WICHITA, Kan., Feb. 28, 2020 /PRNewswire/ --
Fourth Quarter 2019
- Revenue of $2.0 billion
- Earnings per share (EPS) of $0.65; Adjusted EPS* of $0.79
- Cash from operations of $204
million; Adjusted free cash flow* of $102 million
- Announcement by Boeing to decrease 787 production rate to 10
aircraft per month resulted in $34
million forward loss due to fixed cost absorption
Full-Year 2019
- Revenue of $7.9 billion
- EPS of $5.06; Adjusted EPS* of
$5.54
- Cash from operations of $923
million; Adjusted free cash flow* of $723 million
- Third and fourth quarter announcements by Boeing to decrease
787 production rates resulted in total forward losses of
$67 million due to fixed cost
absorption
Recent Events
- Reached MOA with Boeing for 2020 737 MAX production; extended
737 contract to 2033
- Amended Credit Agreement to provide covenant relief through Q1
2021
- Secured $375 million short-term
delayed draw term loan to provide additional liquidity
- Closed acquisition of FMI, a leader in 3D woven carbon-carbon
material for hypersonics
- Extended IAM union contract for 9,000 workers for three
years
- Reduced quarterly cash dividend due to 737 MAX production
Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported fourth
quarter and full-year 2019 financial results.
Table 1.
Summary Financial Results (unaudited)
|
|
|
|
|
4th
Quarter
|
|
Twelve
Months
|
|
($ in millions,
except per share data)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Revenues
|
$1,959
|
$1,835
|
7%
|
$7,863
|
$7,222
|
9%
|
Operating
Income
|
$96
|
$244
|
(61%)
|
$761
|
$843
|
(10%)
|
Operating Income
as a % of Revenues
|
4.9%
|
13.3%
|
(840)
BPS
|
9.7%
|
11.7%
|
(200)
BPS
|
Net
Income
|
$68
|
$178
|
(62%)
|
$530
|
$617
|
(14%)
|
Net Income as a %
of Revenues
|
3.5%
|
9.7%
|
(620)
BPS
|
6.7%
|
8.5%
|
(180)
BPS
|
Earnings Per Share
(Fully Diluted)
|
$0.65
|
$1.68
|
(61%)
|
$5.06
|
$5.65
|
(10%)
|
Adjusted Earnings
Per Share (Fully Diluted)*
|
$0.79
|
$1.85
|
(57%)
|
$5.54
|
$6.26
|
(12%)
|
Fully Diluted
Weighted Avg Share Count
|
104.6
|
105.6
|
|
104.7
|
109.1
|
|
|
"The grounding of the 737 MAX was a significant issue for Spirit
in 2019, particularly after Boeing suspended production on
December 16, 2019," said Spirit
AeroSystems President and Chief Executive Officer Tom Gentile. "After Boeing directed Spirit to
suspend deliveries on December
19th, we took several actions to lower costs and
preserve liquidity. We implemented a workforce reduction of 2,800
employees in Wichita and 400
employees in Oklahoma. We also
negotiated an amendment to our credit facility providing for
covenant relief into 2021 and secured a $375
million short-term delayed draw term loan facility. With
these actions, we believe our liquidity position remains
sufficient. In 2019, we generated $723
million in adjusted free cash flow for the year and ended
the year in a strong cash position of $2.4
billion. Spirit remains a proud partner on the MAX program
and we look forward to working with Boeing to ensure the long-term
success of the program."
737 MAX Program Update
On January 30, 2020, Spirit
announced it had agreed on a production rate with Boeing to produce
216 Boeing 737 MAX shipsets in 2020. On February 6, 2020, Boeing and Spirit executed a
Memorandum of Agreement (MOA) that memorialized the production rate
agreement, subject to any changes in requirements by Boeing. In
addition, the MOA provides that Boeing will pay $225 million to Spirit in the first quarter of
2020, consisting of (i) $70 million
in support of Spirit's inventory and production stabilization, of
which $10 million will be repaid by
Spirit in 2021, and (ii) $155 million
as an incremental pre-payment for costs and shipset deliveries over
the next two years. Other terms include extending the repayment
date of the $123 million advance
received by Spirit under the 2019 MOA to 2022, and extending the
737 MAX pricing terms through 2033 (previously, pricing was through
December 31, 2030).
Accounting Review Results
On January 30, 2020, the Company
announced it was conducting a review of its accounting process
compliance and had concluded that the Company did not comply with
its established accounting processes with respect to whether and
when to accrue certain potential contingent liabilities received by
the Company after the end of the third quarter of 2019. The review
is now substantially complete and the Company concluded that it
should have recorded an incremental contingent liability for the
third quarter of 2019 of less than $8
million. Although the Company views this difference as
immaterial and no restatement of financial statements is required,
the matter led the Company to conclude that a material weakness in
our internal control over financial reporting existed as of
December 31, 2019. The Company has a
corrective action plan in place and expects the material weakness
in financial reporting to be fully remediated by the end of the
year. Additional information on this material weakness will be
described in the Company's Annual Report on Form 10-K for 2019.
