Spirit AeroSystems Holdings Inc. (SPR, Financial) filed Quarterly Report for the period ended 2010-09-30.
Spirit Aerosystems Holdings Inc. has a market cap of $2.69 billion; its shares were traded at around $18.93 with a P/E ratio of 9.7 and P/S ratio of 0.7. SPR is in the portfolios of Bruce Berkowitz of Fairholme Capital Management, Fairholme Fund, David Dreman of Dreman Value Management, Richard Pzena of Pzena Investment Management LLC, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Jeremy Grantham of GMO LLC.
We are one of the largest independent non-OEM (original equipment manufacturer) aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the three months ended September 30, 2010 we generated net revenues of $1,002.0 million and net income of $46.4 million, and for the nine months ended September 30, 2010 we generated net revenues of $3,101.3 million and net income of $157.0 million.
Net Revenues. Net revenues for the three months ended September 30, 2010 were $1,002.0 million, a decrease of $51.8 million, or 5%, compared with net revenues of $1,053.8 million for the same period in the prior year. The decrease in net revenues was primarily driven by fewer large commercial aircraft deliveries and lower non-production revenues in the third quarter of 2010 as compared to the same period in the prior year. In addition, the weakening dollar resulted in a $5.8 million decrease in the value of net revenues from Spirit Europe for 2010. Deliveries to Boeing decreased 5% to 116 ship sets during the third quarter of 2010 as compared to 122 ship sets delivered for the same period in the prior year, as unit deliveries of the B777 dropped by seven ship sets driven by customer delivery schedule, partially offset by an increase in deliveries of the B787 ship sets as that program continues to ramp up in production. In addition, deliveries to Airbus decreased 31% to 87 ship sets during the third quarter of 2010 as compared to 127 ship sets for the same period in the prior year due to a 2010 customer delivery re-phasing at Spirit Europe which reduced third quarter A320 deliveries. Airbus unit deliveries decreased at a higher rate than revenues due to model mix as a lower percentage of deliveries in the current year period were lower-priced A330 aircraft. In total, ship set deliveries decreased 19% to 207 ship sets during the third quarter of 2010 as compared to 255 ship sets for the same period in the prior year. Approximately 96% of Spirits net revenue for the third quarter of 2010 came from our two largest customers, Boeing and Airbus.
Cost of Sales. Cost of sales as a percentage of net revenues was 87% for the three months ended September 30, 2010 compared to 83% for the same period in the prior year. The increase in 2010 was primarily due to lower profitability on follow-on production blocks that generally began in the fourth quarter of 2009 and the impact of a $6.5 million charge for the early retirement incentive included in the recent ten-year agreement with the International Association of Machinists and Aerospace Workers (IAM), the labor union that represents the largest number of Spirit employees. During the third quarter of 2010, we updated our contract profitability estimates resulting in an unfavorable cumulative catch-up adjustment of $4.2 million, primarily driven by additional costs required to meet test hardware schedules on the Sikorsky CH-53K program, partially offset by favorable cost performance trends on mature programs. In the third quarter of 2009, we recognized a favorable cumulative catch-up adjustment of $1.5 million.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the third quarter of 2010 includes $11.2 million of interest and fees paid or accrued in connection with long-term debt and $1.6 million in amortization of deferred financing costs, as compared to $8.3 million of interest and fees paid or accrued in connection with long-term debt and $1.9 million in amortization of deferred financing costs for the same period in the prior year. The increase in interest expense in the third quarter of 2010 was primarily driven by interest on the senior unsecured notes issued in the third quarter of 2009, partially offset by lower LIBOR rates on the floating portion of our Term B loan. The decrease in deferred financing costs was the result of the full amortization of the non-extended portion of our revolving credit facility.
Other Income (Expense). Other income for the third quarter of 2010 was $2.5 million as compared to an expense of $(0.5) million for the same period in the prior year. Other income includes foreign exchange gains of $1.2 million due to changes in foreign exchange rates as compared to foreign exchange losses of $(1.5) million for the same period in the prior year. The increase in income was driven primarily by the effect of foreign currency exchange rates on the intercompany payable from Spirit Europe to Spirit related to our A350 program as well as trade payables and borrowings. Should these balances increase, they will be more susceptible to changes in exchange rates.
