Attached files
file | filename |
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EX-23.1 - EX-23.1 - Spirit AeroSystems Holdings, Inc. | y80301exv23w1.htm |
EX-99.1 - EX-99.1 - Spirit AeroSystems Holdings, Inc. | y80301exv99w1.htm |
8-K - FORM 8-K - Spirit AeroSystems Holdings, Inc. | y80301e8vk.htm |
Exhibit 99.2
Item 1. Condensed Consolidated Financial Statements (unaudited)
As further discussed in Note 21 to the condensed consolidated financial statements, Spirit
AeroSystems Holdings, Inc.s (the Company) condensed consolidated financial statements have been modified to add Note 21 to the
condensed consolidated financial statements. In connection with the anticipated registration with
the Securities and Exchange Commission (the SEC) of the 71/2% Senior Notes due 2017
(the Exchange Notes) to be issued by Spirit AeroSystems, Inc., a direct wholly-owned subsidiary
of the Company (Spirit), in exchange for Spirits outstanding 71/2% Senior Notes due
2017 (the Original Notes and together with the Exchange Notes, the Notes), this additional note
to the Companys condensed consolidated financial statements provides condensed consolidating
financial information in accordance with Rule 3-10(d) of Regulation S-X promulgated by the
Securities and Exchange Commission (the SEC) as the Notes are fully and unconditionally guaranteed, jointly and severally, by the Company and its wholly-owned domestic subsidiaries. The
financial information contained in Note 21 does not reflect events occurring after November 6, 2009, the date of the
filing of the Companys Quarterly Report on Form 10-Q for the quarterly period ended October 1,
2009 (the Quarterly Report) and does not modify or update those disclosures that may have been
affected by subsequent events. For a discussion of events and developments subsequent to the filing
date of the Quarterly Report, please refer to the reports and other information the Company has
filed with the SEC since that date.
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(unaudited)
For the Three | For the Nine | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
October 1, 2009 | September 25, 2008 | October 1, 2009 | September 25, 2008 | |||||||||||||
($ in millions, except per share data) | ||||||||||||||||
Net revenues |
$ | 1,053.8 | $ | 1,027.2 | $ | 3,000.8 | $ | 3,125.7 | ||||||||
Operating costs and expenses |
||||||||||||||||
Cost of sales |
878.3 | 864.3 | 2,637.2 | 2,596.1 | ||||||||||||
Selling, general and administrative |
30.5 | 39.0 | 103.6 | 119.0 | ||||||||||||
Research and development |
14.0 | 12.7 | 41.6 | 33.1 | ||||||||||||
Total operating costs and expenses |
922.8 | 916.0 | 2,782.4 | 2,748.2 | ||||||||||||
Operating income |
131.0 | 111.2 | 218.4 | 377.5 | ||||||||||||
Interest expense and financing fee amortization |
(10.2 | ) | (9.9 | ) | (29.1 | ) | (29.5 | ) | ||||||||
Interest income |
1.6 | 4.4 | 6.2 | 15.1 | ||||||||||||
Other income (loss), net |
(0.5 | ) | (0.7 | ) | 5.2 | 0.9 | ||||||||||
Income before income taxes and equity in net
loss of affiliate |
121.9 | 105.0 | 200.7 | 364.0 | ||||||||||||
Income tax provision |
(34.4 | ) | (31.0 | ) | (58.8 | ) | (118.4 | ) | ||||||||
Income before equity in net loss of affiliates |
87.5 | 74.0 | 141.9 | 245.6 | ||||||||||||
Equity in net loss of affiliate |
(0.2 | ) | | (0.2 | ) | | ||||||||||
Net income |
$ | 87.3 | $ | 74.0 | $ | 141.7 | $ | 245.6 | ||||||||
Earnings per share |
||||||||||||||||
Basic |
$ | 0.63 | $ | 0.54 | $ | 1.03 | $ | 1.79 | ||||||||
Diluted |
$ | 0.62 | $ | 0.53 | $ | 1.01 | $ | 1.76 |
See notes to condensed consolidated financial statements (unaudited)
1
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(unaudited)
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
($ in millions) | ||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 206.7 | $ | 216.5 | ||||
Accounts receivable, net |
235.8 | 149.3 | ||||||
Current portion of long-term receivable |
28.2 | 108.9 | ||||||
Inventory, net |
2,204.6 | 1,882.0 | ||||||
Income tax receivable-current |
6.6 | 3.8 | ||||||
Deferred tax asset-current |
63.2 | 62.1 | ||||||
Other current assets |
16.0 | 10.7 | ||||||
Total current assets |
2,761.1 | 2,433.3 | ||||||
Property, plant and equipment, net |
1,224.0 | 1,068.3 | ||||||
Pension assets |
60.0 | 60.1 | ||||||
Deferred tax asset-non-current |
167.5 | 146.0 | ||||||
Other assets |
71.1 | 52.6 | ||||||
Total assets |
$ | 4,283.7 | $ | 3,760.3 | ||||
Current liabilities |
||||||||
Accounts payable |
$ | 421.2 | $ | 316.9 | ||||
Accrued expenses |
164.1 | 161.8 | ||||||
Current portion of long-term debt |
6.7 | 7.1 | ||||||
Advance payments, short-term |
194.3 | 138.9 | ||||||
Deferred revenue, short-term |
59.3 | 110.5 | ||||||
Other current liabilities |
25.8 | 8.1 | ||||||
Total current liabilities |
871.4 | 743.3 | ||||||
Long-term debt |
583.5 | 580.9 | ||||||
Bonds payable, long-term |
293.4 | | ||||||
Advance payments, long-term |
806.5 | 923.5 | ||||||
Deferred revenue and other deferred credits |
54.3 | 58.6 | ||||||
Pension/OPEB obligation |
49.1 | 47.3 | ||||||
Deferred grant income liability |
117.5 | 38.8 | ||||||
Other liabilities |
52.1 | 70.4 | ||||||
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, 104,819,957 and
103,209,466 issued and outstanding, respectively |
1.0 | 1.0 | ||||||
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 36,216,211 and 36,679,760
shares issued and outstanding, respectively |
0.4 | 0.4 | ||||||
Additional paid-in capital |
946.3 | 939.7 | ||||||
Noncontrolling interest |
0.5 | 0.5 | ||||||
Accumulated other comprehensive loss |
(124.1 | ) | (134.2 | ) | ||||
Retained earnings |
631.8 | 490.1 | ||||||
Total shareholders equity |
1,455.9 | 1,297.5 | ||||||
Total liabilities and shareholders equity |
$ | 4,283.7 | $ | 3,760.3 | ||||
See notes to condensed consolidated financial statements (unaudited)
2
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(unaudited)
For the Nine | For the Nine | |||||||
Months Ended | Months Ended | |||||||
October 1, 2009 | September 25, 2008 | |||||||
($ in millions) | ||||||||
Operating activities |
||||||||
Net income |
$ | 141.7 | $ | 245.6 | ||||
Adjustments to reconcile net income to net cash provided by (used
in) operating activities |
||||||||
Depreciation expense |
91.9 | 90.8 | ||||||
Amortization expense |
7.7 | 7.1 | ||||||
Accretion of long-term receivable |
(5.8 | ) | (13.0 | ) | ||||
Employee stock compensation expense |
6.7 | 11.6 | ||||||
Loss from the ineffectiveness of hedge contracts |
| 0.4 | ||||||
(Gain) loss from foreign currency transactions |
(3.9 | ) | 0.3 | |||||
(Gain) on disposition of assets |
| (0.2 | ) | |||||
Deferred taxes |
(20.5 | ) | 0.9 | |||||
Pension and other post retirement benefits, net |
1.6 | (21.5 | ) | |||||
Grant income |
(1.4 | ) | | |||||
Equity in net income of affiliate |
0.2 | | ||||||
Changes in assets and liabilities |
||||||||
Accounts receivable |
(84.6 | ) | (28.4 | ) | ||||
Inventory, net |
(319.5 | ) | (432.9 | ) | ||||
Accounts payable and accrued liabilities |
104.9 | 30.5 | ||||||
Advance payments |
(61.6 | ) | 230.4 | |||||
Deferred revenue and other deferred credits |
(54.9 | ) | 16.9 | |||||
Income taxes receivable/payable |
(8.7 | ) | 15.1 | |||||
Other |
(5.1 | ) | (7.0 | ) | ||||
Net cash provided by (used in) operating activities |
(211.3 | ) | 146.6 | |||||
Investing Activities |
||||||||
Purchase of property, plant and equipment |
(158.0 | ) | (175.2 | ) | ||||
Long-term receivable |
86.5 | 87.1 | ||||||
Other |
0.2 | (0.7 | ) | |||||
Net cash (used in) investing activities |
(71.3 | ) | (88.8 | ) | ||||
Financing Activities |
||||||||
Proceeds from revolving credit facility |
300.0 | 75.0 | ||||||
Payments on revolving credit facility |
(300.0 | ) | (75.0 | ) | ||||
Proceeds from issuance of debt |
| 8.8 | ||||||
Proceeds from issuance of bonds |
293.4 | | ||||||
Principal payments of debt |
(5.8 | ) | (11.9 | ) | ||||
Proceeds from governmental grants |
0.7 | 1.6 | ||||||
Debt issuance and financing costs |
(17.2 | ) | (6.8 | ) | ||||
Net cash provided by (used in) financing activities |
271.1 | (8.3 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents |
1.7 | (5.2 | ) | |||||
Net increase (decrease) in cash and cash equivalents for the period |
(9.8 | ) | 44.3 | |||||
Cash and cash equivalents, beginning of period |
216.5 | 133.4 | ||||||
Cash and cash equivalents, end of period |
$ | 206.7 | $ | 177.7 | ||||
Supplemental Information |
||||||||
Change in fair value of financial instruments |
$ | (2.1 | ) | $ | 3.1 | |||
Property acquired through capital leases |
$ | 6.0 | $ | |
See notes to condensed consolidated financial statements (unaudited)
3
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
1. Organization and Basis of Interim Presentation
Spirit AeroSystems Holdings, Inc. (Holdings or the Company) was incorporated in the state
of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition
of The Boeing Companys (Boeing) operations in Wichita, Kansas, Tulsa, Oklahoma and McAlester,
Oklahoma (the Boeing Acquisition). Holdings provides manufacturing and design expertise in a wide
range of products and services for aircraft original equipment manufacturers and operators through
its subsidiary, Spirit AeroSystems, Inc. (Spirit). Onex Corporation (Onex) of Toronto, Canada
maintains majority voting power of Holdings. In April 2006, Holdings acquired the aerostructures
division of BAE Systems (Operations) Limited (BAE Aerostructures), which builds structural
components for Airbus, Boeing and Hawker Beechcraft Corporation. Prior to this acquisition,
Holdings sold essentially all of its production to Boeing. Since Spirits incorporation, the
Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Bombardier,
Mitsubishi Aircraft Corporation, Southwest Airlines, and Continental Airlines. The Company has its
headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma,
Prestwick, Scotland, and in Wichita. Spirit opened a new manufacturing facility in Subang, Malaysia
in early 2009 for the production of composite panels for wing components and expects to open
another manufacturing facility in Kinston, North Carolina in 2010 that will initially produce
components for the Airbus A350 XWB aircraft. Spirit is building an assembly plant for the A350 XWB
aircraft in Saint-Nazaire, France, which is expected to be operational in 2010.
Spirit is the majority participant in the Kansas Industrial Energy Supply Company (KIESC), a
tenancy-in-common with other Wichita companies established to purchase natural gas.
Spirit participates in two joint ventures, Spirit-Progresstech LLC (Spirit-Progresstech) and
Taikoo Spirit AeroSystems Composite Co. Ltd. (TSACCL), of which Spirits ownership interest is
50% and 31.5%, respectively. Spirit-Progresstech provides aerospace engineering support services
and TSACCL was formed to develop and implement a state of the art composite and metal bond
component repair station in the Asia-Pacific region.