Acquisition of FMI
On January 10, 2020, Spirit closed
its purchase of Fiber Materials Inc. (FMI) for $120 million. FMI is an industry-leading
technology company specializing in high-temperature materials and
composites for defense. The company's main operations focus on
multidirectional reinforced composites that enable high-temperature
applications such as thermal protection systems, re-entry vehicle
nose tips, and rocket motor throats and nozzles. Their unique
capabilities have positioned them as a leader in 3D woven
carbon-carbon high-temperature materials for hypersonic missiles,
which the Department of Defense has identified as a national
priority. FMI is based in Biddeford,
Maine, and has more than 200 employees at two facilities in
the state. Acquiring FMI aligns with the Company's strategic growth
objectives to diversify its customer base and expand the current
defense business.
"FMI's existing portfolio is an excellent fit with Spirit, and
its capabilities will help us develop new composites technology for
a number of aerospace applications," said Gentile.
Revenue
Spirit's fourth quarter 2019 revenue was $2.0 billion, up from the same period of 2018.
This increase was primarily driven by higher production volumes on
the Boeing 737, 787 and Airbus A350 programs, higher revenue
recognized on the Boeing 787 program, and increased Global Customer
Support and Services (GCS&S) activity, partially offset by
lower revenue recognized on the Airbus A350 program in accordance
with pricing terms. Revenue for the full-year increased to
$7.9 billion, primarily due to higher
production volumes on the Boeing 777, 787 and Airbus A350 programs,
higher revenue recognized on the Boeing 787 program, increased
GCS&S activity, and favorable model mix on the Boeing 737
program. (Table 1)
Spirit's backlog at the end of the fourth quarter of 2019 was
approximately $43 billion, with work
packages on all commercial platforms in the Boeing and Airbus
backlog.
Earnings
Operating income for the fourth quarter of 2019 was $96 million, down compared to $244 million in the same period of 2018,
primarily driven by the forward loss recognized on the Boeing 787
program as a result of Boeing's recently announced production rate
decrease from 12 APM to 10 APM, performance on the Boeing 737
program, lower margin recognized on the Airbus A350 program in
accordance with pricing terms and higher acquisition-related
expenses. Operating income for the full-year was $761 million, down compared to $843 million in 2018, primarily due to higher
acquisition-related expenses, reduced profitability on the Boeing
737 program largely resulting from the 737 MAX grounding, and the
forward losses recognized in the third and fourth quarter driven by
Boeing's announcements to decrease the 787 production rate,
partially offset by higher production volume on the Boeing 737 and
777 programs. Fourth quarter EPS was $0.65, compared to $1.68 in the same period of 2018. Fourth quarter
2019 adjusted EPS* was $0.79,
excluding the impacts of planned acquisitions and the voluntary
retirement program (VRP) offered during the second quarter of 2019,
compared to $1.85 in the same period
of 2018, adjusted to exclude the impact of the planned Asco
acquisition. Full-year EPS was $5.06,
down compared to $5.65 in 2018.
Full-year adjusted EPS* was $5.54,
excluding the impacts of planned acquisitions and the VRP offered
during the second quarter of 2019, down compared to $6.26 in 2018, adjusted to exclude the impact of
the planned Asco acquisition and debt financing costs. (Table
1)
Cash
Cash from operations in the fourth quarter of 2019 was
$204 million, up slightly from
$203 million in the same quarter last
year. Adjusted free cash flow* in the fourth quarter of 2019 was
$102 million, down compared to
$145 million in the same period of
2018. Full-year cash from operations was $923 million, up compared to $770 million last year. Full-year adjusted free
cash flow* was $723 million, up
compared to $565 million in 2018. The
Company fully drew its $800 million
revolver at the end of the quarter in light of the uncertainty
surrounding the Boeing 737 MAX production suspension, and the
proceeds of that draw are included in the total cash balance. Cash
balance at the end of the quarter was $2.4
billion. (Table 2)
On February 24, 2020, Spirit
amended its credit agreement to provide relief from the prior
financial covenants through the first quarter of 2021 due to the
MAX production suspension and low 2020 production rate. In
addition, Spirit entered into a short-term delayed draw term loan
facility of $375 million, which is
generally subject to covenants that are substantially similar to
those in Spirit's Credit Agreement. The $375
million facility, which will be available to be drawn until
August 15, 2020, matures and shall be
repaid in full (if drawn) on the earlier to occur of (a)
September 15, 2020, and (b) the date
that is 45 days after the date on which the FAA re-certifies the
737 MAX program.
* Non-GAAP financial measure, see Appendix for
reconciliation
Table 2.
