unallocated Research
     & Development Expense ($0.7)  ($1.3) (46.2%)     ($1.1)    ($3.5) (68.6%)
    Total Earnings from
     Operations           $111.2  $106.6    4.3%     $377.5    $312.5   20.8%
    

    
    Segment Operating Earnings
     as % of Revenues
      Fuselage Systems     15.2%   18.0% (280) BPS    17.3%    18.3% (100)BPS
      Propulsion Systems   16.2%   16.5%  (30) BPS    16.3%    16.3%      --
      Wing Systems         10.9%    9.3% 160 BPS      11.9%    10.2% 170 BPS
      All Other             0.0%   10.7% (1,070)BPS    0.5%    12.3%(1,180)BPS
    Total Segment Operating
     Earnings as % of
     Revenues              14.4%   15.3%  (90) BPS    15.6%    15.6%      --
    

    
    Total Operating
     Earnings as % of
     Revenues              10.8%   11.0%  (20) BPS    12.1%    10.8%   130 BPS
    



    
                          Spirit Ship Set Deliveries
                      (One Ship Set equals One Aircraft)
    

    
                      2007 Spirit AeroSystems Deliveries
    

    
                      1st Qtr     2nd Qtr     3rd Qtr     4th Qtr   Total 2007
    B737               83           85           84          79         331
    B747                5            4            5           4          18
    B767                3            4            3           3          13
    B777               21           21           21          20          83
    B787*               0            1            0           0           1
    Total             112          115          113         106         446
    

    
    A320 Family        93           84           91          91         359
    A330/340           22           21           22          20          85
    A380                0            0            2           3           5
    Total             115          105          115         114         449
    

    
    Hawker 850XP       16           15           17          20          68
    

    
    Total Spirit      243          235          245         240         963
    

    
    *Full-Revenue Units Only, Does not include Static and Fatigue test units
    


    
                      2008 Spirit AeroSystems Deliveries
    

    
                     1st Qtr      2nd Qtr     3rd Qtr    YTD 2008
    B737               93           95           87         275
    B747                4            7            4          15
    B767                3            3            3           9
    B777               20           22           18          60
    B787*               1            1            1           3
    Total             121          128          113         362
    

    
    A320 Family        95           95           90         280
    A330/340           24           21           23          68
    A380                4            2            4          10
    Total             123          118          117         358
    

    
    Hawker 850XP       15           24           24          63
    

    
    Total Spirit      259          270          254         783
    

    
    *Full-Revenue Units Only, Does not include Static and Fatigue test units
    



    
                      Spirit AeroSystems Holdings, Inc.
         Condensed Consolidated Statements of Operations (unaudited)
    

    
                                          For the Three       For the Nine
                                           Months Ended       Months Ended
                                      September  September September September
                                        25, 2008 27, 2007   25, 2008  27, 2007
    

    
                                       ($ in millions, except per share data)
    

    
    Net Revenues                       $1,027.2  $967.5    $3,125.7  $2,880.4
      Operating costs and expenses:
      Cost of sales                       864.3   804.7     2,596.1   2,388.2
      Selling, general and administrative  39.0    42.9       119.0     142.3
      Research and development             12.7    13.3        33.1      37.4
        Total Operating Costs and
           Expenses                       916.0   860.9     2,748.2   2,567.9
        Operating Income                  111.2   106.6       377.5     312.5
    Interest expense and financing fee
     amortization                          (9.9)   (9.7)      (29.5)    (28.1)
    Interest income                         4.4     8.0        15.1      22.8
    Other income (loss), net               (0.7)    1.3         0.9       5.1
        Income Before Income Taxes        105.0   106.2       364.0     312.3
    Income tax provision                  (31.0)  (22.6)     (118.4)    (90.9)
        Net Income                        $74.0   $83.6      $245.6    $221.4
    

    
    Earnings per share
    Basic                                 $0.54   $0.61       $1.79     $1.65
    Shares                                137.0   136.7       136.9     133.8
    

    
    Diluted                               $0.53   $0.60       $1.76     $1.59
    Shares                                139.1   139.5       139.2     139.2
    



    
                      Spirit AeroSystems Holdings, Inc.
              Condensed Consolidated Balance Sheets (unaudited)
    

    
                                                 September 25,    December 31,
                                                     2008              2007
    