The accompanying unaudited interim condensed consolidated financial statements include the
Companys financial statements and the financial statements of its majority-owned subsidiaries and
have been prepared in accordance with accounting principles generally accepted in the United States
of America (GAAP) and the instructions to Form 10-Q and Article 10 of Regulation S-X. Investments in
business entities in which the Company does not have control, but has the ability to exercise
significant influence over operating and financial policies (generally 20% to 50% ownership),
including Spirit-Progresstech and TSACCL, are accounted for under the equity method. KIESC is
fully consolidated as Spirit owns 77.8% of the entitys equity. All intercompany balances and
transactions have been eliminated in consolidation. Spirits U.K. subsidiary uses local currency,
the British pound, as its functional currency. All other foreign subsidiaries use local currency as
their functional currency with the exception of our Malaysian subsidiary, which uses the British
pound, and our French subsidiary, which uses the U.S. dollar.
As part of the monthly consolidation process, the functional currencies of our international
subsidiaries are translated to U.S. dollars using the end-of-month translation rate for balance
sheet accounts and average period currency translation rates for revenue and income accounts.
In the opinion of management, the accompanying unaudited interim condensed consolidated
financial statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the results of operations for the interim periods.
The results of operations for the nine months ended October 1, 2009, are not necessarily indicative
of the results that may be expected for the year ending December 31, 2009. Certain
reclassifications have been made to the prior year financial statements and notes to conform to the
2009 presentation. The Company adjusted its balance sheet to reflect retrospective presentation of
noncontrolling interests from Other liabilities to the Shareholders equity section at October 1,
2009, and December 31, 2008, in accordance with reporting requirements under authoritative guidance
related to the nature and classification of noncontrolling interest in the consolidated statement
of financial position. The adoption of this guidance did not have a material impact on the
Companys results of operations or statement of cash flows. In connection with the preparation of
the condensed consolidated financial statements and in accordance with the recently issued
authoritative guidance, the Company evaluated subsequent events through November 6, 2009, which is
the date these financial statements were issued. Updated authoritative guidance pertaining to
earnings per share was effective for the Company beginning January 1, 2009. The adoption of this
guidance did not have a material impact on our consolidated financial statements. The interim
financial statements should be read in conjunction with the audited
consolidated financial statements, including the notes thereto, included in our 2008 Annual Report on Form
10-K filed with the Securities and Exchange Commission (SEC) on February 20, 2009.
4
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
2. New Accounting Pronouncements
In the third quarter of 2009, the Company adopted the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC). The ASC is the single official source of
authoritative, nongovernmental GAAP, other than guidance issued by the SEC. The adoption of the
ASC did not have any impact on the financial statements included herein.
In May 2009, the FASB issued authoritative guidance prescribing the period after the balance
sheet date during which management should evaluate transactions for potential recognition, the
circumstances under which an entity should recognize events or transactions occurring after the
balance sheet date and the required disclosures an entity should make about transactions or events
occurring after the balance sheet date. This statement is effective for interim and annual periods
ending after June 15, 2009. The adoption of this guidance did not have a material impact on the
financial statements of the Company.
In April 2009, the FASB issued authoritative guidance which provides additional guidance for
estimating fair value, when the volume and activity for the asset and liability have significantly
decreased. This guidance also includes assistance on identifying circumstances that indicate a
transaction is not orderly. This guidance is effective for interim and annual reporting periods
ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for
periods ended after March 15, 2009. The Company adopted the provisions of this guidance effective
for the period ended July 2, 2009. The adoption of this guidance did not have a material impact
on the Companys financial position or results of operations. See Note 10 for the Companys
disclosures about its derivative and hedging activities.
In April 2009, the FASB issued authoritative guidance which requires disclosures about fair
value of financial instruments for interim periods of publicly traded companies as well as in
annual financial statements. This guidance also amended guidance on interim reporting, to require
those disclosures in summarized financial information for interim reporting periods. The Company
adopted the provisions of this guidance effective for the period ended July 2, 2009. See Note 11
for the Companys disclosures about its estimated fair value on its financial instruments and
long-term debt.
In November 2008, the FASB issued authoritative guidance which addressed the accounting for
equity method investments as a result of the accounting changes prescribed by previous guidance.
This guidance clarified the accounting for certain transactions and impairment considerations
involving equity method investments. The guidance is effective for fiscal years beginning after
December 15, 2008, with early adoption prohibited. The adoption of this guidance did not have a
material impact on the Companys financial position or results of operations.
In March 2008, the FASB issued authoritative guidance related to derivatives and hedging,
which requires disclosures of how and why an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for and how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows. This
guidance is effective for fiscal years beginning after November 15, 2008, with early adoption
permitted. The Company adopted the provisions of the guidance effective January 1, 2009. See Note
10 for the Companys disclosures about its derivative and hedging activities.
In February 2008, the FASB issued authoritative guidance which partially delayed the adoption
of fair value measurement guidance until January 1, 2009 for non-financial assets and liabilities
that are measured at fair value on a non-recurring basis, such as goodwill and identifiable
intangible assets. The adoption of this guidance did not have a material impact on the Companys
financial position or results of operations.
In December 2007, the FASB issued authoritative guidance which establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parents ownership interest and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. The guidance also establishes reporting
requirements that provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The guidance is effective
for fiscal years beginning after December 15, 2008. As a result of adopting this guidance in first
quarter of 2009, the Company adjusted its balance sheet to reflect retrospective presentation
prescribed by the guidance of noncontrolling interests in the amount of $0.5 from Other liabilities
to the Shareholders equity section at April 2, 2009 and December 31, 2008. The Company considered
guidance related to accounting changes and error corrections to ensure this change in accounting
principle is properly accounted for. The adoption of this guidance did not have a material impact
on the Companys results of operations or statement of cash flows.
5
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
3. Accounts Receivable
Accounts receivable, net consists of the following:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
Trade receivables |
$ | 218.1 | $ | 101.2 | ||||
Volume-based pricing accrual |
8.3 | 29.7 | ||||||
Employee receivables |
0.1 | 1.9 | ||||||
Other |
9.4 | 16.6 | ||||||
Total |
235.9 | 149.4 | ||||||
Less: allowance for doubtful accounts |
(0.1 | ) | (0.1 | ) | ||||
Accounts receivable, net |
$ | 235.8 | $ | 149.3 | ||||
4. Inventory
Inventories are summarized as follows:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
Raw materials |
$ | 186.2 | $ | 176.3 | ||||
Work-in-process |
1,552.3 | 1,260.3 | ||||||
Finished goods |
29.6 | 27.5 | ||||||
Product inventory |
1,768.1 | 1,464.1 | ||||||
Capitalized pre-production |
436.5 | 417.9 | ||||||
Total inventory, net |
$ | 2,204.6 | $ | 1,882.0 | ||||
Inventories are summarized by platform as follows:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
B737 |
$ | 332.8 | $ | 309.6 | ||||
B747(1) |
185.7 | 154.2 | ||||||
B767 |
20.8 | 16.6 | ||||||
B777 |
160.0 | 166.4 | ||||||
B787(2) |
888.8 | 768.3 | ||||||
Airbus All platforms |
140.1 | 70.7 | ||||||
Gulfstream(3) |
335.7 | 224.7 | ||||||
Rolls-Royce |
52.3 | 43.7 | ||||||
Cessna Citation Columbus(4) |
22.5 | 20.0 | ||||||
Aftermarket |
28.6 | 25.7 | ||||||
Other in-process inventory related to long-term contracts and other programs(5) |
37.3 | 82.1 | ||||||
Total inventory |
$ | 2,204.6 | $ | 1,882.0 | ||||
(1) | B747 inventory includes $41.1 and $63.6 in non-recurring production costs at October 1, 2009 and December 31, 2008, respectively, related to the B747-8 program. Also included is $26.0 of progress payments for B747-8 tooling received in 2009, which is netted against the B747 inventory. | |
(2) | B787 inventory includes $232.8 and $235.4 in capitalized pre-production costs at October 1, 2009 and December 31, 2008, respectively. | |
(3) | Gulfstream inventory includes $203.4 and $182.5 in capitalized pre-production costs at October 1, 2009 and December 31, 2008, respectively. | |
(4) | Includes non-recurring costs incurred on the Cessna Citation Columbus program that was terminated in July 2009 and are subject to our termination claim. | |
(5) | Includes non-program specific inventoriable cost accruals and miscellaneous other work-in-process. |
6
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
Capitalized pre-production costs include certain costs, including applicable overhead,
incurred before a product is manufactured on a recurring basis. These costs are typically recovered
over a certain number of ship set deliveries and the Company believes these amounts will be fully
recovered.
At October 1, 2009, work-in-process inventory included $398.1 of deferred production costs,
which is comprised of $314.9 related to B787, $94.7 on certain other contracts for the excess of
production costs over the estimated average cost per ship set, and ($11.5) of credit balances for
favorable variances on other contracts between actual costs incurred and the estimated average cost
per ship set for units delivered under the current production blocks. These balances were $162.0,
including $169.4 related to the B787 and $30.6 for certain other contracts, and ($38.0) of credit
balances for favorable variances on other contracts between actual costs incurred and the estimated
cost per ship set for units delivered under the current production blocks, respectively, at
December 31, 2008. Recovery of excess over average deferred production costs is dependent on the
number of ship sets ultimately sold and the ultimate selling prices and lower production costs
associated with future production under these contract blocks. The Company believes these amounts
will be fully recovered.
Sales significantly under estimates or costs significantly over estimates could result in the
realization of losses on these contracts in future periods.
The following is a roll forward of the inventory obsolescence and surplus reserve included in
the inventory balances at October 1, 2009:
Balance-December 31, 2008 |
$ | 31.2 | ||
Charges to costs and expenses |
9.9 | |||
Write-offs, net of recoveries |
(22.0 | ) | ||
Exchange rate |
0.2 | |||
Balance-October 1, 2009 |
$ | 19.3 | ||
5. Property, Plant and Equipment
Property, plant and equipment, net consists of the following:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
Land |
$ | 16.6 | $ | 15.5 | ||||
Buildings (including improvements) |
259.6 | 206.5 | ||||||
Machinery and equipment |
596.1 | 512.8 | ||||||
Tooling |
478.9 | 428.9 | ||||||
Construction in progress |
266.5 | 204.3 | ||||||
Total |
1,617.7 | 1,368.0 | ||||||
Less: accumulated depreciation |
(393.7 | ) | (299.7 | ) | ||||
Property, plant and equipment, net |
$ | 1,224.0 | $ | 1,068.3 | ||||
Interest costs associated with construction-in-progress are capitalized until the assets are
completed and ready for use. Capitalized interest was $2.6 and $1.2 for the three months ended
October 1, 2009 and September 25, 2008, respectively, and $5.1 and $4.3 for the nine months ended
October 1, 2009 and September 25, 2008, respectively. Repair and maintenance costs are expensed as
incurred. The Company recognized $14.3 and $15.1 of repair and maintenance expense for the three
months ended October 1, 2009 and September 25, 2008, respectively, and $58.5 and $64.7 for the nine
months ended October 1, 2009 and September 25, 2008, respectively.
We capitalize certain costs, such as software coding, installation and testing, that are
incurred to purchase or to create and implement internal-use computer software in accordance with
FASB authoritative guidance pertaining to capitalization of cost for internal-use software.
Depreciation expense related to capitalized software was $3.9 and $5.8 for the three months ended
October 1, 2009 and September 25, 2008, respectively, and $11.2 and $17.1 for the nine months ended
October 1, 2009 and September 25, 2008, respectively.
7
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
6. Current Portion of Long-Term Receivable
In connection with the Boeing Acquisition, Boeing is required to make future non-interest
bearing payments to Spirit attributable to the acquisition of title of various tooling and other
capital assets to be determined by Spirit. Spirit will retain usage rights and custody of the
assets for their remaining useful lives without compensation to Boeing. Since Spirit retains the
risks and rewards of ownership to such assets, Spirit recorded such amounts as consideration to be
returned from Boeing. The discounted receivable is accreted as interest income until payments occur
and is recorded as a component of other current assets. The accretion of interest income was $1.3
and $3.7 for the three months ended October 1, 2009 and September 25, 2008, respectively, and $5.8
and $13.0 for the nine months ended October 1, 2009 and September 25, 2008, respectively.
The following is a schedule of future payments from this receivable:
2009 |
$ | 28.9 | ||
A discount rate of 9.75% was used to record these payments at their estimated present value of
$28.2 and $108.9 at October 1, 2009 and December 31, 2008, respectively. At October 1, 2009, the
remaining discounted balance of this receivable was all current.