Cash Flow and Liquidity (unaudited)
|
|
|
|
|
|
4th
Quarter
|
|
Twelve
Months
|
|
($ in
millions)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Cash from
Operations
|
$204
|
$203
|
1%
|
$923
|
$770
|
20%
|
Purchases of
Property, Plant & Equipment
|
($113)
|
($100)
|
13%
|
($232)
|
($271)
|
(14%)
|
Free Cash
Flow*
|
$91
|
$103
|
(12%)
|
$691
|
$499
|
38%
|
Adjusted Free Cash
Flow*
|
$102
|
$145
|
(30%)
|
$723
|
$565
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
December
31,
|
|
Liquidity
|
|
|
|
2019
|
2018
|
|
Cash
|
|
|
|
$2,351
|
$774
|
|
Total
Debt
|
|
|
|
$3,034
|
$1,895
|
|
|
|
|
|
|
|
|
2020 Outlook
Given the continued uncertainty surrounding the timing of return
to service of the 737 MAX, Spirit will not be providing guidance at
this time.
Segment Results
Fuselage Systems
Fuselage Systems segment revenue in the fourth quarter of 2019
increased two percent from the same period last year to
$1.0 billion. This increase was
primarily due to higher production volumes on the Boeing 787 and
increased GCS&S activities, partially offset by lower
production volumes on the Boeing 737 program. Operating margin for
the fourth quarter of 2019 decreased to 5.8 percent, compared to
15.6 percent during the same period of 2018, primarily due to the
forward loss recognized on the Boeing 787 program as a result of
Boeing's announced production rate decrease as well as lower margin
recognized on the Boeing 737 program. In the fourth quarter of
2019, the segment recorded pretax $(4.2)
million of unfavorable cumulative catch-up adjustments and
$(24.1) million of net forward
losses. In the fourth quarter of 2018, the segment recorded pretax
$(3.9) million of unfavorable
cumulative catch-up adjustments and $4.9
million of favorable changes in estimates on forward loss
programs.
Propulsion Systems
Propulsion Systems segment revenue in the fourth quarter of 2019
increased 20 percent from the same period last year to $532 million, primarily driven by higher
production volumes on the Boeing 737, 777 and Airbus A220 programs
as well as favorable model mix on the Boeing 737 program. Operating
margin for the fourth quarter of 2019 increased to 18.7 percent,
compared to 18.0 percent during the same period of 2018, primarily
due to performance and favorable model mix on the Boeing 737
program. In the fourth quarter of 2019, the segment recorded pretax
$(6.3) million of unfavorable
cumulative catch-up adjustments and $(12.0)
million of net forward losses. In the fourth quarter of
2018, the segment recorded pretax $(0.4)
million of unfavorable cumulative catch-up adjustments and
$(0.7) million of net forward
losses.
Wing Systems
Wing Systems segment revenue in the fourth quarter of 2019
increased four percent from the same period last year to
$391 million, primarily due to higher
production volumes on the Boeing 787 and Airbus A350 programs.
Operating margin for the fourth quarter of 2019 decreased to 10.0
percent, compared to 16.1 percent during the same period of 2018,
primarily driven by the forward loss recognized on the Boeing 787
program as a result of Boeing's announced production rate decrease,
performance on the Boeing 737 program as well as pricing terms on
the Airbus A350 program. In the fourth quarter of 2019, the segment
recorded pretax $(3.0) million of
unfavorable cumulative catch-up adjustments and $(5.6) million of net forward losses. In the
fourth quarter of 2018, the segment recorded pretax $2.1 million of favorable cumulative catch-up
adjustments and $1.4 million of
favorable changes in estimates on forward loss programs.
Table 4.
Segment Reporting (unaudited)
|
|
|
|
4th
Quarter
|
Twelve
Months
|
($ in
millions)
|
2019
|
2018
|
Change
|
2019
|
2018
|
Change
|
|
|
|
|
|
|
|
Segment
Revenues
|
|
|
|
|
|
|
Fuselage
Systems
|
$1,034.5
|
$1,017.4
|
1.7%
|
$4,206.2
|
$4,000.8
|
5.1%
|
Propulsion Systems
|
532.3
|
442.9
|
20.2%
|
2,057.8
|
1,702.5
|
20.9%
|
Wing
Systems
|
390.9
|
374.4
|
4.4%
|
1,588.3
|
1,513.0
|
5.0%
|
All
Other
|
1.6
|
0.6
|
**
|
10.8
|
5.7
|
89.5%
|
Total Segment
Revenues
|
$1,959.3
|
$1,835.3
|
6.8%
|
$7,863.1
|
$7,222.0
|
8.9%
|
|
|
|
|
|
|
|
Segment Earnings
from Operations
|
|
|
|
|
|
|
Fuselage
Systems
|
$60.3
|
$158.4
|
(61.9%)
|
$440.8
|
$576.1
|
(23.5%)
|
Propulsion Systems
|
99.7
|
79.6
|
25.3%
|
404.6
|
283.5
|
42.7%
|
Wing
Systems
|
38.9
|
60.3
|
(35.5%)
|
216.0
|
226.4
|
(4.6%)
|
All
Other
|
0.9
|
-
|
**
|
3.4
|
0.3
|
**
|
Total
Segment Operating Earnings
|
$199.8
|
$298.3
|
(33.0%)
|
$1,064.8
|
$1,086.3
|
(2.0%)
|
|
|
|
|
|
|
|
Unallocated