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Spirit Aerosystems Holdings Inc. has a market cap of $2.69 billion; its shares were traded at around $18.93 with a P/E ratio of 9.7 and P/S ratio of 0.7. SPR is in the portfolios of Bruce Berkowitz of Fairholme Capital Management, Fairholme Fund, David Dreman of Dreman Value Management, Richard Pzena of Pzena Investment Management LLC, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
On October 15, 2010, Spirit entered into Amendment No. 3 to its Second Amended and Restated Credit Agreement, dated as of November 27, 2006. As a result of the amendment, among other things, the revolving credit commitment was increased from $408.8 million to $650.0 million and the maturity date, with respect to $630.0 million of the revolver, was extended to September 30, 2014. The maturity date for the remaining $20.0 million of the revolver was subsequently extended to September 30, 2014 as a result of an assignment and acceptance agreement, dated November 1, 2010, which transferred the remaining $20.0 million revolver commitment to a new revolver lender. The credit agreement amendment also extended the maturity date for $437.4 million of the outstanding term loan to September 30, 2016. The maturity date for the $130.2 million balance of the outstanding term loan remains at September 30, 2013. See also Liquidity and Capital Resources.We are one of the largest independent non-OEM (original equipment manufacturer) aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the three months ended September 30, 2010 we generated net revenues of $1,002.0 million and net income of $46.4 million, and for the nine months ended September 30, 2010 we generated net revenues of $3,101.3 million and net income of $157.0 million.
Net Revenues. Net revenues for the three months ended September 30, 2010 were $1,002.0 million, a decrease of $51.8 million, or 5%, compared with net revenues of $1,053.8 million for the same period in the prior year. The decrease in net revenues was primarily driven by fewer large commercial aircraft deliveries and lower non-production revenues in the third quarter of 2010 as compared to the same period in the prior year. In addition, the weakening dollar resulted in a $5.8 million decrease in the value of net revenues from Spirit Europe for 2010. Deliveries to Boeing decreased 5% to 116 ship sets during the third quarter of 2010 as compared to 122 ship sets delivered for the same period in the prior year, as unit deliveries of the B777 dropped by seven ship sets driven by customer delivery schedule, partially offset by an increase in deliveries of the B787 ship sets as that program continues to ramp up in production. In addition, deliveries to Airbus decreased 31% to 87 ship sets during the third quarter of 2010 as compared to 127 ship sets for the same period in the prior year due to a 2010 customer delivery re-phasing at Spirit Europe which reduced third quarter A320 deliveries. Airbus unit deliveries decreased at a higher rate than revenues due to model mix as a lower percentage of deliveries in the current year period were lower-priced A330 aircraft. In total, ship set deliveries decreased 19% to 207 ship sets during the third quarter of 2010 as compared to 255 ship sets for the same period in the prior year. Approximately 96% of Spirits net revenue for the third quarter of 2010 came from our two largest customers, Boeing and Airbus.
Cost of Sales. Cost of sales as a percentage of net revenues was 87% for the three months ended September 30, 2010 compared to 83% for the same period in the prior year. The increase in 2010 was primarily due to lower profitability on follow-on production blocks that generally began in the fourth quarter of 2009 and the impact of a $6.5 million charge for the early retirement incentive included in the recent ten-year agreement with the International Association of Machinists and Aerospace Workers (IAM), the labor union that represents the largest number of Spirit employees. During the third quarter of 2010, we updated our contract profitability estimates resulting in an unfavorable cumulative catch-up adjustment of $4.2 million, primarily driven by additional costs required to meet test hardware schedules on the Sikorsky CH-53K program, partially offset by favorable cost performance trends on mature programs. In the third quarter of 2009, we recognized a favorable cumulative catch-up adjustment of $1.5 million.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the third quarter of 2010 includes $11.2 million of interest and fees paid or accrued in connection with long-term debt and $1.6 million in amortization of deferred financing costs, as compared to $8.3 million of interest and fees paid or accrued in connection with long-term debt and $1.9 million in amortization of deferred financing costs for the same period in the prior year. The increase in interest expense in the third quarter of 2010 was primarily driven by interest on the senior unsecured notes issued in the third quarter of 2009, partially offset by lower LIBOR rates on the floating portion of our Term B loan. The decrease in deferred financing costs was the result of the full amortization of the non-extended portion of our revolving credit facility.
Other Income (Expense). Other income for the third quarter of 2010 was $2.5 million as compared to an expense of $(0.5) million for the same period in the prior year. Other income includes foreign exchange gains of $1.2 million due to changes in foreign exchange rates as compared to foreign exchange losses of $(1.5) million for the same period in the prior year. The increase in income was driven primarily by the effect of foreign currency exchange rates on the intercompany payable from Spirit Europe to Spirit related to our A350 program as well as trade payables and borrowings. Should these balances increase, they will be more susceptible to changes in exchange rates.
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