7. Other Assets
Other assets are summarized as follows:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
Intangible assets |
||||||||
Patents |
$ | 2.0 | $ | 2.0 | ||||
Favorable leasehold interests |
9.7 | 9.7 | ||||||
Customer relationships |
27.6 | 25.3 | ||||||
Total intangible assets |
39.3 | 37.0 | ||||||
Less: Accumulated amortization-patents |
(0.7 | ) | (0.6 | ) | ||||
Accumulated amortization-favorable leasehold interest |
(2.9 | ) | (2.5 | ) | ||||
Accumulated amortization-customer relationships |
(12.1 | ) | (8.7 | ) | ||||
Intangible assets, net |
23.6 | 25.2 | ||||||
Deferred financing costs, net |
26.9 | 14.3 | ||||||
Fair value of derivative instruments |
1.4 | 3.8 | ||||||
Goodwill |
3.0 | 2.7 | ||||||
Equity in net assets of affiliates |
4.1 | 3.9 | ||||||
Other |
12.1 | 2.7 | ||||||
Total |
$ | 71.1 | $ | 52.6 | ||||
Deferred financing costs, net are recorded net of $19.3 and $14.7 of accumulated amortization
at October 1, 2009 and December 31, 2008, respectively. During the second quarter of 2009, the
Company incurred $10.2 of additional deferred financing costs in connection with the amendment to
its revolving credit facility on June 8, 2009. During the third quarter of 2009, the Company
incurred $7.0 of additional deferred financing costs in connection with its issuance of long-term
bonds on September 30, 2009.
The Company recognized $1.0 and $1.1 of amortization expense of intangibles for the three
months ended October 1, 2009 and September 25, 2008, respectively, and $3.0 and $3.7 for the nine
months ended October 1, 2009 and September 25, 2008, respectively.
8. Advance Payments and Deferred Revenue/Credits
Advance payments. Advance payments are those payments made to Spirit by third parties in
contemplation of the future performance of services, receipt of goods, incurrence of expenditures,
or for other assets to be provided by Spirit on a contract and are repayable if such obligation is
not satisfied. The amount of advance payments to be recovered against units expected to be
delivered within a year is classified as a short-term liability, with the balance of the
unliquidated advance payments classified as a long-term liability. Progress payments differ from
advance payments in that progress payments are made for work completed prior to receipt of payment.
8
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
Deferred revenue. Deferred revenue consists of nonrefundable amounts received in advance of
revenue being earned for specific contractual deliverables. These payments are classified as
deferred revenue when received, and recognized as revenue as the production units are delivered.
Advance payments and deferred revenue/credits are summarized by platform as follows:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
B737 |
$ | 66.7 | $ | 87.3 | ||||
B747 |
3.0 | 8.0 | ||||||
B787 |
960.2 | 1,019.9 | ||||||
Airbus All platforms |
25.7 | 52.6 | ||||||
Gulfstream |
42.5 | 42.5 | ||||||
Other |
16.3 | 21.2 | ||||||
Total advance payments and deferred revenue/credits |
$ | 1,114.4 | $ | 1,231.5 | ||||
9. Government Grants
As part of our site construction projects in Kinston, North Carolina and Subang, Malaysia, we
have the potential benefit of grants related to government funding of a portion of these buildings
and other specific capital assets. Due to the terms of the lease agreements, we are deemed to own
the construction projects. During the construction phase of the facilities, as amounts eligible
under the terms of the grants are expended, we will record that spending as Property, Plant and
Equipment (construction-in-progress) and Deferred Grant Income Liability (less the present value of
any future minimum lease payments). Upon completion of the facilities, the Deferred Grant Income
will be amortized as a reduction to production cost. This amortization is based on specific terms
associated with the different grants. In North Carolina, the Deferred Grant Income related to the
capital investment criteria, which represents half of the grant, will be amortized over the lives
of the assets purchased to satisfy the capital investment performance criteria. The other half of
the Deferred Grant Income will be amortized over a ten year period in a manner consistent with the
job performance criteria. In Malaysia, the Deferred Grant Income will be amortized based on the
lives of the eligible assets constructed with the grant funds as there are no performance criteria.
As of October 1, 2009, we recorded $117.5 within Property, Plant and Equipment and Deferred Grant
Income Liability related to the use of grant funds in North Carolina and Malaysia. Of this amount,
$113.7 in capital represents transactions where funds have been paid directly to contractors by an
agency of the Malaysian Government in the case of Malaysia, and by the escrow agent in North
Carolina, so they are not reflected on the Statement of Cash Flows.
Deferred grant income liability, net consists of the following:
Nine Months Ended | Twelve Months Ended | |||||||
October 1, 2009 | December 31, 2008 | |||||||
Beginning balance |
$ | 38.8 | $ | | ||||
Grant liability recorded |
77.4 | 38.8 | ||||||
Grant income recognized |
(1.4 | ) | | |||||
Exchange rate |
2.7 | | ||||||
Total deferred grant income liability |
$ | 117.5 | $ | 38.8 | ||||
The asset related to the deferred grant income, net consists of the following:
Nine Months Ended | Twelve Months Ended | |||||||
October 1, 2009 | December 31, 2008 | |||||||
Beginning balance |
$ | 38.8 | $ | | ||||
Amount paid by Spirit (reimbursed by third parties) |
0.7 | 2.3 | ||||||
Amount paid by escrow agent |
76.7 | 37.0 | ||||||
Depreciation |
(1.4 | ) | | |||||
Exchange rate |
2.7 | (0.5 | ) | |||||
Total asset value related to deferred grant income |
$ | 117.5 | $ | 38.8 | ||||
9
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
10. Derivative and Hedging Activities
Effective for the first quarter of 2009, we adopted FASBs authoritative guidance on
derivative and hedging disclosures, which expands the quarterly and annual disclosure requirements
about our derivative instruments and hedging activities.
The Company enters into interest rate swap agreements to reduce its exposure to the variable
rate portion of its long-term debt. The Company also enters into foreign currency forward contracts
to reduce the risks associated with the changes in foreign exchange rates on sales and cost of
sales denominated in currencies other than the entities functional currency. Any gains or losses
on hedges are included in net revenues or cost of sales. The Company does not use these contracts
for speculative or trading purposes. On the inception date, the Company designates a derivative
contract as either a fair value or cash flow hedge in accordance with FASB guidance on
accounting for derivatives and hedges and links the contract to either a specific asset or
liability on the balance sheet, or to forecasted commitments or transactions. The Company formally
documents the hedging relationship between the hedging instrument and the hedged item as well as
its risk-management objective and strategy for undertaking the hedge, the nature of the risk being
hedged, how the hedging instruments effectiveness in offsetting the hedged risk will be assessed,
and a description of the method of measuring ineffectiveness. The Company also formally assesses,
both at the hedges inception and on a quarterly basis, whether the derivative item is effective in
offsetting changes in fair value or cash flows.
Changes in the fair value of derivative instruments considered to be effective hedges are
reported in Accumulated Other Comprehensive Income, net of tax. In the case of interest rate
swaps, amounts are subsequently reclassified into interest expense as a yield adjustment of the
hedged interest payments in the same period in which the related interest affects earnings. If the
actual interest rate on the fixed rate portion of debt is less than LIBOR, the monies received are
recorded as an offset to interest expense. Conversely, if the actual interest rate on the fixed
rate portion of debt is greater than LIBOR, then the Company pays the difference, which is recorded
to interest expense. Reclassifications of the amounts related to the foreign currency forward
contracts are recorded to revenues in the same period in which the contract is settled. Any change
in the fair value resulting from ineffectiveness is immediately recognized in earnings.
The Company also considers counterparty credit risk and its own credit risk in its
determination of all estimated fair values. The Company has applied these valuation techniques and
believes it has obtained the most accurate information available for the types of derivative
contracts it holds. The Company attempts to manage exposure to counterparty credit risk by only
entering into agreements with major financial institutions which are expected to be able to fully
perform under the terms of the agreement.
The Company discontinues hedge accounting prospectively when it is determined that the
derivative is no longer effective in offsetting changes in the cash flows of the hedged item; the
derivative expires or is sold, terminated or exercised; the derivative is no longer designated as a
hedging instrument because it is unlikely that a forecasted transaction will occur; or management
determines
that designation of the derivative as a hedging instrument is no longer appropriate. When
hedge accounting is discontinued, the Company continues to carry the derivative instrument on the
balance sheet at its fair value with subsequent changes in fair value included in earnings, and
gains and losses that were accumulated in Other Comprehensive Income are recognized immediately in
earnings.
To the extent that derivative instruments do not qualify for hedge accounting treatment, the
changes in fair market value of the instruments are reported in the results of operations of the
current period.
The Companys hedge agreements do not include provisions requiring collateral. The Company has
certain derivative instruments covered by master netting arrangements whereby, in the event of a
default as defined by the senior secured credit facility or termination event, the non-defaulting
party has the right to offset any amounts payable against any obligation of the defaulting party
under the same counterparty agreement.
The entire asset classes of the Company, including hedges, are pledged as collateral for both
the term loan and the revolving credit facility under the Companys senior secured credit facility
(see Note 12).
The Company enters into master netting arrangements for its derivatives to mitigate the credit
risk of financial instruments.
10
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
Interest Rate Swaps
As required under our senior secured credit facility (see Note 12), we enter into
floating-to-fixed interest rate swap agreements periodically. As of October 1, 2009, the interest
swap agreements had notional amounts totaling $500.0.
Effective | Fair Value, | |||||||||||||||||||||||
Principal Amount | Expires | Variable Rate | Fixed Rate | Fixed Rate (1) | October 1, 2009 | |||||||||||||||||||
$ | 100 | July 2010 | LIBOR | 4.37 | % | 6.12 | % | $ | (3.8 | ) | ||||||||||||||
$ | 100 | July 2011 | LIBOR | 4.27 | % | 6.02 | % | $ | (6.4 | ) | ||||||||||||||
$ | 300 | July 2011 | LIBOR | 3.23 | % | 4.98 | % | $ | (13.1 | ) | ||||||||||||||
Total |
$ | (23.3 | ) | |||||||||||||||||||||
(1) | Effective rates include the fixed rates plus 175 basis points. |
The purpose of entering into these swaps was to reduce the Companys exposure to variable
interest rates. The interest rate swaps settle on a quarterly basis when interest payments are
made. These settlements occur through the maturity date. The fair value of the interest rate swaps
was a liability (unrealized loss) of ($23.3) and ($23.0) at October 1, 2009 and December 31, 2008,
respectively.
Foreign Currency Forward Contracts
Spirits wholly owned subsidiary Spirit AeroSystems (Europe) Limited (Spirit Europe) has
certain sales, expenses, assets and liabilities that are denominated in British pounds sterling.
However, sales of Spirit Europes products to Boeing and some procurement costs are denominated in
U.S. dollars and Euros. As a consequence, movements in exchange rates could cause net sales and our
expenses to fluctuate, affecting our profitability and cash flows. In addition, even when revenues
and expenses are matched, we must translate British pound sterling denominated results of
operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated
financial statements. Consequently, increases and decreases in the value of the U.S. dollar as
compared to the British pound sterling will affect our reported results of operations and the value
of our assets and liabilities on our consolidated balance sheet, even if our results of operations
or the value of those assets and liabilities has not changed in its original currency. These
transactions could significantly affect the comparability of our results between financial periods
and/or result in significant changes to the carrying value of our assets, liabilities and
shareholders equity.
We use foreign currency forward contracts to reduce our exposure to currency exchange rate
fluctuations. The objective of these contracts is to minimize the impact of currency exchange rate
movements on our operating results. The hedges are being accounted for as cash flow hedges in
accordance with authoritative guidance. Gains and losses from these cash flow hedges are recorded
to Other Comprehensive Income until the underlying transaction for which the hedge was placed is
recognized and then the value in Other Comprehensive Income is reclassified to earnings. In the
third quarter of 2009, we entered into new hedging contracts to hedge
the U.S. dollar revenue from certain customers and payments in British pounds sterling. The
fair value of the forward contracts was a net liability of $2.9 and $2.6 as of October 1, 2009 and
December 31, 2008, respectively.