Expense
|
|
|
|
|
|
|
SG&A
|
($87.8)
|
($55.9)
|
(57.1%)
|
($261.4)
|
($210.4)
|
(24.2%)
|
Impact of Severe
Weather Event
|
-
|
10.0
|
**
|
-
|
10.0
|
**
|
Research &
Development
|
(18.5)
|
(11.2)
|
(65.2%)
|
(54.5)
|
(42.5)
|
(28.2%)
|
Cost of
Sales
|
2.2
|
2.4
|
(8.3%)
|
11.9
|
(0.2)
|
**
|
Total Earnings
from Operations
|
$95.7
|
$243.6
|
(60.7%)
|
$760.8
|
$843.2
|
(9.8%)
|
|
|
|
|
|
|
|
Segment Operating
Earnings as % of Revenues
|
|
|
|
|
|
|
Fuselage
Systems
|
5.8%
|
15.6%
|
(980)
BPS
|
10.5%
|
14.4%
|
(390)
BPS
|
Propulsion Systems
|
18.7%
|
18.0%
|
70
BPS
|
19.7%
|
16.7%
|
300
BPS
|
Wing
Systems
|
10.0%
|
16.1%
|
(610)
BPS
|
13.6%
|
15.0%
|
(140)
BPS
|
All
Other
|
56.3%
|
-
|
**
|
31.5%
|
5.3%
|
**
|
Total Segment
Operating Earnings as % of Revenues
|
10.2%
|
16.3%
|
(610)
BPS
|
13.5%
|
15.0%
|
(150)
BPS
|
|
|
|
|
|
|
|
Total Operating
Earnings as % of Revenues
|
4.9%
|
13.3%
|
(840)
BPS
|
9.7%
|
11.7%
|
(200)
BPS
|
|
|
|
|
|
|
|
** Represents an amount
equal to or in excess of 100% or not meaningful.
|
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains "forward-looking statements" that
may involve many risks and uncertainties. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as "aim," "anticipate," "believe,"
"could," "continue," "estimate," "expect," "goal," "forecast,"
"intend," "may," "might," "objective," "outlook," "plan,"
"predict," "project," "should," "target," "will," "would," and
other similar words, or phrases, 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)
|
the timing and
conditions surrounding the return to service of the B737 MAX, the
B737 MAX production rates under the 2020 MOA and other agreements
with Boeing, future demand for the aircraft, and any residual
impacts of the grounding on production rates for the
aircraft;
|
2)
|
our reliance on
Boeing for a significant portion of our revenues;
|
3)
|
our ability to
continue to grow our business and execute our growth strategy
including our ability to enter into profitable supply arrangements
with additional customers;
|
4)
|
the business
condition and liquidity of Boeing and Airbus and their ability to
satisfy their contractual obligations to the Company;
|
5)
|
demand for our
products and services and the effect of economic and geopolitical
conditions in the industries and markets in which we operate in the
U.S. and globally;
|
6)
|
the certainty of our
backlog, including the ability of customers to cancel or delay
orders prior to shipment;
|
7)
|
our ability to
accurately estimate and manage performance, cost, margins, and
revenue under our contracts, and the potential for additional
forward losses on new and maturing programs;
|
8)
|
our ability and our
suppliers' ability to accommodate, and the cost of accommodating,
announced increases in the build rates of certain
aircraft;
|
9)
|
competitive
conditions in the markets in which we operate, including
in-sourcing by commercial aerospace original equipment
manufacturers;
|
10)
|
our ability to
successfully negotiate, or re-negotiate, future pricing under our
supply agreements with Boeing, Airbus and other
customers;
|
11)
|
the success and
timely execution of key milestones, such as the receipt of
necessary regulatory approvals and satisfaction of closing
conditions, in our announced acquisitions of Asco and select
Bombardier assets, and our ability to effectively assess, manage,
close, and integrate such acquisitions along with others that we
pursue, and generate synergies and other cost savings therefrom,
while avoiding unexpected costs, charges, expenses, and adverse
changes to business relationships and business
disruptions;
|
12)
|
the possibility that
our cash flows may not be adequate for our additional capital
needs;
|
13)
|
our ability to avoid
or recover from cyber-based or other security attacks and other
operations disruptions;
|
14)
|
legislative or
regulatory actions, both domestic and foreign, impacting our
operations;
|
15)
|
the effect of changes
in tax laws and the Company's ability to accurately calculate and
estimate the effect of such changes;
|
16)
|
any reduction in our
credit ratings;
|
17)
|
our dependence on our
suppliers, as well as the cost and availability of raw materials
and purchased components;
|
18)
|
our ability to
recruit and retain a critical mass of highly skilled
employees;
|
19)
|
our relationships
with the unions representing many of our employees, including our
ability to avoid labor disputes and work stoppages with respect to
our union employees;
|
20)
|
spending by the U.S.
