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8-K - FORM 8-K - Spirit AeroSystems Holdings, Inc.d85421e8vk.htm
Exhibit 99
(SPIRIT LOGO)
Spirit AeroSystems Holdings, Inc.
3801 S. Oliver
Wichita, KS 67210
www.spiritaero.com
Spirit AeroSystems Holdings, Inc. Reports Third Quarter 2011 Financial Results; Reports Revenues of $1.130 billion and Fully Diluted EPS of $0.47 Per Share
  Third Quarter 2011 Revenues of $1.130 billion
 
  Operating Income of $121 million; Operating Margins of 10.7 percent
 
  Fully-Diluted Earnings Per Share of $0.47
 
  Cash and Cash Equivalents were $138 million
 
  Total backlog of approximately $30 billion
     Wichita, Kan., Nov. 3, 2011 — Spirit AeroSystems Holdings, Inc. [NYSE: SPR] reported third quarter 2011 financial results reflecting solid core operating performance and strong demand for large commercial aircraft.
     Spirit’s third quarter 2011 revenues were $1.130 billion, up from $1.002 billion for the same period of 2010 as the company benefited from higher production deliveries during the quarter.
     Operating income was $121 million, compared to $82 million for the same period in 2010, primarily driven by increased volume and model mix. In comparison, the third quarter of 2010 operating income included a $6 million one-time expense and a $4 million unfavorable cumulative catch-up adjustment associated with new program development.
Table 1. Summary Financial Results (unaudited)
                                                 
    3rd Quarter             Nine Months        
($ in millions, except per share data)   2011     2010     Change     2011     2010     Change  
Revenues
  $ 1,130     $ 1,002       13 %   $ 3,645     $ 3,101       18 %
Operating Income
  $ 121     $ 82       46 %   $ 254     $ 261       (3% )
Operating Income as a % of Revenues
    10.7 %     8.2 %   250 BPS     7.0 %     8.4 %   (140) BPS
Net Income
  $ 67     $ 46       45 %   $ 132     $ 157       (16% )
Net Income as a % of Revenues
    6.0 %     4.6 %   140 BPS     3.6 %     5.1 %   (150) BPS
Earnings per Share (Fully Diluted)
  $ 0.47     $ 0.33       42 %   $ 0.93     $ 1.11       (16% )
Fully Diluted Weighted Avg Share Count
    142.2       141.5               142.3       140.9          

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     Net income for the quarter was $67 million, or $0.47 per fully diluted share, compared to $46 million, or $0.33 per fully diluted share, in the same period of 2010. Current quarter net income reflects higher interest expense associated with increased long-term debt, partially offset by a lower effective tax rate as compared to the third quarter of 2010. (Table 1)
     “This quarter marked a number of important milestones, including the certification of the 787-8 and 747-8 Freighter, the initial delivery of a 787-8 to an airline customer and the announcement of the 737 MAX, where we look to play a significant role on the derivative that extends the life of this very successful platform,” said President and Chief Executive Officer Jeff Turner. “For the 747-8 and 787-8, these are notable achievements that enable us to move on to the programs’ production phase where we can begin to realize their long-term value.”
     “Our other development programs continue to make progress toward important near-term milestones in testing and certification. We are focused on supporting our customers in meeting these milestones and positioning these programs for long-term success,” Turner continued.
     “Our backlog of $30 billion reflects the strong global demand for commercial aircraft and positions us well to realize the long-term value of these core programs for our customers, shareholders, and employees,” Turner concluded.
     Spirit’s backlog at the end of the third quarter of 2011 increased by 4 percent to $30 billion as orders exceeded deliveries. Spirit calculates its backlog based on contractual prices for products and volumes from the published firm order backlogs of Airbus and Boeing, along with firm orders from other customers.
     Spirit updated its contract profitability estimates during the third quarter of 2011, resulting in a net pre-tax $4 million favorable cumulative catch-up adjustment and an additional $10 million forward-loss on the CH-53K program due to a shift in the make versus buy strategy in the development phase of the program. In comparison, Spirit recognized a ($4) million unfavorable cumulative catch-up adjustment for the third quarter of 2010.