Notional Amount
October 1, 2009 | December 31, 2008 | |||||||||||||||
Foreign | Foreign | |||||||||||||||
USD | Currency | USD | Currency | |||||||||||||
Year | Buy/(Sell)(1) | Buy/(Sell)(1) | Buy/(Sell)(1) | Buy/(Sell)(1) | ||||||||||||
2009 |
$ | (12.2 | ) | £ | 7.4 | $ | (18.8 | ) | £ | 11.3 | ||||||
2010 |
(37.8 | ) | 22.8 | 0.3 | (0.2 | ) | ||||||||||
2011-2013 |
(19.5 | ) | 11.5 | | (0.2 | ) | ||||||||||
$ | (69.5 | ) | £ | 41.7 | $ | (18.5 | ) | £ | 10.9 | |||||||
(1) | Includes foreign currency forward contracts for 2010 through 2013 novated to Spirit Europe as a result of the BAE Acquisition (buy $0.3/sell £0.4), which had no underlying contractual transactions at the inception date of the contracts and, therefore, are classified as debt securities which are not subject to hedge accounting. The mark-to-market values of these debt securities are recorded through the Consolidated Statement of Operations on a monthly basis in accordance with FASB authoritative guidance on investments - debt and equity securities disclosures. |
11
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
The following table summarizes the Companys fair value of outstanding derivatives at October
1, 2009 and December 31, 2008:
Fair Values of Derivative Instruments | ||||||||||||||||
Other Asset Derivatives | Other Liability Derivatives | |||||||||||||||
October 1, 2009 | December 31, 2008 | October 1, 2009 | December 31, 2008 | |||||||||||||
Derivatives designated as hedging
instruments |
||||||||||||||||
Interest rate swaps |
||||||||||||||||
Current |
$ | | $ | | $ | 17.7 | $ | 4.0 | ||||||||
Non-current |
| | 5.6 | 19.0 | ||||||||||||
Foreign currency forward contracts |
||||||||||||||||
Current |
| | 1.3 | 2.4 | ||||||||||||
Non-current |
| | 1.3 | | ||||||||||||
Total derivatives designated as
hedging instruments |
| | 25.9 | 25.4 | ||||||||||||
Derivatives not designated as hedging
instruments |
||||||||||||||||
Interest rate swaps |
||||||||||||||||
Current |
| | | | ||||||||||||
Non-current |
| | | | ||||||||||||
Foreign currency forward contracts |
||||||||||||||||
Current |
0.5 | | 0.5 | | ||||||||||||
Non-current |
1.4 | 3.8 | 1.7 | 4.0 | ||||||||||||
Total derivatives not
designated as hedging instruments |
1.9 | 3.8 | 2.2 | 4.0 | ||||||||||||
Total derivatives |
$ | 1.9 | $ | 3.8 | $ | 28.1 | $ | 29.4 | ||||||||
The impact on Other Comprehensive Income (OCI) and earnings from cash flow hedges for the
three months ended October 1, 2009 and September 25, 2008 was as follows:
Location of | ||||||||||||||||||||||||||||
(Gain) or | Location of (Gain) | Amount of (Gain) or Loss | ||||||||||||||||||||||||||
Loss | Amount of (Gain) or Loss | or Loss Recognized | Recognized in Income on | |||||||||||||||||||||||||
Amount of Gain or (Loss) | Reclassified | Reclassified from | in Income on | Derivative (Ineffective | ||||||||||||||||||||||||
Recognized in OCI, net of | from | Accumulated OCI into | Derivative | Portion and Amount | ||||||||||||||||||||||||
tax, on Derivative | Accumulated | Income | (Ineffective Portion | Excluded from | ||||||||||||||||||||||||
(Effective Portion) | OCI into | (Effective Portion) | and Amount | EffectivenessTesting) | ||||||||||||||||||||||||
Derivatives in | For the Three Months Ended | Income | For the Three Months Ended | Excluded from | For the Three Months Ended | |||||||||||||||||||||||
Cash Flow Hedging | October 1, | September 25, | (Effective | October 1, | September | Effectiveness | October 1, | September 25, | ||||||||||||||||||||
Relationships | 2009 | 2008 | Portion) | 2009 | 25, 2008 | Testing) | 2009 | 2008 | ||||||||||||||||||||
Interest rate swaps |
$ | (2.3 | ) | $ | (0.3 | ) | Interest expense | $ | 4.0 | $ | 2.3 | Other (income)/ expense | $ | | $ | (0.6 | ) | |||||||||||
Foreign currency
forward contracts |
(1.8 | ) | (1.3 | ) | Sales/ Revenue | | (0.5 | ) | Other (income)/ expense | | | |||||||||||||||||
Total |
$ | (4.1 | ) | $ | (1.6 | ) | $ | 4.0 | $ | 1.8 | $ | | $ | (0.6 | ) | |||||||||||||
The impact on earnings from foreign currency forward contracts that do not qualify as
cash flow hedges was not material for the three months ended October 1, 2009 and September 25,
2008.
12
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
The impact on Other Comprehensive Income (OCI) and earnings from cash flow hedges for the nine
months ended October 1, 2009 and September 25, 2008 was as follows:
Location of | ||||||||||||||||||||||||||||
(Gain) or | Location of (Gain) | Amount of (Gain) or Loss | ||||||||||||||||||||||||||
Loss | Amount of (Gain) or Loss | or Loss Recognized | Recognized in Income on | |||||||||||||||||||||||||
Amount of Gain or (Loss) | Reclassified | Reclassified from | in Income on | Derivative (Ineffective | ||||||||||||||||||||||||
Recognized in OCI, net of | from | Accumulated OCI into | Derivative | Portion and Amount | ||||||||||||||||||||||||
tax, on Derivative | Accumulated | Income | (Ineffective Portion | Excluded from | ||||||||||||||||||||||||
(Effective Portion) | OCI into | (Effective Portion) | and Amount | EffectivenessTesting) | ||||||||||||||||||||||||
Derivatives in | For the Nine Months Ended | Income | For the Nine Months Ended | Excluded from | For the Nine Months Ended | |||||||||||||||||||||||
Cash Flow Hedging | October 1, | September 25, | (Effective | October 1, | September 25, | Effectiveness | October 1, | September 25, | ||||||||||||||||||||
Relationships | 2009 | 2008 | Portion) | 2009 | 2008 | Testing) | 2009 | 2008 | ||||||||||||||||||||
Interest rate swaps |
$ | (5.0 | ) | $ | (2.9 | ) | Interest expense | $ | 11.3 | $ | 3.3 | Other (income)/ expense | $ | | $ | | ||||||||||||
Foreign currency
forward contracts |
(1.8 | ) | (1.5 | ) | Sales/ Revenue | 3.2 | (1.9 | ) | Other (income)/ expense | (0.1 | ) | | ||||||||||||||||
Total |
$ | (6.8 | ) | $ | (4.4 | ) | $ | 14.5 | $ | 1.4 | $ | (0.1 | ) | $ | | |||||||||||||
Gains and losses accumulated in Other Comprehensive Income for interest rate swaps are
reclassified into earnings as each interest rate period is reset. During the next twelve months,
the Company estimates that ($10.9) will be reclassified from Other Comprehensive Income, net of
tax, as a charge to earnings from interest rate swaps. Interest rate swaps are placed for a period
of time not to exceed the maturity of the Companys senior secured term loan. None of the gains or
losses reclassified to earnings were attributable to the discontinuance of cash flow hedges.
Gains and losses accumulated in Other Comprehensive Income for foreign currency forward
contracts are reclassified into earnings as the underlying transactions for which the contracts
were entered into are realized. During the next twelve months, the Company estimates that ($0.9)
will be reclassified from Other Comprehensive Income, net of tax, as a charge to earnings from
foreign currency forward contracts. None of the gains or losses reclassified to earnings were
attributable to the discontinuance of cash flow hedges.
11. Fair Value Measurements
FASBs authoritative guidance on fair value measurements defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. It also establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard discloses three levels of inputs that may be used to
measure fair value:
Level 1 | Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market. | |
Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of our interest rate swaps and foreign currency forward contracts. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
13
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
Fair Value Measurements | ||||||||||||||||||||||||
At October 1, 2009 | ||||||||||||||||||||||||
October 1, 2009 | Using | |||||||||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||||||||||
Total | Active Markets | Other | Significant | |||||||||||||||||||||
Carrying | Assets | Liabilities | for Identical | Observable | Unobservable | |||||||||||||||||||
Amount in | Measured at | Measured at | Assets | Inputs | Inputs | |||||||||||||||||||
Description | Balance Sheet | Fair Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||
Interest Rate Swaps |
$ | (23.3 | ) | $ | | $ | (23.3 | ) | $ | | $ | (23.3 | ) | $ | | |||||||||
Foreign Currency
Forward Contracts |
$ | (2.9 | ) | $ | 1.9 | $ | (4.8 | ) | $ | | $ | (2.9 | ) | $ | |
Fair Value Measurements | ||||||||||||||||||||||||
At December 31, 2008 | ||||||||||||||||||||||||
December 31, 2008 | Using | |||||||||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||||||||||
Total | Active Markets | Other | Significant | |||||||||||||||||||||
Carrying | Assets | Liabilities | for Identical | Observable | Unobservable | |||||||||||||||||||
Amount in | Measured at | Measured at | Assets | Inputs | Inputs | |||||||||||||||||||
Description | Balance Sheet | Fair Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||
Interest Rate Swaps |
$ | (23.0 | ) | $ | | $ | (23.0 | ) | $ | | $ | (23.0 | ) | $ | | |||||||||
Foreign Currency
Forward Contracts |
$ | (2.6 | ) | $ | 3.8 | $ | (6.4 | ) | $ | | $ | (2.6 | ) | $ | |
The fair value of the interest rate swaps and foreign currency forward contracts are
determined by using mark-to-market reports generated for each derivative and evaluated for
counterparty risk. In the case of the interest rate swaps, the Company evaluated its counterparty
risk using credit default swaps, historical default rates and credit spreads.
The Companys long-term debt consists of obligations with variable interest rates and senior
unsecured notes. The estimated fair value of our debt obligations is based on the quoted market
prices for such obligations. The following table presents the carrying amount and estimated fair
value of long-term debt in accordance with FASB authoritative guidance on fair value measurements
related to disclosures of financial instruments:
October 1, 2009 | December 31, 2008 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Senior secured
term loan (including
current portion) |
$ | 573.5 | $ | 552.0 | $ | 577.9 | $ | 479.7 | ||||||||
Senior unsecured notes |
293.4 | 293.4 | | | ||||||||||||
Malaysian loan |
8.8 | 8.8 | 8.9 | 7.4 | ||||||||||||
$ | 875.7 | $ | 854.2 | $ | 586.8 | $ | 487.1 | |||||||||
14
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
12. Debt
Credit Agreement
In connection with the Boeing Acquisition, Spirit executed an $875.0 credit agreement that
consisted of a $700.0 senior secured term loan used to fund the acquisition and pay all related
fees and expenses associated with the acquisition and the credit agreement, and a $175.0 senior
secured revolving credit facility. In March 2008, the revolving credit facility was increased to
$650.0. In June 2009, Spirit entered into amendment No. 2 to its senior secured credit facility,
whereby the revolving credit facility was increased from $650.0 to $729.0. The maturity date with
respect to $408.8 of the revolver was extended to June 30, 2012. The maturity date for the
remaining $320.2 of the revolver will continue to be June 30, 2010. Commitment fees associated
with the portion of the revolver that was extended to June 30, 2012 increased from a rate of 50
basis points on the undrawn amount to 75 basis points. Commitment fees associated with the undrawn
portion of the revolver that terminates on June 30, 2010 continue to be 50 basis points. The
applicable margin payable on revolving loans in respect of which the underlying revolving credit
commitment has been extended to June 30, 2012 (Extending Revolving Loans) has been increased. The
applicable margin continues to be determined in accordance with a performance grid based on total
leverage ratio and, for Extending Revolving Loans, ranges from 4.00% to 3.00% per annum in the case
of LIBOR advances and from 3.00% to 2.00% per annum in the case of alternate base rate advances.
The applicable margin payable in respect of loans that are not Extending Revolving Loans continues
to range from 2.75% to 2.25% per annum in the case of LIBOR advances and from 1.75% to 1.25% per
annum in the case of alternate base rate advances. As of October 1, 2009 and December 31,
2008, Spirit had no outstanding borrowings under its revolving credit facility. The entire asset
classes of Spirit, including inventory and property, plant and equipment, are pledged as collateral
for both the term loan and the revolving credit facility.