and other governments on defense;
|
21)
|
pension plan
assumptions and future contributions;
|
22)
|
the effectiveness of
our internal control over financial reporting; and any difficulties
or delays that could affect the Company's ability to effectively
implement the remediation plan, in whole or in part, to address the
material weakness identified in the Company's internal control over
financial reporting, as described in Item 9A. "Controls and
Procedures";
|
23)
|
the outcome or impact
of ongoing or future litigation, claims, and regulatory actions,
including our exposure to potential product liability and warranty
claims;
|
24)
|
our ability to
continue selling certain receivables through our supplier financing
programs;
|
25)
|
our ability to access
capital markets to fund our liquidity needs, and the costs and
terms of any additional financing;
|
26)
|
any regulatory or
legal action arising from the review of our accounting processes;
and
|
27)
|
the risks of doing
business internationally, including fluctuations in foreign
currency exchange rates, impositions of tariffs or embargoes, trade
restrictions, compliance with foreign laws, and domestic and
foreign government policies.
|
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. You
should review carefully the section captioned "Risk Factors" in the
Company's Annual Report on Form 10-K for a more complete discussion
of these and other factors that may affect our business.
Spirit Shipset
Deliveries
|
(one shipset
equals one aircraft)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
Twelve
Months
|
|
|
2019
|
2018
|
|
2019
|
2018
|
B737
|
|
153
|
148
|
|
606
|
605
|
B747
|
|
1
|
2
|
|
6
|
6
|
B767
|
|
8
|
7
|
|
33
|
30
|
B777
|
|
12
|
12
|
|
56
|
44
|
B787
|
|
42
|
35
|
|
166
|
143
|
Total
Boeing
|
|
216
|
204
|
|
867
|
828
|
|
|
|
|
|
|
|
A220(1)
|
|
14
|
6
|
|
40
|
12
|
A320
Family
|
|
172
|
169
|
|
682
|
657
|
A330
|
|
8
|
16
|
|
35
|
62
|
A350
|
|
30
|
27
|
|
111
|
98
|
A380
|
|
-
|
2
|
|
1
|
6
|
Total
Airbus
|
|
224
|
220
|
|
869
|
835
|
|
|
|
|
|
|
|
Business/Regional Jet
(1)
|
|
12
|
15
|
|
55
|
71
|
|
|
|
|
|
|
|
Total
|
|
452
|
439
|
|
1,791
|
1,734
|
|
|
|
|
|
|
|
(1) Airbus acquired
majority ownership in the C-Series program (subsequently renamed to
the A220 program) in July 2018; all C-Series deliveries prior to Q3
2018 are included in Business/Regional Jet and all subsequent A220
deliveries are included in A220.
|
|
|
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Statements of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
For the Twelve
Months Ended
|
|
|
December 31,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
|
|
($ in millions,
except per share data)
|
|
|
|
|
|
|
|
|
|
Revenue
|
$1,959.3
|
|
$1,835.3
|
|
$7,863.1
|
|
$7,222.0
|
Operating costs
and expenses:
|
|
|
|
|
|
|
|
Cost of
sales
|
1,757.3
|
|
1,534.6
|
|
6,786.4
|
|
6,135.9
|
Selling, general and
administrative
|
87.8
|
|
55.9
|
|
261.4
|
|
210.4
|
Impact of severe
weather event
|
-
|
|
(10.0)
|
|
-
|
|
(10.0)
|
Research and
development
|
18.5
|
|
11.2
|
|
54.5
|
|
42.5
|
|
Total operating
costs and expenses
|
1,863.6
|
|
1,591.7
|
|
7,102.3
|
|
6,378.8
|
|
Operating
income
|
95.7
|
|
243.6
|
|
760.8
|
|
843.2
|
Interest expense and
financing fee amortization
|
(25.8)
|
|
(19.7)
|
|
(91.9)
|
|
(80.0)
|
Other income
(expense), net
|
6.1
|
|
(6.2)
|
|
(5.8)
|
|
(7.0)
|
|
Income before
income taxes and equity in net income of affiliates
|
76.0
|
|
217.7
|
|
663.1
|
|
756.2
|
Income tax
provision
|
(8.1)
|
|
(40.1)
|
|
(132.8)
|
|
(139.8)
|
|
Income before
equity in net income of affiliates
|
67.9
|
|
177.6
|
|
530.3
|
|
616.4
|
Equity in net income
of affiliates
|
(0.2)
|
|
-
|
|
(0.2)
|
|
0.6
|
|
Net
income
|
$67.7
|
|
$177.6
|
|
$530.1
|
|
$617.0
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
Basic
|
$0.65
|
|
$1.70
|
|
$5.11
|
|
$5.71
|
Shares
|
103.5
|
|
104.5
|
|
103.6
|
|
108.0
|
|
|
|
|
|
|
|
|
|
Diluted
|
$0.65
|
|
$1.68
|
|
$5.06
|
|
$5.65
|
Shares
|
104.6
|
|
105.6
|
|
104.7
|
|
109.1
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$0.12
|
|
$0.12
|
|
$0.48
|
|
$0.46
|
|
|