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     Cash flow from operations was a $66 million source of cash for the third quarter of 2011, compared to a $122 million use of cash for the third quarter of 2010. The current quarter working capital reflects increased inventory offset by favorable accounts receivable and the timing of payables. (Table 2)
Table 2. Cash Flow and Liquidity
                                 
    3rd Quarter     Nine Months  
($ in millions)   2011     2010     2011     2010  
Cash Flow from Operations
  $ 66     ( 122 )   ( 176 )   ( 239 )
Purchases of Property, Plant & Equipment
  ( 80 )   ( 52 )   ( 164 )   ( 183 )
                 
    September 29,     December 31,  
Liquidity   2011     2010  
Cash
  $ 138     $ 482  
Total Debt
  $ 1,204     $ 1,197  
     Cash balances at the end of the quarter were $138 million while the company’s $650 million revolving credit facility remained undrawn. Approximately $20 million of the credit facility is reserved for financial letters of credit. Debt balances at the end of the third quarter were $1,204 million.
     The company’s credit rating remains unchanged at the end of the third quarter 2011 with a BB rating, stable outlook by Standard & Poor’s and a Ba2 rating, stable outlook by Moody’s Investor Services.

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Financial Outlook
     Spirit revenue guidance for the full-year 2011 is updated and expected to be approximately $4.7 billion based on Boeing’s 2011 delivery guidance of ~480 aircraft; expected B787 ship set deliveries; expected Airbus deliveries in 2011 of approximately 520 to 530 aircraft; internal Spirit forecasts for other customer production activities; expected non-production revenues; and foreign exchange rates consistent with those in the third quarter of 2011.
     Fully diluted earnings per share guidance for 2011 remains unchanged at $1.40-$1.50.
     Guidance for cash flow from operations, less capital expenditures, is expected to be between a $250 and $300 million use of cash in the aggregate, with capital expenditures of approximately $250 million.
     The 2011 forecasted effective tax rate is updated to approximately 31 percent. (Table 3)
     Risk to our financial guidance includes, among other factors; 787 delivery volumes; higher than forecast non-recurring and recurring costs on our development programs; mid-range business jet market risks; and our ability to achieve anticipated productivity and cost improvements.
                 
Table 3. Financial Outlook   2010 Actual   2011 Guidance
Revenues
  $4.2 billion   ~$4.7 billion
Earnings Per Share (Fully Diluted)
  $1.55     $1.40 - $1.50  
Effective Tax Rate
    26.3%     ~ 31%
Cash Flow from Operations
  $125 million   ($50)- $0 million
Capital Expenditures
  $288 million   ~$250 million

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Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements.” Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “continue,” “plan,” “forecast,” or other similar words, or the negative thereof, unless the context requires otherwise. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements. Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: our ability to continue to grow our business and execute our growth strategy, including the timing, execution and profitability of new programs; our ability to perform our obligations and manage costs related to our new commercial and business aircraft development programs and the related recurring production; margin pressures and the potential for additional forward-losses on aircraft development programs; our ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft, including, but not limited to, the Boeing B737, B747, B767 and B777 programs, and the Airbus A320 and A380 programs; the effect on business and commercial aircraft demand and build rates of continuing weakness in the global economy and economic challenges facing commercial airlines, a lack of business and consumer confidence, and the impact of continuing instability in global financial and credit markets, including, but not limited to, any failure to avert a sovereign debt crisis in Europe; customer cancellations or deferrals as a result of global economic uncertainty; the success and timely execution of key milestones such as deliveries of Boeing’s new B787 and certification and delivery of Airbus’ new A350 XWB aircraft programs, including first flight, certification and first delivery for the Airbus A350 XWB, receipt of necessary regulatory approvals, and customer adherence to their announced schedules; our ability to enter into profitable supply arrangements with additional customers; the ability of all parties to satisfy their performance requirements under existing supply contracts with Boeing and Airbus, our two major customers, and other customers and the risk of nonpayment by such customers; any adverse impact on Boeing’s and Airbus’ production of aircraft resulting from cancellations, deferrals or reduced orders by their customers or from labor disputes or acts of terrorism; any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; returns on pension plan assets and impact of future discount rate changes on pension obligations; our ability to borrow additional funds or refinance debt; competition from original equipment manufacturers and other aerostructures suppliers; the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and United Kingdom Bribery Act, environmental laws and agency regulations, both in the U.S. and abroad; the cost and availability of raw materials and purchased components; our ability to successfully extend or renegotiate our primary collective bargaining contracts with our labor unions; our ability to recruit and retain highly skilled employees and our relationships with the unions representing many of our employees; spending by the U.S. and other governments on defense; the possibility that our cash flows and borrowing facilities may not be adequate for our additional capital needs or for payment of interest on and principal of our indebtedness; our exposure under our existing senior secured revolving credit facility to higher interest payments should interest rates increase substantially; the effectiveness of our interest rate and foreign currency hedging programs; the outcome or impact of ongoing or future litigation, claims and regulatory actions; and our exposure to potential product liability and warranty claims. These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should review carefully the sections captioned “Risk Factors” in our 2010 Form 10-K filed February 22, 2011 and our second quarter 2011 Form 10-Q filed August 5 for a more complete discussion of these and other factors that may affect our business.

