Spirit AeroSystems Holdings Inc. (SPR) filed Quarterly Report for the period ended 2009-10-01.
SPIRIT AEROSYSTEMS is the world's largest independent supplier of commercial airplane assemblies and components. In addition to its Kansas facility Spirit has operations in Tulsa and McAlester Okla. Prestwick Scotland and Samlesbury England. In the U.S. Spirit's core products include fuselages pylons nacelles and wing components. Additionally Spirit provides aftermarket customer support services including spare parts maintenance/repair/overhaul and fleet support services in North America and Europe. Spirit Europe produces wing components for a host of customers including Airbus. Spirit Aerosystems Holdings Inc. has a market cap of $2.44 billion; its shares were traded at around $17.58 with a P/E ratio of 10 and P/S ratio of 0.6.
Highlight of Business Operations:
Net Revenues. Net revenues for the three months ended October 1, 2009 were $1,053.8 million, an increase of $26.6 million, compared with net revenues of $1,027.2 million for the same period in the prior year. The increase in net revenues is primarily attributable to a return to full rate production in 2009, as compared to the reduced production in 2008 caused by strike of Boeing employees represented by the International Association of Machinists and Aerospace Workers (the “Boeing IAM Strike”) that commenced in September 2008, resulting in a $29.5 million increase in net revenues, increased development program net revenues of $34.0 million and increased ship set deliveries of the B787 and B777 as compared to the same period in the prior year. The revenue increase was partially offset by fewer B747 ship set deliveries as a result of the transition to the B747-8 model, fewer Hawker 850XP deliveries, and by a $20.0 million decrease in the value of net revenues from Spirit Europe as a result of the strengthening of the dollar. Deliveries to Boeing increased by 8% to 122 ship sets during the third quarter of 2009 compared to 113 ship sets delivered for the same period in the prior year, as unit deliveries to Boeing were at pre-strike levels in the third quarter of 2009. Approximately 97% of Spirit’s net revenue for the third quarter of 2009 came from our two largest customers, Boeing and Airbus.
Interest Income. Interest income for the third quarter of 2009 consisted of $1.3 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $0.3 million of interest income, as compared to $3.7 million of accretion and $0.7 million in interest income for the same period in the prior year. The combined decrease of $2.8 million, as compared to the three months ended September 25, 2008, was primarily due to lower accretion income as a result of a lower outstanding balance on the discounted long-term receivable and lower interest rates on interest bearing accounts.
Net Revenues. Net revenues for the nine months ended October 1, 2009 were $3,000.8 million, a decrease of $124.9 million, or 4%, compared with net revenues of $3,125.7 million for the same period in the prior year. The decrease in net revenues is primarily attributable to the decrease in B737 deliveries, primarily due to the residual impact of the Boeing IAM Strike in the first half of 2009 and fewer B747 deliveries due to the transition to the B747-8 model, resulting in a $175.6 million decrease in net revenues, net of B747-8 non-recurring revenues, and a $89.2 million decrease in the value of net revenues from Spirit Europe as a result of the strengthening of the dollar. The decrease in net revenues was partially offset by increased ship set deliveries of the B787 as compared to the same period in the prior year, $38.6 million in volume-based pricing adjustments for the first five months of 2009, increased development program net revenues of $97.0 million, and a $36.2 million increase in net revenues from Airbus primarily as a result of higher deliveries in the first nine months of 2009 compared to the same period in 2008. Deliveries to Boeing decreased by 4% to 348 ship sets during the nine months ended October 1, 2009 compared to 362 ship sets delivered for the same period in the prior year, as unit deliveries to Boeing lagged behind pre-strike levels in the first two quarters of 2009. Deliveries to Airbus increased by 7% to 384 ship sets during the nine months ended October 1, 2009 compared to 358 ship sets delivered for the same period in the prior year. Approximately 96% of Spirit’s net revenues for the nine months ended October 1, 2009 came from our two largest customers, Boeing and Airbus.
Operating Income. Operating income for the nine months ended October 1, 2009 was $218.4 million, a decrease of $159.1 million, or 42%, as compared to operating income of $377.5 million for the same period in the prior year. The decrease was driven by the recognition of several unusual charges recorded in the second quarter, including a $93.0 million forward-loss charge for the Gulfstream G250 business jet program, the $10.9 million impact of the Cessna Citation Columbus termination, and the realization of unfavorable cumulative catch-up adjustments totaling $37.7 million during the first nine months of 2009.
Interest Income. Interest income for the nine months ended October 1, 2009 consisted of $5.8 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $0.4 million in interest income, as compared to $13.0 million of accretion of the discounted long-term receivable and $2.1 million of interest income for the same period in the prior year. The combined decrease of $8.9 million, as compared to the nine months ended September 25, 2008, was primarily due to lower accretion income as a result of a lower outstanding balance on the discounted long-term receivable and lower interest rates on interest bearing accounts.
Provision for Income Taxes. The income tax provision for the nine months ended October 1, 2009 includes $55.6 million for federal income taxes, $0.6 million for state taxes and $2.6 million for foreign taxes. The income tax provision for the nine months ended September 25, 2008 included $112.1 million for federal income taxes, $3.1 million for state taxes, and $3.2 million for foreign taxes. The 29.3% effective income tax rate for the nine months ended October 1, 2009 differs from the 32.5% effective income tax rate for the same period in the prior year primarily due to the reinstatement of the R&E Tax Credit on October 3, 2008.
SPR is in the portfolios of Bruce Berkowitz of Fairholme Capital Management, Richard Pzena of Pzena Investment Management LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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