The amended credit agreement contains customary affirmative and negative covenants, including
restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or
transfers of assets, payments of dividends, transactions with affiliates, change in control and
other matters customarily restricted in such agreements. The amended credit agreement contains a
revised Covenant Leverage Ratio and a new Interest Coverage Ratio. The Covenant Leverage Ratio (as
defined in the credit agreement) financial covenant was modified to provide that the maximum
Covenant Leverage Ratio as of the last day of any fiscal quarter through the final maturity date of
the credit agreement shall not exceed 2.5:1 through maturity. The new Interest Coverage Ratio (as
defined in the credit agreement) financial covenant was added to provide that the Interest Coverage
Ratio as of the last day of any fiscal quarter through the final maturity date of the credit
agreement shall not be less than 4:1. The Financial Covenant ratios are calculated each quarter in
accordance with the credit agreement. Failure to meet these financial covenants would be an event
of default under the senior secured credit facility. As of October 1, 2009, we were and expect to
continue to be in full compliance with all covenants contained within our credit agreement.
Malaysian Term Loan
On June 2, 2008, Spirits wholly owned subsidiary, Spirit AeroSystems Malaysia SDN BHD
(Spirit Malaysia) entered into a Facility Agreement (Malaysia Facility Agreement) for a term
loan facility of Ringgit Malaysia (RM) 69.2 (approximately USD $20.0) (the Malaysia Facility),
with EXIM Bank to be used towards partial financing of plant and equipment (including the
acquisition of production equipment), materials, inventory and administrative costs associated with
the establishment of an aerospace-related composite component assembly plant, plus potential
additional work packages in Malaysia at the Malaysia International Aerospace Center in Subang,
Selangor, Malaysia (the Project). Funds for the Project will be available on a drawdown basis
over a twenty-four month period from the date of the Malaysia Facility Agreement. Spirit Malaysia
is scheduled to make periodic draws against the Malaysia Facility.
The indebtedness repayment requires quarterly principal installments of RM 3.3 (USD $1.0) from
September 2011 through May 2017, or until the entire loan principal has been repaid.
Outstanding amounts drawn under the Malaysia Facility are subject to a fixed interest rate of
3.5% per annum, payable quarterly.
France Factory
On July 17, 2009, Spirits indirect wholly owned subsidiary, Spirit AeroSystems
France SARL (Spirit France) entered into a capital lease agreement for 9.0 Euros (approximately
USD $13.1), with BNP Paribas Bank (BNP) to be used towards the construction of a plant associated
with the establishment of an aerospace-related component assembly plant in Saint Nazaire, France
(the Project). Spirit will act as BNPs construction agent during the construction phase of the
Project and lease payments will begin upon completion of construction, which is expected during the
third quarter of 2010.
15
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
The capital lease repayment is variable based on the three-month Euribor rate and is paid
quarterly. Payments are expected to be approximately 0.2 Euro (USD $0.3) from July 2010 through
April 2025 with a residual amount of 0.9 Euro (USD $1.3) to be paid at the conclusion of the
capital lease agreement.
Outstanding amounts expended by BNP under the capital lease agreement are capitalized as
Construction in Progress on Spirits books with a corresponding amount of Construction Debt.
During the third quarter of 2009, Spirit recorded $4.1 in Construction Debt.
Total debt shown on the balance sheet is comprised of the following:
October 1, | December 31, | |||||||
2009 | 2008 | |||||||
Senior secured debt (short and long-term) |
$ | 573.5 | $ | 577.9 | ||||
Revolving credit facility |
| | ||||||
Malaysian term loan |
8.8 | 8.9 | ||||||
Present value of capital lease obligations |
6.0 | 1.2 | ||||||
Other |
2.0 | | ||||||
Total |
$ | 590.3 | $ | 588.0 | ||||
13. Long-Term Bond Debt
On September 30, 2009, Spirit issued $300.0 of 7 1/2% Senior Notes due October 1, 2017 (the
Notes), with interest payable semi-annually, in cash in arrears on April 1 and October 1 of each
year, beginning April 1, 2010. Prior to October 1, 2012, Spirit may redeem up to 35% of the
aggregate principal amount of the Notes with the proceeds of certain equity offerings at a
redemption price of 107.5% of the principal amount thereof, plus accrued and unpaid interest and
additional interest, if any, to the redemption date. At any time prior to October 1, of the years
set forth below, Spirit may redeem the Notes, in whole or in part, at a redemption price equal to
100% of the principal amount of the Notes redeemed, plus a make-whole premium, plus any accrued and
unpaid interest and additional interest, if any, to the redemption date. Spirit may redeem the
Notes at its option, in whole or in part, at any time on or after October 1, 2013, upon not less
than 30 nor more than 60 days notice at the redemption prices (expressed as percentages of the
principal amount to be redeemed) set forth below, plus any accrued and unpaid interest and
additional interest, if any, to the redemption date.
Year | Price | |||
2013 |
103.750 | % | ||
2014 |
101.875 | % | ||
2015 and thereafter |
100.000 | % |
If a change of control of Spirit occurs, each holder of the Notes shall have the right to
require that Spirit repurchase all or a portion of such holders Notes at a purchase price of 101%
of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any,
to the date of repurchase.
The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior
unsecured basis by the Company and Spirits existing and future domestic subsidiaries that
guarantee Spirits obligations under Spirits senior secured credit facility. The present value of
the Notes was $293.4 as of October 1, 2009, measured by the bond offering price of 97.804%.
The Notes are Spirits senior unsecured obligations and rank equal in right of payment with
all of Spirits and the guarantors other existing and future senior indebtedness. The Notes are
senior in right of payment to all of Spirits and the guarantors existing and future indebtedness
that is by its terms expressly subordinated to the Notes and the guarantees. The Notes are
effectively subordinated in right of payment to all of Spirits and the guarantors secured
indebtedness to the extent of the value of the assets securing such indebtedness, including
obligations under Spirits senior secured credit facility, which is secured by substantially all of
the assets of Spirit and the guarantors.
The Indenture contains covenants that limit Spirits, and certain of Spirits subsidiaries
ability, subject to certain exceptions and qualifications, to (i) incur additional debt; (ii) pay
dividends, redeem stock or make other distributions, (iii) repurchase equity securities, prepay
subordinated debt or make certain investments, (iv) make other restricted payments and investments,
(v) issue certain disqualified stock and preferred stock, (vi) create liens without granting equal
and ratable liens to the holders of the Notes, (vii) enter into sale and leaseback transactions, (viii) merge, consolidate or transfer or dispose
of substantially all of their assets, (ix) enter into certain types of transactions with affiliates
and (x) sell assets.
16
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
These covenants are subject to a number of qualifications and limitations.
In addition, the Indenture limits Spirits, and the guarantor subsidiaries ability to engage in
businesses other than businesses in which such companies are engaged on the date of issuance of the
Notes and related businesses.
In addition, the Indenture provides for customary events of default which include (subject in
certain cases to customary grace and cure periods), among other things: failure to make payments on
the Notes when due, failure to comply with covenants under the Indenture, failure to pay certain
other indebtedness or acceleration of maturity of certain other indebtedness, failure to satisfy or
discharge certain final judgments and occurrence of certain bankruptcy events. If an event of
default occurs, the trustee or holders of at least 25% of the aggregate principal amount of the
then outstanding Notes may, among other things, declare the entire outstanding balance of principal
of and interest on all outstanding Notes to be immediately due and payable. If an event of default
involving certain bankruptcy events occurs, payment of principal of and interest on the Notes will
be accelerated without the necessity of notice or any other action on the part of any person.
Spirit repaid $200.0 of borrowings under its existing senior secured revolving credit facility
using a portion of the proceeds of the offering of the Notes, which increased the availability
under the revolving credit facility to $729.0, reduced by $16.9 of outstanding letters of credit.
14. Pension and Other Post-Retirement Benefits
Defined Benefit Plans | ||||||||||||||||
For the Three | For the Nine | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
October 1, | September 25, | October 1, | September 25, | |||||||||||||
Components of Net Periodic Pension Income | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Service cost |
$ | 1.6 | $ | 1.8 | $ | 4.5 | $ | 5.5 | ||||||||
Interest cost |
9.8 | 9.6 | 29.2 | 28.9 | ||||||||||||
Expected return on plan assets |
(14.1 | ) | (17.9 | ) | (41.9 | ) | (53.8 | ) | ||||||||
Amortization of prior service cost |
| | | | ||||||||||||
Amortization of net (gain)/loss |
2.1 | (1.4 | ) | 6.2 | (4.3 | ) | ||||||||||
Net periodic pension income |
$ | (0.6 | ) | $ | (7.9 | ) | $ | (2.0 | ) | $ | (23.7 | ) | ||||
Other Benefits | ||||||||||||||||
For the Three | For the Nine | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
October 1, | September 25, | October 1, | September 25, | |||||||||||||
Components of Net Periodic Benefit Cost | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Service cost |
$ | 0.5 | $ | 0.3 | $ | 1.5 | $ | 1.1 | ||||||||
Interest cost |
0.7 | 0.5 | 2.1 | 1.5 | ||||||||||||
Expected return on plan assets |
| | | | ||||||||||||
Amortization of prior service cost |
| | | | ||||||||||||
Amortization of net (gain)/loss |
| (0.1 | ) | | (0.4 | ) | ||||||||||
Net periodic benefit cost |
$ | 1.2 | $ | 0.7 | $ | 3.6 | $ | 2.2 | ||||||||
Employer Contributions
We expect to contribute zero dollars to the U.S. qualified pension plan and
less than $0.2 to both the Supplemental Executive Retirement Plan (SERP) and post-retirement
medical plans in 2009. Our projected contributions to the U.K. pension plan for 2009 were $7.6, of
which $5.9 was contributed by the end of the third quarter of 2009. We anticipate contributing an
additional $1.7 to the U.K. pension plan during the remainder of 2009. The entire amount
contributed and the projected contributions can vary based on exchange rate fluctuations.
17
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
15. Stock Compensation
The Company has established various stock compensation plans which include restricted share
grants and stock purchase plans. Compensation values are based on the value of the Companys common
stock at the grant date. The common stock value is added to equity and charged to period expense or
included in inventory and cost of sales.
For the three months ended October 1, 2009, the Company recognized a total of $0.7 of stock
compensation expense, net of forfeitures, as compared to $4.1 of stock compensation expense, net of
forfeitures, recognized for the three months ended September 25, 2008. Of the total $0.7 of stock
compensation expense recorded for the three months ended October 1, 2009, $0.6 was recorded as
expense in Selling, general and administrative expense while the remaining $0.1 was capitalized in
inventory and is recognized through cost of sales consistent with the accounting methods we follow
in accordance with authoritative guidance related to revenue
recognition for construction-type and
production-type contracts. Of the $4.1 of stock compensation expense recorded for the three months
ended September 25, 2008, $4.0 was recorded as expense in Selling, general and administrative
expense while the remaining $0.1 was capitalized in inventory in accordance with the guidance.
For the nine months ended October 1, 2009, the Company recognized a total of $6.7 of stock
compensation expense, net of forfeitures, as compared to $11.6 of stock compensation expense, net
of forfeitures, recognized for the nine months ended September 25, 2008. Of the total $6.7 of stock
compensation expense recorded for the nine months ended October 1, 2009, $6.4 was recorded as
expense in Selling, general and administrative expense while the remaining $0.3 was capitalized in
inventory and is recognized through Cost of sales consistent with the accounting methods we follow
in accordance with authoritative guidance related to revenue recognition for construction-type and
production-type contracts. Of the $11.6 of stock compensation expense recorded for the nine months
ended September 25, 2008, $11.3 was recorded as expense in Selling, general and administrative
expense while the remaining $0.3 was capitalized in inventory in accordance with the guidance.
The fair value of vested class A and class B shares granted under the Companys stock
compensation plans was $0.4 and $29.2, respectively, at October 1, 2009, based on the market value
of the Companys common stock on that date.