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Appendix
Segment Results
Fuselage Systems
     Fuselage Systems segment revenues for the third quarter of 2011 were $542 million, up 12 percent from the same period last year, primarily driven by higher twin-aisle production volumes. Operating margin for the third quarter of 2011 was 14.7 percent as compared to 13.9 percent during the same period of 2010. The segment recorded an additional pre-tax $10 million forward-loss charge due to a shift in the make versus buy strategy of the development phase of the CH-53K program, which was partially offset by a favorable pre-tax $1 million cumulative catch-up adjustment.
Propulsion Systems
     Propulsion Systems segment revenues for the third quarter of 2011 were $309 million, up 22 percent from the same period last year, largely driven by higher twin-aisle production volumes and increased aftermarket volumes. Operating margin for the third quarter of 2011 was 17.1 percent as compared to 12.1 percent in the third quarter of 2010. In the third quarter of 2011 the segment realized a favorable pre-tax $5 million cumulative catch-up adjustment.
Wing Systems
     Wing Systems segment revenues for the third quarter of 2011 were $277 million, up 5 percent from the same period last year, primarily driven by higher twin-aisle production volumes. Operating margin for the third quarter of 2011 was 8.2 percent as compared to 9.8 percent during the same period of 2010, as the segment recorded an unfavorable pre-tax $2 million cumulative catch-up adjustment in 2011.

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Table 4. Segment Reporting           (unaudited)                     (unaudited)          
    3rd Quarter     Nine Months  
($ in millions)   2011     2010     Change     2011     2010     Change  
Segment Revenues
                                               
Fuselage Systems
  $ 541.6     $ 484.6       11.8 %   $ 1,842.7     $ 1,516.0       21.6 %
Propulsion Systems
  $ 309.1     $ 252.6       22.4 %   $ 899.8     $ 799.0       12.6 %
Wing Systems
  $ 276.8     $ 263.9       4.9 %   $ 894.2     $ 779.7       14.7 %
All Other
  $ 2.2     $ 0.9             $ 8.2     $ 6.6          
 
                                   
Total Segment Revenues
  $ 1,129.7     $ 1,002.0       12.7 %   $ 3,644.9     $ 3,101.3       17.5 %
 
                                               
Segment Earnings from Operations
                                               
Fuselage Systems
  $ 79.6     $ 67.6       17.8 %   $ 221.7     $ 224.4       (1.2 %)
Propulsion Systems
  $ 52.8     $ 30.6       72.5 %   $ 141.8     $ 97.6       45.3 %
Wing Systems
  $ 22.6     $ 25.9       (12.7 %)   $ 8.8     $ 73.1       (88.0 %)
All Other
  $ 1.3     $ (0.1 )           $ 1.8     $ (2.3 )        
 
                                   
Total Segment Operating Earnings
  $ 156.3     $ 124.0       26.0 %   $ 374.1     $ 392.8       (4.8 %)
 
                                               
Unallocated Corporate SG&A Expense
  $ (35.1 )   $ (34.4 )     2.0 %   $ (107.8 )   $ (104.1 )     3.6 %
Unallocated Research & Development Expense
  $ (0.7 )   $ (0.7 )     0.0 %   $ (1.7 )   $ (2.2 )     (22.7 %)
Unallocated Cost of Sales
  $ 0.0     $ (6.5 )     (100.0 %)   $ (10.9 )   $ (25.4 )     (57.1 %)
 