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Balance Sheets
|
(unaudited)
|
|
December 31,
2019
|
|
December 31,
2018
|
|
($ in
millions)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$2,350.5
|
|
$773.6
|
Restricted
cash
|
0.3
|
|
0.3
|
Accounts receivable,
net
|
546.4
|
|
545.1
|
Contract assets,
short-term
|
528.3
|
|
469.4
|
Inventory,
net
|
1,118.8
|
|
1,012.6
|
Other current
assets
|
98.7
|
|
48.3
|
Total current assets
|
4,643.0
|
|
2,849.3
|
Property, plant and
equipment, net
|
2,271.7
|
|
2,167.6
|
Right of use
assets
|
48.9
|
|
-
|
Contract assets,
long-term
|
6.4
|
|
54.1
|
Pension
assets
|
449.1
|
|
326.7
|
Deferred income
taxes
|
106.5
|
|
205.0
|
Other
assets
|
80.4
|
|
83.2
|
Total assets
|
$7,606.0
|
|
$5,685.9
|
Liabilities
|
|
|
|
Accounts
payable
|
$1,058.3
|
|
$902.6
|
Accrued
expenses
|
240.2
|
|
313.1
|
Profit
sharing
|
84.5
|
|
68.3
|
Current portion of
long-term debt
|
50.2
|
|
31.4
|
Operating lease
liabilities, short-term
|
6.0
|
|
-
|
Advance payments,
short-term
|
21.6
|
|
2.2
|
Contract liabilities,
short-term
|
158.3
|
|
157.9
|
Forward loss
provision, short-term
|
83.9
|
|
12.4
|
Deferred revenue and
other deferred credits, short-term
|
14.8
|
|
20.0
|
Deferred grant income
liability - current
|
3.6
|
|
16.0
|
Other current
liabilities
|
39.3
|
|
58.2
|
Total current liabilities
|
1,760.7
|
|
1,582.1
|
Long-term
debt
|
2,984.1
|
|
1,864.0
|
Operating lease
liabilities, long-term
|
43.0
|
|
-
|
Advance payments,
long-term
|
333.3
|
|
231.9
|
Pension/OPEB
obligation
|
35.7
|
|
34.6
|
Contract liabilities,
long-term
|
356.3
|
|
369.8
|
Forward loss
provision, long-term
|
163.5
|
|
170.6
|
Deferred revenue and
other deferred credits, long-term
|
34.4
|
|
31.2
|
Deferred grant income
liability - non-current
|
29.0
|
|
28.0
|
Deferred income
taxes
|
8.3
|
|
0.8
|
Other non-current
liabilities
|
95.8
|
|
134.8
|
Stockholders'
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,
104,882,379 and 105,461,817 shares issued and outstanding,
respectively
|
1.1
|
|
1.1
|
Additional paid-in
capital
|
1,125.0
|
|
1,100.9
|
Accumulated other
comprehensive loss
|
(109.2)
|
|
(196.6)
|
Retained
earnings
|
3,201.3
|
|
2,713.2
|
Treasury stock, at
cost (41,523,470 and 40,719,438 shares, respectively)
|
(2,456.8)
|
|
(2,381.0)
|
Total stockholders' equity
|
1,761.4
|
|
1,237.6
|
Noncontrolling
interest
|
0.5
|
|
0.5
|
Total equity
|
1,761.9
|
|
1,238.1
|
Total liabilities and equity
|
$7,606.0
|
|
$5,685.9
|
|
|
|
|
|
|
|
Spirit AeroSystems
Holdings, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(unaudited)
|
|
|
|
|
|
|
|
For the Twelve
Months Ended
|
|
|
December 31,
2019
|
|
December 31,
2018
|
|
|
($ in
millions)
|
Operating
activities
|
|
|
|
|
Net income
|
|
$530.1
|
|
$617.0
|
Adjustments to
reconcile net income to net cash provided by operating
activities
|
|
|
|
|
Depreciation
expense
|
|
251.6
|
|
230.6
|
Amortization
expense
|
|
0.1
|
|
0.4
|
Amortization of deferred
financing fees
|
|
3.5
|
|
17.9
|
Accretion of customer supply
agreement
|
|
4.3
|
|
4.1
|
Employee stock compensation
expense
|
|
36.1
|
|
27.4
|
Loss (gain) from derivative
instruments
|
|
8.1
|
|
(7.2)
|
Loss (gain) from foreign
currency transactions
|
|
1.6
|
|
(0.3)
|
Loss on impairment and
disposition of assets
|
|
4.9
|
|
1.8
|
Deferred
taxes
|
|
86.1
|
|
(38.0)
|
Pension and other
post-retirement benefits, net
|
|
(20.0)
|
|
(33.4)
|
Grant liability
amortization
|
|
(16.2)
|
|
(21.6)
|
Equity in net income of
affiliates
|
|
0.2
|
|
(0.6)
|
Forward loss
provision
|
|
40.7
|
|
(170.9)
|
Changes in assets and
liabilities
|
|
|
|
|
Accounts receivable,
net
|
|
12.8
|
|
(47.9)
|
Contract assets
|
|
(5.2)
|
|
(8.5)
|
Inventory, net
|
|
(95.4)
|
|
(61.3)
|
Accounts payable and accrued
liabilities
|
|
34.6
|
|
244.5
|
Profit sharing/deferred
compensation
|
|
16.0
|
|
(40.9)
|
Advance payments
|
|
120.8
|
|
(98.3)
|
Income taxes
receivable/payable
|
|
(59.6)
|
|
(28.4)
|
Contract
liabilities
|
|
(13.0)
|
|
208.3
|
Deferred revenue and other
deferred credits
|
|
6.2
|
|
16.9
|
Other
|
|
(25.6)
|
|
(41.7)
|
Net
cash provided by operating activities
|
|
$922.7
|
|
$769.9
|
Investing
activities
|
|
|
|
|