    
                                                        ($ in millions)
    Current assets
    Cash and cash equivalents                       $177.7            $133.4
    Accounts receivable, net                         211.9             159.9
    Current portion of long-term
     receivable                                       82.8             109.5
    Inventory, net                                 1,768.8           1,342.6
    Prepaids                                          13.1              14.2
    Other current assets                              67.8              83.2
         Total current assets                      2,322.1           1,842.8
    Property, plant and equipment, net             1,053.2             963.8
    Long-term receivable                              51.9             123.0
    Pension assets                                   350.9             318.7
    Other assets                                      84.6              91.6
         Total assets                             $3,862.7          $3,339.9
    Current liabilities
    Accounts payable                                 389.4             362.6
    Accrued expenses                                 177.4             182.6
    Current portion of long-term debt                  8.1              16.0
    Advance payments, short-term                     210.7              67.6
    Deferred revenue, short-term                      43.5              42.3
    Other current liabilities                         20.8               3.9
         Total current liabilities                   849.9             675.0
    Long-term debt                                   583.8             579.0
    Advance payments, long-term                      740.7             653.4
    Other liabilities                                179.7             165.9
    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, 103,214,928 and
     102,693,058 issued and outstanding,
     respectively                                      1.0               1.0
    Common stock, Class B par value
     $0.01, 150,000,000 shares
     authorized, 36,682,070 and
     36,826,434 shares issued and
     outstanding, respectively                         0.4               0.4
    Additional paid-in capital                       935.6             924.6
    Accumulated other comprehensive
     income                                          101.3             117.7
    Retained earnings                                470.3             222.9
         Total shareholders' equity                1,508.6           1,266.6
         Total liabilities and
          shareholders' equity                    $3,862.7          $3,339.9
    



    
                      Spirit AeroSystems Holdings, Inc.
         Condensed Consolidated Statements of Cash Flows (unaudited)
    

    
                                                 For the Nine     For the Nine
                                                 Months Ended     Months Ended
                                                 September 25,   September 27,
                                                     2008              2007
                                                        ($ in millions)
    Operating activities
    Net Income                                      $245.6            $221.4
    Adjustments to reconcile net income
     to net cash provided by operating
     activities
         Depreciation expense                         90.8              67.1
         Amortization expense                          7.1               5.7
         Accretion of long-term
          receivable                                 (13.0)            (16.0)
         Employee stock compensation
          expense                                     11.6              26.8
         Excess tax (benefit) from share-
          based payment arrangements                   -               (32.9)
         Loss from effectiveness of hedge contracts    0.4               -
         Loss from foreign currency
          transactions                                 0.3               -
         (Gain) loss on disposition of
          assets                                      (0.2)              0.4
         Deferred  taxes                               0.9               3.8
         Pension and other post-
          retirement benefits, net                   (21.5)            (22.0)
    Changes in assets and liabilities
         Accounts receivable                         (28.4)            (48.0)
         Inventory, net                             (432.9)           (312.6)
         Accounts payable and accrued
          liabilities                                 30.5              18.7
         Advance payments                            230.4              93.6
         Income taxes payable                         15.1              56.6
         Deferred revenue and other
          deferred credits                            16.9              36.4
         Other                                        (7.0)              6.3
            Net cash provided by
             operating activities                    146.6             105.3
    Investing Activities
    Purchase of property, plant and
     equipment                                      (175.2)           (228.0)
    Proceeds from sale of assets                       1.8               0.2
    Long-term receivable                              87.1              22.8
    Financial derivatives                              1.1               3.1
    Investment in joint venture                       (3.6)              -
            Net cash (used in) investing
             activities                              (88.8)           (201.9)
    Financing Activities
    Proceeds from revolving credit
     facility                                         75.0               -
    Payments on revolving credit facility            (75.0)              -
    Proceeds from issuance of debt                     8.8               -
    Proceeds from government grants                    1.6               -
    Principal payments of debt                       (11.9)            (14.4)
    Debt issuance costs                               (6.8)              -
    Excess tax benefit from share-based
     payment arrangements                              -                32.9
    Executive stock (repurchase)                       -                (1.0)
            Net cash provided by (used
             in) financing activities                 (8.3)             17.5
    Effect of exchange rate changes on
     cash and cash equivalents                        (5.2)              0.2
            Net increase (decrease) in
             cash and cash equivalents
             for the period                           44.3             (78.9)
    Cash and cash equivalents, beginning
     of the period                                   133.4             184.3
    Cash and cash equivalents, end of the
     period                                         $177.7            $105.4

    




For further information:

For further information: Investors, Phil Anderson, +1-316-523-1797, or
Media, Debbie Gann, +1-316-526-3910, both of Spirit AeroSystems Holdings, Inc.
Web Site: http://www.spiritaero.com


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