                                   
Total Earnings from Operations
  $ 120.5     $ 82.4       46.2 %   $ 253.7     $ 261.1       (2.8 %)
 
                                               
Segment Operating Earnings as % of Revenues
                                               
Fuselage Systems
    14.7 %     13.9 %   80 BPS     12.0 %     14.8 %   (280) BPS
Propulsion Systems
    17.1 %     12.1 %   500 BPS     15.8 %     12.2 %   360 BPS
Wing Systems
    8.2 %     9.8 %   (160) BPS     1.0 %     9.4 %   (840) BPS
All Other
    59.1 %     (11.1 %)             22.0 %     (34.8 %)        
 
                                   
Total Segment Operating Earnings as % of Revenues
    13.8 %     12.4 %   140 BPS     10.3 %     12.7 %   (240) BPS
 
                                               
Total Operating Earnings as % of Revenues
    10.7 %     8.2 %   250 BPS     7.0 %     8.4 %   (140) BPS
Contact information:
Investor Relations: Coleen Tabor (316) 523-7040
Media: Ken Evans (316) 523-4070
On the web: http://www.spiritaero.com
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Spirit Ship Set Deliveries
(One Ship Set equals One Aircraft)
2010 Spirit AeroSystems Deliveries
                                         
    1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Total 2010  
     
B737
    94       96       93       89       372  
B747
    3       1       2       4       10  
B767
    3       4       3       5       15  
B777
    21       18       14       14       67  
B787
    5       4       4       3       16  
     
Total
    126       123       116       115       480  
A320 Family
    102       95       75       96       368  
A330/340
    25       23       5       19       72  
A380
    1       5       7       5       18  
     
Total
    128       123       87       120       458  
Business/Regional Jet*
    5       6       6       10       27  
     
Total Spirit
    259       252       209       245       965  
     
2011 Spirit AeroSystems Deliveries
                                         
    1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     YTD 2011  
     
B737
    93       97       95               285  
B747
    4       3       4               11  
B767
    5       6       6               17  
B777
    16       22       21               59  
B787
    6       7       5               18  
     
Total
    124       135       131               390  
A320 Family
    103       91       103               297  
A330/340
    18       26       24               68  
A380
    6       5       7               18  
     
Total
    127       122       134               383  
Business/Regional Jet
    8       10       8               26  
     
Total Spirit
    259       267       273               799  
     
 
*   Previously included Hawker-Beechcraft products only. Now includes Spirit deliveries associated with business and regional jets.

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
                                 
    For the Three Months Ended     For the Nine Months Ended  
    September 29, 2011     September 30, 2010     September 29, 2011     September 30, 2010  
            ($ in millions, except per share data)          
Net revenues
  $ 1,129.7     $ 1,002.0     $ 3,644.9     $ 3,101.3  
Operating costs and expenses:
                               
Cost of sales
    963.0       868.5       3,245.6       2,689.2  
Selling, general and administrative
    38.4       38.5       118.5       115.9  
Research and development
    7.8       12.6       27.1       35.1  
 
                       
Total operating costs and expenses
    1,009.2       919.6       3,391.2       2,840.2  
Operating income
    120.5       82.4       253.7       261.1  
Interest expense and financing fee amortization
    (19.0 )     (12.8 )     (61.6 )     (40.6 )
Interest income
                0.2       0.2  
Other income (expense), net
    (1.6 )     2.5             (0.3 )
 
                       
Income before income taxes and equity in net loss of affiliate
    99.9       72.1       192.3       220.4  
Income tax provision
    (32.4 )     (25.4 )     (59.6 )     (62.8 )
 
                       
Income before equity in net loss of affiliate
    67.5       46.7       132.7       157.6  
Equity in net loss of affiliate
    (0.2 )     (0.3 )     (0.7 )     (0.6 )
 
                       
Net income
  $ 67.3     $ 46.4     $ 132.0     $ 157.0  
 
                       
 
                               
Earnings per share
                               
Basic
  $ 0.48     $ 0.33     $ 0.93     $ 1.13  
Shares
    139.4       138.3       139.1       137.7  
 
                               
Diluted
  $ 0.47     $ 0.33     $ 0.93     $ 1.11  
Shares
    142.2       141.5       142.3       140.9  