Purchase of property, plant
and equipment
|
|
(232.2)
|
|
(271.2)
|
Equity in assets of
affiliates
|
|
(7.9)
|
|
-
|
Proceeds from sale of
assets
|
|
0.2
|
|
3.4
|
Net
cash used in investing activities
|
|
($239.9)
|
|
($267.8)
|
Financing
activities
|
|
|
|
|
Proceeds from issuance of
debt
|
|
250.0
|
|
-
|
Proceeds from issuance of
bonds
|
|
-
|
|
1,300.0
|
Proceeds from revolving
credit facility
|
|
900.0
|
|
-
|
Payments on revolving credit
facility
|
|
(100.0)
|
|
-
|
Principal payments of
debt
|
|
(13.4)
|
|
(6.7)
|
Payments on term
loan
|
|
(16.6)
|
|
(256.3)
|
Payments on bonds
|
|
-
|
|
(300.0)
|
Taxes paid related to net
share settlement awards
|
|
(12.9)
|
|
(15.6)
|
Proceeds from issuance of
ESPP stock
|
|
2.6
|
|
2.1
|
Debt issuance and financing
costs
|
|
-
|
|
(23.2)
|
Purchase of treasury
stock
|
|
(75.8)
|
|
(805.8)
|
Dividends paid
|
|
(50.4)
|
|
(48.0)
|
Other
|
|
0.9
|
|
-
|
Net
cash provided by (used in) financing activities
|
|
$884.4
|
|
($153.5)
|
Effect of exchange
rate changes on cash, cash equivalents, and restricted
cash
|
|
5.9
|
|
-
|
Net
increase in cash, cash equivalents, and restricted
cash
|
|
$1,573.1
|
|
$348.6
|
Cash, cash
equivalents, and restricted cash, beginning of the
period
|
|
794.1
|
|
445.5
|
Cash, cash
equivalents, and restricted cash, end of the period
|
|
$2,367.2
|
|
$794.1
|
|
|
|
|
|
Reconciliation of
Cash and Cash Equivalents and Restricted Cash:
|
|
December 31,
2019
|
|
December 31,
2018
|
Cash and cash
equivalents, beginning of the period
|
|
$773.6
|
|
$423.3
|
Restricted cash,
short-term, beginning of the period
|
|
0.3
|
|
2.2
|
Restricted cash,
long-term, beginning of the period
|
|
20.2
|
|
20.0
|
Cash, cash
equivalents, and restricted cash, beginning of the
period
|
|
$794.1
|
|
$445.5
|
|
|
|
|
|
Cash and cash
equivalents, end of the period
|
|
$2,350.5
|
|
$773.6
|
Restricted cash,
short-term, end of the period
|
|
0.3
|
|
0.3
|
Restricted cash,
long-term, end of the period
|
|
16.4
|
|
20.2
|
Cash, cash
equivalents, and restricted cash, end of the period
|
|
$2,367.2
|
|
$794.1
|
Appendix
In addition to reporting our financial information using U.S.
Generally Accepted Accounting Principles (GAAP), management
believes that certain non-GAAP measures (which are indicated by *
in this report) provide investors with important perspectives into
the company's ongoing business performance. The non-GAAP measures
we use in this report are (i) adjusted diluted earnings per share,
(ii) free cash flow, and (iii) adjusted free cash flow, which are
described further below. The company does not intend for the
information to be considered in isolation or as a substitute for
the related GAAP measures. Other companies may define and calculate
the measures differently than we do, limiting the usefulness of the
measures for comparison with other companies.
Adjusted Diluted Earnings Per Share. To provide additional
transparency, we have disclosed non-GAAP adjusted diluted earnings
per share (Adjusted EPS). This metric excludes various items that
are not considered to be directly related to our operating
performance. Management uses Adjusted EPS as a measure of business
performance and we believe this information is useful in providing
period-to-period comparisons of our results. The most comparable
GAAP measure is diluted earnings per share.
Free Cash Flow. Free Cash Flow is defined as GAAP cash from
operating activities (generally referred to herein as "cash from
operations"), less capital expenditures for property, plant and
equipment. Management believes Free Cash Flow provides investors
with an important perspective on the cash available for
stockholders, debt repayments including capital leases, and
acquisitions after making the capital investments required to
support ongoing business operations and long term value creation.
Free Cash Flow does not represent the residual cash flow available
for discretionary expenditures as it excludes certain mandatory
expenditures. The most comparable GAAP measure is cash provided by
operating activities. Management uses Free Cash Flow as a measure
to assess both business performance and overall liquidity.