Due to the occurrence during the third quarter of 2009 of the four-year anniversaries of the
Executive Incentive Plan grant dates for certain participants in the plan, those participants
acquired an incremental 8.81% interest in the shares granted to them under the plan, such that
their total cumulative interest in the shares granted to them would be 80%. The total number of
additional shares in which an interest was acquired in the third quarter of 2009 was 24,849. The
participants have a nonforfeitable interest in those shares; however, as per the plan document, the
shares are still restricted until the earlier of a liquidity event or June 16, 2015. Participants
do not have the unrestricted rights of stockholders until those shares vest. Other participants
will acquire the cumulative 80% interest as they reach the four-year anniversary date of their
grant dates throughout the remainder of 2009 and 2010.
16. Income Taxes
The process for calculating our income tax expense involves estimating actual current taxes
due plus assessing temporary differences arising from differing treatment for tax and accounting
purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are
periodically evaluated to determine their recoverability. The total net deferred tax assets as of
October 1, 2009 and December 31, 2008 were $224.1 and $204.7, respectively.
We file income tax returns in all jurisdictions in which we operate. We established reserves
to provide for additional income taxes that may be due in future years as these previously filed
tax returns are audited. These reserves have been established based on managements assessment as
to the potential exposure attributable to permanent differences and interest applicable to both
permanent and temporary differences. All tax reserves are analyzed quarterly and adjustments made
as events occur that warrant modification.
In general, the Company records income tax expense each quarter based on its best estimate as
to the full years effective tax rate. Certain items, however, are given discrete period treatment
and the tax effects for such items are therefore reported in the quarter that an event
arises. Events or items that give rise to discrete recognition include finalizing amounts in income
tax returns filed, finalizing audit examinations for open tax years, and expiration of a statute of
limitations.
The 28.2% effective tax rate for the three months ended October 1, 2009 differs from the 29.5%
effective tax rate for the same period in 2008 primarily due to reinstating the U.S. Research and
Experimentation Tax Credit (R&E Tax Credit) on October 3, 2008. The 29.3% effective tax rate for
the nine months ended October 1, 2009 differs from the 32.5% effective tax rate for the same period
in 2008 primarily due to reinstating the R&E Tax Credit on October 3, 2008.
The Companys 2005 and 2006 U.S. Federal income tax returns are currently being examined. The
Company expects no material change in its recorded unrecognized tax benefit liability in the next
12 months.
18
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
17. Shareholders Equity
Earnings
per Share Calculation
The following table sets forth the computation of basic and diluted earnings per share:
For the Three Months Ended | ||||||||||||||||||||||||
October 1, 2009 | September 25, 2008 | |||||||||||||||||||||||
Shares | Per Share | Shares | Per Share | |||||||||||||||||||||
Income | (in millions) | Amount | Income | (in millions) | Amount | |||||||||||||||||||
Basic EPS |
||||||||||||||||||||||||
Income available to common shareholders |
$ | 87.3 | 138.6 | $ | 0.63 | $ | 74.0 | 137.0 | $ | 0.54 | ||||||||||||||
Diluted potential common shares |
1.6 | 2.1 | ||||||||||||||||||||||
Diluted EPS |
||||||||||||||||||||||||
Income available to common shareholders + assumed vesting |
$ | 87.3 | 140.2 | $ | 0.62 | $ | 74.0 | 139.1 | $ | 0.53 |
For the Nine Months Ended | ||||||||||||||||||||||||
October 1, 2009 | September 25, 2008 | |||||||||||||||||||||||
Shares | Per Share | Shares | Per Share | |||||||||||||||||||||
Income | (in millions) | Amount | Income | (in millions) | Amount | |||||||||||||||||||
Basic EPS |
||||||||||||||||||||||||
Income available to common shareholders |
$ | 141.7 | 138.2 | $ | 1.03 | $ | 245.6 | 136.9 | $ | 1.79 | ||||||||||||||
Diluted potential common shares |
1.8 | 2.3 | ||||||||||||||||||||||
Diluted EPS |
||||||||||||||||||||||||
Income available to common shareholders + assumed vesting |
$ | 141.7 | 140.0 | $ | 1.01 | $ | 245.6 | 139.2 | $ | 1.76 |
Other Comprehensive Income
Components of Other Comprehensive Income, net of tax, consist of the following:
For the Three Months Ended | ||||||||
October 1, | September 25, | |||||||
2009 | 2008 | |||||||
Net income |
$ | 87.3 | $ | 74.0 | ||||
Other Comprehensive Income (loss), net of tax |
||||||||
Unrealized gain (loss) on investments |
||||||||
Unrealized gain (loss) on interest rate swaps, net of tax |
(2.3 | ) | (0.3 | ) | ||||
Pension, SERP, and Retiree Medical adjustments, net of tax |
(1.2 | ) | | |||||
Unrealized (loss) on foreign currency forward contracts, net of tax |
(1.8 | ) | (1.3 | ) | ||||
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax |
2.5 | 0.7 | ||||||
Foreign currency translation adjustments |
(3.7 | ) | (11.7 | ) | ||||
Total Other Comprehensive Income |
$ | 80.8 | $ | 61.4 | ||||
19
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
For the Nine Months Ended | ||||||||
October 1, | September 25, | |||||||
2009 | 2008 | |||||||
Net income |
$ | 141.7 | $ | 245.6 | ||||
Other Comprehensive Income (loss), net of tax |
||||||||
Unrealized gain (loss) on investments |
||||||||
Unrealized gain (loss) on interest rate swaps, net of tax |
(5.0 | ) | (2.9 | ) | ||||
Pension, SERP, and Retiree Medical adjustments, net of tax |
(3.7 | ) | | |||||
Unrealized gain (loss) on foreign currency forward contracts, net of tax |
(1.8 | ) | (1.5 | ) | ||||
Reclassification of realized (gain) loss on hedging instruments into net income, net of tax |
9.3 | 0.7 | ||||||
Foreign currency translation adjustments |
11.3 | (12.7 | ) | |||||
Total Other Comprehensive Income |
$ | 151.8 | $ | 229.2 | ||||
18. Related Party Transactions
On March 26, 2007, Hawker Beechcraft, Inc. (Hawker), of which Onex Partners II LP (an
affiliate of Onex) owns approximately a 49% interest, acquired Raytheon Aircraft Acquisition
Company and substantially all of the assets of Raytheon Aircraft Services Limited. Spirits
Prestwick facility provides wing components for the Hawker 800 Series manufactured by Hawker. For
the three months ended October 1, 2009 and September 25, 2008, sales to Hawker were $2.9 and $7.4,
respectively, and $10.5 and $19.9 for the nine months ended October 1, 2009 and September 25, 2008,
respectively.
A member of the Holdings Board of Directors is also a member of the Board of Directors of
Hawker.
Since February 2007, an executive of the Company has been a member of the Board of Directors
of one of the Companys suppliers, Precision Castparts Corp. of Portland, Oregon, a manufacturer of
complex metal components and products. For the three months ended October 1, 2009 and September
25, 2008, the Company purchased $11.7 and $15.1 of products, respectively, from this supplier. For
the nine months ended October 1, 2009 and September 25, 2008, the Company purchased $35.7 and $48.0
of products, respectively, from this supplier.
A member of Holdings Board of Directors is the president and chief executive officer of
Aviall, Inc., the parent company of one of our customers, Aviall Services, Inc. and a wholly owned
subsidiary of Boeing. On September 18, 2006, Spirit entered into a distribution agreement with
Aviall Services, Inc. Net revenues under the distribution agreement were $1.2 and $1.4 for the
three months ended October 1, 2009 and September 25, 2008, respectively, and $4.5 and $4.3 for the
nine months ended October 1, 2009 and September 25, 2008, respectively.
The Company paid $0.1 and less than $0.1 to a subsidiary of Onex for services rendered for each of the three
month periods ended October 1, 2009 and September 25, 2008 respectively, and $0.2 for each of the nine month
periods ended October 1, 2009 and September 25, 2008. Management believes the amounts charged were
reasonable in relation to the services provided.
Boeing owns and operates significant information technology systems utilized by the Company
and, as required under the acquisition agreement for the Boeing Acquisition, is providing those
systems and support services to Spirit under a Transition Services Agreement. A number of services
covered by the Transition Services Agreement have now been established by the Company, and the
Company is scheduled to continue to use the remaining systems and support services it has not yet
established. The Company incurred fees of $2.8 and $5.2 for services performed for the three months
ended October 1, 2009 and September 25, 2008, respectively, and $10.3 and $17.6 for the nine months
ended October 1, 2009 and September 25, 2008, respectively. The amounts owed to Boeing and
recorded as accrued liabilities were $7.0 and $9.5 at October 1, 2009 and December 31, 2008,
respectively.
The spouse of one of the Companys executives is a special counsel at a law firm utilized by
the Company and at which the executive was previously employed. The Company paid fees of $0.5 to
the firm for each of the three month periods ended October 1, 2009 and September 25, 2008, and $1.4
for each of the nine month periods ended October 1, 2009 and September 25, 2008.
An executive of the Company is a member of the Board of Directors of a Wichita, Kansas bank
that provides banking services to Spirit. In connection with the banking services provided to
Spirit, the Company pays fees consistent with commercial terms that would be available to unrelated
third parties. Such fees are not material to Spirit.
20
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
19. Commitments, Contingencies and Guarantees
Litigation
From time to time we are subject to, and are presently involved in, litigation or other legal
proceedings arising in the ordinary course of business. While the final outcome of these matters
cannot be predicted with certainty, considering, among other things, the meritorious legal defenses
available, it is the opinion of the Company that none of these items, when finally resolved, will
have a material adverse effect on the
Companys long-term financial position or liquidity. Consistent with the requirements of authoritative guidance on accounting for contingencies, we had
no accruals at October 1, 2009 or December 31, 2008 for loss contingencies. However, an unexpected
adverse resolution of one or more of these items could have a material adverse effect on the
results of operations in a particular quarter or fiscal year.
From time to time, in the ordinary course of business and like others in the industry, we
receive requests for information from government agencies in connection with their regulatory or
investigational authority. Such requests can include subpoenas or demand letters for documents to
assist the government in audits or investigations. We review such requests and notices and take
appropriate action. We have been subject to certain requests for information and investigations in
the past and could be subject to such requests for information and investigations in the future.
Additionally, we are subject to federal and state requirements for protection of the environment,
including those for disposal of hazardous waste and remediation of contaminated sites. As a result,
we are required to participate in certain government investigations regarding environmental
remediation actions.
In December 2005, a lawsuit was filed against Spirit, Onex, and Boeing alleging age
discrimination in the hiring of employees by Spirit when Boeing sold its Wichita commercial
division to Onex. The complaint was filed in U.S. District Court in Wichita, Kansas and seeks
class-action status, an unspecified amount of compensatory damages and more than $1.5 billion in
punitive damages. The Asset Purchase Agreement requires Spirit to indemnify Boeing for damages
resulting from the employment decisions that were made by us with respect to former employees of
Boeing Wichita, which relate or allegedly relate to the involvement of, or consultation with,
employees of Boeing in such employment decisions. The Company intends to vigorously defend itself
in this matter. Management believes the resolution of this matter will not materially affect the
Companys financial position, results of operations or liquidity.
In December 2005, a federal grand jury sitting in Topeka, Kansas issued subpoenas regarding
the vapor degreasing equipment at our Wichita, Kansas facility. The governments investigation
appeared to focus on whether the degreasers were operating within permit parameters and whether
chemical wastes from the degreasers were disposed of properly. The subpoenas covered a time period
both before and after our purchase of the Wichita, Kansas facility. Subpoenas were issued to
Boeing, Spirit and individuals who were employed by Boeing prior to the Boeing Acquisition, but are
now employed by us. We responded to the subpoena and provided additional information to the
government as requested. On March 25, 2008, the U.S. Attorneys Office informed the Company that it
was closing its criminal file on the investigation. A civil investigation into this matter is
ongoing. Management believes the resolution of this matter will not materially affect the Companys
financial position, results of operations or liquidity.