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
                 
    September 29,     December 31,  
    2011     2010  
    ($ in millions)  
Current assets
               
Cash and cash equivalents
  $ 138.3     $ 481.6  
Accounts receivable, net
    333.2       200.2  
Inventory, net
    2,571.9       2,507.9  
Other current assets
    98.5       105.0  
 
           
Total current assets
    3,141.9       3,294.7  
Property, plant and equipment, net
    1,542.4       1,470.0  
Pension assets
    191.5       172.4  
Other assets
    116.0       164.9  
 
           
Total assets
  $ 4,991.8     $ 5,102.0  
 
           
Current liabilities
               
Accounts payable
  $ 521.7     $ 443.5  
Accrued expenses
    236.0       219.6  
Current portion of long-term debt
    14.7       9.5  
Advance payments, short-term
    7.8       169.4  
Deferred revenue, short-term
    30.9       302.6  
Other current liabilities
    12.4       19.5  
 
           
Total current liabilities
    823.5       1,164.1  
Long-term debt
    1,189.6       1,187.3  
Advance payments, long-term
    658.1       655.2  
Deferred revenue and other deferred credits
    33.8       29.0  
Pension/OPEB obligation
    77.6       72.5  
Other liabilities
    253.8       183.0  
Equity
               
Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued
           
Common stock, Class A par value $0.01, 200,000,000 shares authorized, 118,507,150 and 107,201,314 issued, respectively
    1.2       1.1  
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 24,371,445 and 34,897,388 shares issued, respectively
    0.2       0.3  
Additional paid-in capital
    993.3       983.6  
Accumulated other comprehensive loss
    (72.5 )     (75.3 )
Retained earnings
    1,032.7       900.7  
 
           
Total shareholders’ equity
    1,954.9       1,810.4  
Noncontrolling interest
    0.5       0.5  
 
           
Total equity
    1,955.4       1,810.9  
 
           
Total liabilities and equity
  $ 4,991.8     $ 5,102.0  
 
           

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
                 
    For the Nine Months Ended  
    September 29, 2011     September 30, 2010  
    ($ in millions)  
Operating activities
               
Net income
  $ 132.0     $ 157.0  
Adjustments to reconcile net income to net cash (used in) operating activities
               
Depreciation expense
    97.0       84.5  
Amortization expense
    10.6       9.2  
Employee stock compensation expense
    8.6       23.5  
Excess tax benefits from share-based payment arrangements
    (1.2 )     (4.9 )
Loss on disposition of assets
    0.8        
Loss from foreign currency transactions
    1.2       4.4  
Deferred taxes
    16.0       6.1  
Long-term tax (benefit) provision
    8.9       (17.6 )
Pension and other post-retirement benefits, net
    (7.4 )     (6.3 )
Grant income
    (4.0 )     (1.9 )
Equity in net loss of affiliate
    0.7       0.6  
Changes in assets and liabilities
               
Accounts receivable
    (127.9 )     (130.5 )
Inventory, net
    (61.1 )     (268.1 )
Accounts payable and accrued liabilities
    93.7       12.7  
Advance payments
    (158.7 )     (116.6 )
Deferred revenue and other deferred credits
    (265.1 )     (38.0 )
Other
    80.1       46.9  
 
           
Net cash (used in) operating activities
    (175.8 )     (239.0 )
 
           
Investing activities
               
Purchase of property, plant and equipment
    (164.2 )     (183.0 )
Other
    0.4       (0.5 )
 
           
Net cash (used in) investing activities
    (163.8 )     (183.5 )
 
           
Financing activities
               
Proceeds from revolving credit facility
          125.0  
Principal payments of debt
    (5.3 )     (8.0 )
Debt issuance and financing costs
          (0.2 )
Excess tax benefits from share-based payment arrangements
    1.2       4.9  
 
           
Net cash provided by (used in) financing activities
    (4.1 )     121.7  
 
           
Effect of exchange rate changes on cash and cash equivalents
    0.4       (1.9 )
 
           
Net decrease in cash and cash equivalents for the period
    (343.3 )     (302.7 )
Cash and cash equivalents, beginning of the period
    481.6       369.0  
 
           
Cash and cash equivalents, end of the period
  $ 138.3     $ 66.3  
 
           

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