Adjusted Free Cash Flow. Management considers certain items that
arise from time to time to be outside the ordinary course of our
operations. Management believes that excluding these items provides
a better understanding of the underlying trends in the company's
operating performance and allows more accurate comparisons of the
company's operating results to historical performance. Accordingly,
Adjusted Free Cash Flow is defined as free cash flow less these
special items. The most comparable GAAP measure is cash provided by
operating activities. Management uses Adjusted Free Cash Flow
as a measure to assess both business performance and overall
liquidity.
The tables below provide reconciliations between the GAAP and
non-GAAP measures.
Adjusted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
Twelve
Months
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted Earnings
Per Share
|
|
$0.65
|
|
$1.68
|
|
$5.06
|
|
$5.65
|
|
Costs Related to
Planned Acquisitions
|
|
0.17
|
a
|
0.17
|
b
|
0.43
|
c
|
0.50
|
d
|
Q2 2019 Voluntary
Retirement Program
|
|
(0.03)
|
e
|
-
|
|
0.05
|
e
|
-
|
|
2018 Debt Financing
Costs
|
|
-
|
|
-
|
|
-
|
|
0.11
|
f
|
Adjusted Diluted
Earnings Per Share
|
|
$0.79
|
|
$1.85
|
|
$5.54
|
|
$6.26
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Shares (in
millions)
|
|
104.6
|
|
105.6
|
|
104.7
|
|
109.1
|
|
|
|
|
|
|
|
|
|
|
|
a
Represents the three months ended Q4 2019 net EPS impact of $0.17
per share, which includes:
- Gains related to foreign currency fluctuation on Euro account of
$(0.05) (included in Other income)
- Transaction costs of $0.22 (included in SG&A)
|
|
|
|
|
|
|
|
|
|
|
b
Represents the three months ended Q4 2018 net EPS impact of $0.17
comprised of the following:
- Loss related to foreign currency forward contract of $0.11
(included in Other income)
- Transaction costs of $0.01 (included in SG&A)
- Interest expense on new debt related to Asco of $0.05 (included
in Interest expense)
|
|
|
|
|
|
|
|
|
|
|
c
Represents the twelve months ended Q4 2019 net EPS impact of $0.43
per share, which includes:
- Loss related to foreign currency forward contract of $0.13
(included in Other income)
- Loss related to foreign currency fluctuation on Euro account of
$0.04 (included in Other income)
- Transaction costs of $0.26 (included in SG&A)
|
|
|
|
|
|
|
|
|
|
|
d
Represents the twelve months ended Q4 2018 net EPS impact of $0.50
comprised of the following:
- Loss related to foreign currency forward contract of $0.27
(included in Other income)
- Transaction costs of $0.12 (included in SG&A)
- Interest expense on new debt related to Asco of $0.11 (included
in Interest expense)
|
|
|
|
|
|
|
|
|
|
|
e
Represents the three and twelve months ended Q4 2019 retirement
incentive expenses resulting from the VRP offered during the
second quarter of 2019 (included in Other income)
|
|
|
|
|
|
|
|
|
|
|
f
Represents the twelve months ended Q4 2018 debt financing costs
resulting from debt financing activity occuring in 2018 (included
in Interest expense)
|
|
|
|
|
|
|
Free Cash
Flow
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
4th
Quarter
|
|
Twelve
Months
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Cash from
Operations
|
$204
|
|
$203
|
|
$923
|
|
$770
|
|
Capital
Expenditures
|
(113)
|
|
(100)
|
|
(232)
|
|
(271)
|
|
Free Cash
Flow
|
$91
|
|
$103
|
|
$691
|
|
$499
|
|
Costs related to
planned acquisitions
|
11
|
a
|
42
|
b
|
32
|
c
|
66
|
d
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash
Flow
|
$102
|
|
$145
|
|
$723
|
|
$565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a Represents the three
months ended Q4 2019 acquisition impact of $11 million comprised
of:
- Cash loss from conversion of Asco funds account from Euro to USD
of $6 million
- Transaction payments of $5 million
|
|
|
|
|
|
|
|
|
|
b Represents the three
months ended Q4 2018 Asco acquisition impact of $42 million
comprised of:
- Cash paid on foreign currency forward contract of $27 million
- Transaction payments of $2 million
- Interest paid on proportion of new debt related to Asco of $13
million
|
|
|
|
|
|
|
|
|
|
c Represents the twelve
months ended Q4 2019 acquisition impact of $32 million comprised
of:
- Cash paid on foreign currency forward contract of $11 million
- Transaction payments of $15 million
- Cash loss from conversion of Asco funds account from Euro to USD
of $6 million
|
|
|
|
|
|
|
|
|
|
d Represents the twelve
months ended Q4 2018 Asco acquisition impact of $66 million
comprised of:
- Cash paid on foreign currency forward contract of $41 million
- Transaction payments of $10 million
- Interest paid on proportion of new debt related to Asco of $15
million
|
|
View original
content:http://www.prnewswire.com/news-releases/spirit-aerosystems-reports-2019-results-301013241.html
SOURCE Spirit AeroSystems Holdings, Inc.