On February 16, 2007, an action entitled Harkness et al. v. The Boeing Company et al. was
filed in the U.S. District Court for the District of Kansas. The defendants were served in early
July 2007. The defendants include Spirit AeroSystems Holdings, Inc., Spirit AeroSystems, Inc., the
Spirit AeroSystems Holdings Inc. Retirement Plan for the International Brotherhood of Electrical
Workers (IBEW), Wichita Engineering Unit (SPEEA WEU) and Wichita Technical and Professional Unit
(SPEEA WTPU) Employees, and the Spirit AeroSystems Retirement Plan for International Association of
Machinists and Aerospace Workers (IAM) Employees, along with The Boeing Company and Boeing
retirement and health plan entities. The named plaintiffs are twelve former Boeing employees, eight
of whom were or are employees of Spirit. The plaintiffs assert several claims under ERISA and
general contract law and brought the case as a class action on behalf of similarly situated
individuals. The putative class consists of approximately 2,500 current or former employees of
Spirit. The parties agreed to class certification and are currently in the discovery process. The
sub-class members who have asserted claims against the Spirit entities are those individuals who,
as of June 2005, were employed by Boeing in Wichita, Kansas, were participants in the Boeing
pension plan, had at least 10 years of vesting service in the Boeing plan, were in jobs represented
by a union, were between the ages of 49 and 55, and who went to work for Spirit on or about June
17, 2005. Although there are many claims in the suit, the plaintiffs claims against the Spirit
entities, asserted under various theories, are (1) that the Spirit plans wrongfully failed to
determine that certain plaintiffs are entitled to early retirement bridging rights to pension and
retiree medical benefits that were allegedly triggered by their separation from employment by
Boeing and (2) that the plaintiffs pension benefits were unlawfully transferred from Boeing to
Spirit in that their claimed early retirement bridging rights are not being afforded these
individuals as a result of their separation from Boeing, thereby decreasing their benefits. The
plaintiffs seek a declaration that they are entitled to the early retirement pension benefits and
retiree medical benefits, an injunction ordering that the defendants provide the benefits, damages
pursuant to breach of contract claims and attorney fees. Boeing has notified Spirit that it
believes it is entitled to indemnification from Spirit for any indemnifiable damages it may incur
in the Harkness litigation, under the terms of the Asset Purchase Agreement (APA) between Boeing
and Spirit. Management believes the resolution of this matter will not materially affect the
Companys financial position, results of operations or liquidity.
21
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
On July 21, 2005, the International Union, Automobile, Aerospace and Agricultural Implement
Workers of America (UAW) filed a grievance against Boeing on behalf of certain former Boeing
employees in Tulsa and McAlester, Oklahoma, regarding issues that parallel those asserted in
Harkness et al. v. The Boeing Company et al. Boeing denied the grievance, and the UAW subsequently
filed suit to compel arbitration, which the parties eventually agreed to pursue. The arbitration
was conducted in January 2008. In
July 2008, the arbitrator issued an opinion and award in favor of
the UAW. The arbitrator directed Boeing to reinstate the seniority of the employees and afford
them the benefits appurtenant thereto. On March 5, 2009, the arbitrator entered an Opinion and
Supplemental Award that directed Boeing to award certain benefits to UAW members upon whose behalf
the grievance was brought, notwithstanding the prior denial of such benefits by the Boeing Plan
Administrator. On April 10, 2009, Boeing filed a Complaint in the United States District Court for
the Northern District of Illinois, seeking a ruling that the Arbitrator exceeded his authority in
granting the Supplemental Award. On September 16, 2009, the District Court entered an order
affirming the arbitrators Supplemental Award. Boeing has notified Spirit of its intent to seek
indemnification from Spirit for any indemnifiable damages it may incur in the UAW matter,
pursuant to the terms of the APA. Management believes the resolution of this matter will not
materially affect the Companys financial position, results of operations or liquidity.
On May 11, 2009, Spirit filed a lawsuit in the United States District Court for the District of
Kansas against SPS Technologies (SPS), LLC and Precision Castparts Corp. Spirits claims are
based on the sale by SPS of certain non-conforming nut plate fasteners to Spirit between August
2007 and August 2008. Many of the fasteners were used on assemblies that Spirit sold to a customer.
In the fall of 2008, Spirit discovered the non-conformity and notified the customer of the
discrepancy. Subsequently, Spirit and the customer removed and replaced nut plates on various
in-process aircraft assemblies. Spirits lawsuit seeks damages, including damages related to these
efforts, under various theories, including breach of contract and breach of implied warranty.
Guarantees
Contingent liabilities in the form of letters of credit, letters of guarantee and performance
bonds have been provided by the Company. These letters of credit reduce the amount of borrowings
available under the revolving credit facility. As of October 1, 2009 and December 31, 2008, $33.0
and $14.0 were outstanding in respect of these guarantees, respectively.
Indemnification
The Company has entered into indemnification agreements with each of its directors, and some
of its executive employment agreements include indemnification provisions. Under those agreements,
the Company agrees to indemnify each of these individuals against claims arising out of events or
occurrences related to that individuals service as the Companys agent or the agent of any of its
subsidiaries to the fullest extent legally permitted.
Service and Product Warranties and Extraordinary Rework
The Company provides service and warranty policies on its products. Liability under service
and warranty policies is based upon specific claims and a review of historical warranty and service
claim experience. Adjustments are made to accruals as claim data and historical experience change.
In addition, the Company incurs discretionary costs to service its products in connection with
product performance or quality issues.
The following is a roll forward of the service warranty balances at October 1, 2009:
Balance-December 31, 2008 |
$ | 6.5 | ||
Charges to costs and expenses |
4.9 | |||
Exchange rate |
0.2 | |||
Balance-October 1, 2009 |
$ | 11.6 | ||
22
Spirit AeroSystems Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
($ in millions other than per share data)
($ in millions other than per share data)
20. Segment Information
The Company operates in three principal segments: Fuselage Systems, Propulsion Systems and
Wing Systems. Essentially all revenues in the three principal segments are from Boeing, with the
exception of Wing Systems, which includes revenues from Airbus and other customers. Approximately
96% of the Companys net revenues for the nine months ended October 1, 2009 came from our two
largest customers, Boeing and Airbus. All other activities fall within the All Other segment,
principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of
natural gas through a tenancy-in-common with other companies that have operations in Wichita. The
Companys primary profitability measure to review a segments operating performance is segment
operating income before unallocated corporate selling, general and administrative expenses and
unallocated research and development. Unallocated corporate selling, general and administrative
expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to our operating segments and
are not allocated in measuring the operating segments profitability and performance and operating
margins.
The Companys Fuselage Systems segment includes development, production and marketing of
forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to
aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and
overhaul (MRO).
The Companys Propulsion Systems segment includes development, production and marketing of
struts/pylons, nacelles (including thrust reversers) and related engine structural components
primarily to aircraft or engine OEMs, as well as related spares and MRO services.
The Companys Wing Systems segment includes development, production and marketing of wings and
wing components (including flight control surfaces) as well as other miscellaneous structural parts
primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place
at the Companys facilities in Tulsa and McAlester, Oklahoma, Prestwick, Scotland and Subang,
Malaysia.
The Companys segments are consistent with the organization and responsibilities of management
reporting to the chief operating decision-maker for the purpose of assessing performance. The
Companys definition of segment operating income differs from operating income as presented in its
primary financial statements and a reconciliation of the segment and consolidated results is
provided in the table set forth below. Most selling, general and administrative expenses, and all
interest expense or income, related financing costs and income tax amounts, are not allocated to
the operating segments.
While some working capital accounts are maintained on a segment basis, much of the Companys
assets are not managed or maintained on a segment basis. Property, plant and equipment, including
tooling, is used in the design and production of products for each of the segments and, therefore,
is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets and
deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to
any particular segment. Raw materials and certain component parts are used in the production of
aerostructures across all segments. Work-in-process inventory is identifiable by segment, but is
managed and evaluated at the program level. As there is no segmentation of the Companys productive
assets, depreciation expense (included in fixed manufacturing costs and selling, general and
administrative expenses) and capital expenditures, no allocation of these amounts has been made
solely for purposes of segment disclosure requirements.
The following table shows segment information:
For the Three | For the Nine | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
October 1, | September 25, | October 1, | September 25, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Segment Revenues |
||||||||||||||||
Fuselage Systems |
$ | 525.9 | $ | 484.8 | $ | 1,497.6 | $ | 1,470.2 | ||||||||
Propulsion Systems |
266.2 | 291.5 | 772.1 | 863.1 | ||||||||||||
Wing Systems |
257.3 | 246.8 | 712.9 | 773.5 | ||||||||||||
All Other |
4.4 | 4.1 | 18.2 | 18.9 | ||||||||||||
$ | 1,053.8 | $ | 1,027.2 | $ | 3,000.8 | $ | 3,125.7 | |||||||||
Segment Operating Income (Loss) |
||||||||||||||||
Fuselage Systems |
$ | 95.2 | $ | 73.5 | $ | 229.4 | $ | 255.0 | ||||||||
Propulsion Systems |
35.3 | 47.1 | 97.2 | 140.9 | ||||||||||||
Wing Systems |
26.6 | 26.9 | (12.7 | ) | 92.3 | |||||||||||
All Other |
1.0 | | (1.0 | ) | 0.1 | |||||||||||
Business Segment Operating Income |
158.1 | 147.5 | 312.9 | 488.3 | ||||||||||||
Unallocated corporate SG&A |
(26.7 | ) | (35.6 | ) | (92.9 | ) | (109.7 | ) | ||||||||
Unallocated research and development |
(0.4 | ) | (0.7 | ) | (1.6 | ) | (1.1 | ) | ||||||||
Total operating income |
$ | 131.0 | $ | 111.2 | $ | 218.4 | $ | 377.5 | ||||||||
23
21. Condensed Consolidating Financial Information
On September 30, 2009, Spirit completed an offering of $300.0 million aggregate principal amount of
its 71/2% Senior Notes due 2017 (the Original Notes). The Original Notes were sold to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the
Securities Act), and outside the United States only to non-U.S. persons in accordance with
Regulation S promulgated under the Securities Act. In connection
with the sale of the Original Notes, the
Company entered into a Registration Rights Agreement with the initial purchasers of the Original
Notes party thereto, pursuant to which the Company, Spirit and the Subsidiary Guarantors (as
defined below) agreed to file a registration statement with respect to an offer to exchange the
Original Notes for a new issue of substantially identical notes registered under the Securities Act
(the Exchange Notes, and together with the Original Notes, the Notes). The Notes are fully and
unconditionally guaranteed on a joint and several senior unsecured basis by the Company and its
wholly-owned domestic subsidiaries (the Subsidiary Guarantors).
The following condensed consolidating financial information, which has been prepared in accordance
with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the
Securities Act, presents the condensed consolidating financial information separately for:
(i) | Spirit, as the subsidiary issuer of the Notes; | ||
(ii) | The Subsidiary Guarantors, on a combined basis, which are guarantors of the Notes; | ||
(iii) | The Companys other subsidiaries, on a combined basis, which are not guarantors of the Notes (the Subsidiary Non-Guarantors); | ||
(iv) | Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Company, the Subsidiary Guarantors and the Subsidiary Non-Guarantors, (b) eliminate the investments in the Companys subsidiaries and (c) record consolidating entries; and | ||
(v) | The Company and its subsidiaries on a consolidated basis. |
The Company, which is a guarantor of the Notes, is excluded from the tables below as it has no assets or operations independent from its subsidiaries.
24
Spirit AeroSystems Holdings, Inc.
Condensed Consolidating Balance Sheet
October 1, 2009
(unaudited)
Condensed Consolidating Balance Sheet
October 1, 2009
(unaudited)
Guarantor | Non-Guarantor | Consolidating | ||||||||||||||||||
Spirit | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 178.1 | $ | | $ | 28.6 | $ | | $ | 206.7 | ||||||||||
Accounts receivable, net |
214.0 | | 82.3 | (60.5 | ) | 235.8 | ||||||||||||||
Current portion of long-term receivable |
28.2 | | | | 28.2 | |||||||||||||||
Inventory, net |
2,056.3 | 6.8 | 141.8 | (0.3 | ) | 2,204.6 | ||||||||||||||
Income tax receivable current |
6.6 | | | | 6.6 | |||||||||||||||
Deferred tax asset current |
60.7 | | 2.5 | | 63.2 | |||||||||||||||
Other current assets |
13.8 | | 2.2 | | 16.0 | |||||||||||||||
Total current assets |
2,557.7 | 6.8 | 257.4 | (60.8 | ) | 2,761.1 | ||||||||||||||
Property, plant and equipment, net |
977.9 | 118.9 | 127.2 | | 1,224.0 | |||||||||||||||
Pension assets |
60.0 | | | | 60.0 | |||||||||||||||
Deferred tax asset non-current |
167.5 | | | | 167.5 | |||||||||||||||
Investment in Subsidiaries |
102.4 | | | (102.4 | ) | | ||||||||||||||
Other assets |
198.2 | 80.0 | 22.9 | (230.0 | ) | 71.1 | ||||||||||||||
Total assets |
$ | 4,063.7 | $ | 205.7 | $ | 407.5 | $ | (393.2 | ) | $ | 4,283.7 | |||||||||
Current liabilities |
||||||||||||||||||||
Accounts payable |
$ | 316.8 | $ | 13.0 | $ | 121.5 | $ | (30.1 | ) | $ | 421.2 | |||||||||
Accrued expenses |
149.3 | | 14.8 | | 164.1 | |||||||||||||||
Current portion of long-term debt |
6.7 | | 30.0 | (30.0 | ) | 6.7 | ||||||||||||||
Advance payments, short-term |
194.3 | | | | 194.3 | |||||||||||||||
Deferred revenue, short-term |
42.6 | 16.7 | | 59.3 | ||||||||||||||||
Other current liabilities |
21.4 | 4.4 | | 25.8 | ||||||||||||||||
Total current liabilities |
731.1 | 13.0 | 187.4 | (60.1 | ) | 871.4 | ||||||||||||||
Long-term debt |
648.7 | 80.0 | 84.8 | (230.0 | ) | 583.5 | ||||||||||||||
Long-term bonds payable |
293.4 | | | | 293.4 | |||||||||||||||
Advance payments, long-term |
806.5 | | | | 806.5 | |||||||||||||||
Deferred revenue and other deferred credits |
54.3 | | | | 54.3 | |||||||||||||||
Pension/OPEB obligation |
48.7 | | 0.4 | | 49.1 | |||||||||||||||
Deferred grant income liability |
| 79.4 | 38.1 | | 117.5 | |||||||||||||||
Other liabilities |
38.6 | | 13.5 | | 52.1 | |||||||||||||||
Shareholders equity |
||||||||||||||||||||
Preferred stock, par value $0.01,
10,000,000 shares authorized, no shares
issued and outstanding |
| | | | | |||||||||||||||
Common stock, Class A par value $0.01,
200,000,000 shares authorized, 104,819,957
shares issued and outstanding, respectively |
1.0 | | | | 1.0 | |||||||||||||||
Common stock, Class B par value $0.01,
150,000,000 shares authorized, 36,216,211
shares issued and outstanding, respectively |
0.4 | | | | 0.4 | |||||||||||||||
Additional paid-in capital |
946.3 | 33.3 | 69.1 | (102.4 | ) | 946.3 | ||||||||||||||
Noncontrolling interest |
| | 0.5 | | 0.5 | |||||||||||||||
Accumulated other comprehensive income |
(113.9 | ) | | (10.2 | ) | | (124.1 | ) | ||||||||||||
Retained earnings |
608.6 | | 23.9 | (0.7 | ) | 631.8 | ||||||||||||||
Total shareholders equity |
1,442.4 | 33.3 | 83.3 | (103.1 | ) | 1,455.9 | ||||||||||||||
Total liabilities and shareholders equity |
$ | 4,063.7 | $ | 205.7 | $ | 407.5 | $ | (393.2 | ) | $ | 4,283.7 | |||||||||
25
Spirit AeroSystems Holdings, Inc.
Condensed Consolidating Statement of Operations
For the Nine Months Ended October 1, 2009
(unaudited)
Condensed Consolidating Statement of Operations
For the Nine Months Ended October 1, 2009
(unaudited)
Guarantor | Non-Guarantor | Consolidating | ||||||||||||||||||
Spirit | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||
Net Revenues |
$ | 2,667.5 | $ | | $ | 352.8 | $ | (19.5 | ) | $ | 3,000.8 | |||||||||
Operating costs and expenses |
||||||||||||||||||||
Cost of sales |
2,325.4 | | 331.1 | (19.3 | ) | 2,637.2 | ||||||||||||||
Selling, general and administrative |
90.8 | 0.1 | 12.7 | | 103.6 | |||||||||||||||
Research and development |
39.9 | | 1.7 | | 41.6 | |||||||||||||||
Total operating costs and expenses |
2,456.1 | 0.1 | 345.5 | (19.3 | ) | 2,782.4 | ||||||||||||||
Operating income (loss) |
211.4 | (0.1 | ) | 7.3 | (0.2 | ) | 218.4 | |||||||||||||
Interest expense, net and financing fee amortization |
(29.1 | ) | 0.2 | (2.4 | ) | 2.2 | (29.1 | ) | ||||||||||||
Interest income |
8.4 | | | (2.2 | ) | 6.2 | ||||||||||||||
Other income, net |
2.7 | | 2.5 | | 5.2 | |||||||||||||||
Income (loss) before
income taxes and equity in net loss of affiliates |
193.4 | 0.1 | 7.4 | (0.2 | ) | 200.7 | ||||||||||||||
Income tax provision |
(56.4 | ) | | (2.4 | ) | | (58.8 | ) | ||||||||||||
Income (loss) before equity in net loss of affiliates |
137.0 | 0.1 | 5.0 | (0.2 | ) | 141.9 | ||||||||||||||
Equity in net loss of affiliates |
(0.2 | ) | | | | (0.2 | ) | |||||||||||||
Net income (loss) |
$ | 136.8 | $ | 0.1 | $ | 5.0 | $ | (0.2 | ) | $ | 141.7 | |||||||||
Spirit AeroSystems Holdings, Inc.
Condensed Consolidating Statement of Operations
For the Nine Months Ended September 25, 2008
(unaudited)
Condensed Consolidating Statement of Operations
For the Nine Months Ended September 25, 2008
(unaudited)
Guarantor | Non-Guarantor | Consolidating | ||||||||||||||||||
Spirit | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||
Net Revenues |
$ | 2,727.8 | $ | | $ | 400.2 | $ | (2.3 | ) | $ | 3,125.7 | |||||||||
Operating costs and expenses |
||||||||||||||||||||
Cost of sales |
2,236.0 | | 362.1 | (2.0 | ) | 2,596.1 | ||||||||||||||
Selling, general and administrative |
103.4 | 0.2 | 15.5 | (0.1 | ) | 119.0 | ||||||||||||||
Research and development |
30.7 | | 2.4 | | 33.1 | |||||||||||||||
Total operating costs and expenses |
2,370.1 | 0.2 | 380.0 | (2.1 | ) | 2,748.2 | ||||||||||||||
Operating income (loss) |
357.7 | (0.2 | ) | 20.2 | (0.2 | ) | 377.5 | |||||||||||||
Interest expense and financing fee amortization |
(29.4 | ) | | (4.1 | ) | 4.0 | (29.5 | ) | ||||||||||||
Interest income |
19.0 | | 0.1 | (4.0 | ) | 15.1 | ||||||||||||||
Other income (loss), net |
3.0 | | (2.1 | ) | | 0.9 | ||||||||||||||
Income (loss) before income taxes |
350.3 | (0.2 | ) | 14.1 | (0.2 | ) | 364.0 | |||||||||||||
Income tax provision |
(115.2 | ) | | (3.2 | ) | | (118.4 | ) | ||||||||||||
Net income (loss) |
$ | 235.1 | $ | (0.2 | ) | $ | 10.9 | $ | (0.2 | ) | $ | 245.6 | ||||||||
26
Spirit AeroSystems Holdings, Inc.
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended October 1, 2009
(unaudited)
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended October 1, 2009
(unaudited)
Guarantor | Non-Guarantor | Consolidating | ||||||||||||||||||
Spirit | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||
Operating activities |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (190.1 | ) | $ | 5.4 | $ | (27.5 | ) | $ | 0.9 | $ | (211.3 | ) | |||||||
Investing Activities |
||||||||||||||||||||
Purchase of property, plant and equipment |
(118.0 | ) | (32.9 | ) | (7.1 | ) | | (158.0 | ) | |||||||||||
Proceeds from the sale of assets |
0.2 | | | | 0.2 | |||||||||||||||
Long-term receivable |
86.5 | | | | 86.5 | |||||||||||||||
Investment in subsidiary |
(27.5 | ) | | | 27.5 | | ||||||||||||||
Other |
(0.7 | ) | | 0.7 | | | ||||||||||||||
Net cash (used in) investing activities |
(59.5 | ) | (32.9 | ) | (6.4 | ) | 27.5 | (71.3 | ) | |||||||||||
Financing Activities |
||||||||||||||||||||
Proceeds from revolving credit facility |
300.0 | | | | 300.0 | |||||||||||||||
Payments on revolving credit facility |
(300.0 | ) | | | | (300.0 | ) | |||||||||||||
Increase (decrease) intercompany debt |
(21.7 | ) | | 21.7 | | | ||||||||||||||
Proceeds from parent company contribution |
| 27.5 | | (27.5 | ) | | ||||||||||||||
Proceeds from issuance of bonds |
293.4 | | | | 293.4 | |||||||||||||||
Principal payments of debt |
(5.7 | ) | (0.1 | ) | | (5.8 | ) | |||||||||||||
Proceeds from governmental grants |
| | 0.7 | | 0.7 | |||||||||||||||
Debt issuance and financing costs |
(17.2 | ) | | | | (17.2 | ) | |||||||||||||
Net cash provided by financing activities |
248.8 | 27.5 | 22.3 | (27.5 | ) | 271.1 | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | 2.6 | (0.9 | ) | 1.7 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents for the period |
(0.8 | ) | | (9.0 | ) | | (9.8 | ) | ||||||||||||
Cash and cash equivalents, beginning of period |
178.9 | | 37.6 | | 216.5 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 178.1 | $ | | $ | 28.6 | $ | | $ | 206.7 | ||||||||||
27
Spirit AeroSystems Holdings, Inc.
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 25, 2008
(unaudited)
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 25, 2008
(unaudited)
Guarantor | Non-Guarantor | Consolidating | ||||||||||||||||||
Spirit | Subsidiaries | Subsidiaries | Adjustments | Total | ||||||||||||||||
Operating activities |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 118.8 | $ | | $ | 27.8 | $ | | $ | 146.6 | ||||||||||
Investing Activities |
||||||||||||||||||||
Purchase of property, plant and equipment |
(161.2 | ) | (2.1 | ) | (11.9 | ) | | (175.2 | ) | |||||||||||
Proceeds from the sale of assets |
1.8 | | | | 1.8 | |||||||||||||||
Long-term receivable |
87.1 | | | | 87.1 | |||||||||||||||
Investment in subsidiary |
(2.1 | ) | | | 2.1 | | ||||||||||||||
Other |
(3.6 | ) | | 1.1 | | (2.5 | ) | |||||||||||||
Net cash (used in) investing activities |
(78.0 | ) | (2.1 | ) | (10.8 | ) | 2.1 | (88.8 | ) | |||||||||||
Financing Activities |
||||||||||||||||||||
Proceeds from revolving credit facility |
75.0 | | | | 75.0 | |||||||||||||||
Payments on revolving credit facility |
(75.0 | ) | | | | (75.0 | ) | |||||||||||||
Collection on (repayments of) intercompany debt |
16.2 | | (16.2 | ) | | | ||||||||||||||
Proceeds from parent company contribution |
| 2.1 | (2.1 | ) | | |||||||||||||||
Proceeds from issuance of debt |
| | 8.8 | | 8.8 | |||||||||||||||
Principal payments of debt |
(11.9 | ) | | | | (11.9 | ) | |||||||||||||
Proceeds from governmental grants |
| | 1.6 | | 1.6 | |||||||||||||||
Debt issuance and financing costs |
(6.8 | ) | | | | (6.8 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
(2.5) | 2.1 | (5.8) | (2.1) | (8.3) | |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
| | (5.2 | ) | | (5.2 | ) | |||||||||||||
Net increase in cash and cash equivalents for the period |
38.3 | | 6.0 | | 44.3 | |||||||||||||||
Cash and cash equivalents, beginning of period |
110.6 | | 22.8 | | 133.4 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 148.9 | $ | | $ | 28.8 | $ | | $ | 177.7 | ||||||||||
28