Spirit AeroSystems Reports Second Quarter 2024 Results
WICHITA, Kan., Aug. 5, 2024 /PRNewswire/ --
Second Quarter 2024
-- Revenues of $1.5 billion
-- EPS of $(3.56); Adjusted EPS* of $(2.73)
-- Cash used in operations of $566 million; Free cash flow* usage of $597
million
Spirit AeroSystems Holdings, Inc. (NYSE: SPR) ("Spirit," "Spirit AeroSystems" or the "Company") reported second quarter 2024 financial results.
"This has been a dynamic and eventful period for the company, and I want to extend my gratitude to each employee for their dedication and hard work," said Pat Shanahan, President and Chief Executive Officer, Spirit AeroSystems. "Their commitment, resilience and teamwork have driven meaningful improvements in safety, compliance and quality while continuing to meet our customer commitments."
"While we have made significant improvements in the quality of our product, our financial results were negatively impacted by delivery delays as we continue to optimize the product verification process," said Irene Esteves, Executive Vice President and Chief Financial Officer, Spirit AeroSystems. "We are focused on further institutionalizing this process while improving the overall quality of each unit we produce."
Boeing 737 Program Update
Beginning in March of 2024, Spirit and Boeing established a joint product verification process to ensure conformity of fuselages prior to transportation to Boeing's final assembly site in Renton, Washington. Spirit's deliveries continue to be delayed as the companies work together to optimize the process.
During the second quarter of 2024, the Company delivered 27 Boeing 737 fuselages, which was lower than anticipated. Spirit's production facilities cycled at a rate of 31 aircraft per month during the quarter, a rate faster than the units were accepted through the product verification process, which led to an increase of undelivered units in Wichita, Kansas. This delay in deliveries contributed to higher levels of contract assets and inventory, which resulted in higher operational cash usage. Once the completed units can be fully inspected and accepted by the customer, they will be considered delivered which will allow Spirit to collect on those units.
Revenue
Spirit's revenue in the second quarter of 2024 increased from the same period of 2023, primarily due to higher production activities on most Commercial programs and higher Defense and Space revenues, partially offset by lower production volume on the Boeing 737 program. Overall deliveries decreased to 336 shipsets during the second quarter of 2024 compared to 342 shipsets in the same period of 2023.
Spirit's backlog at the end of the second quarter of 2024 was approximately $48 billion, which includes work packages on all commercial platforms in the Airbus and Boeing backlog.
Earnings
Operating loss for the second quarter of 2024 was higher compared to the same period of 2023, primarily driven by the higher unfavorable changes in estimates during the current period.
Total change in estimates in the second quarter of 2024 included net forward losses of $214 million and unfavorable cumulative catch-up adjustments for periods prior to the second quarter of $52 million. The Boeing 787 program drove $173 million of forward losses, primarily due to schedule changes, as disclosed as a subsequent event in the first quarter of 2024, as well as higher estimated supply chain costs. The Airbus A220 program recognized $25 million of forward losses, primarily resulting from production performance and supply chain cost growth. Unfavorable cumulative catch-up adjustments were primarily related to the Boeing 737 and 777 programs of $28 million and $19 million, respectively. The Boeing 737 program cumulative catch-up adjustments were driven by the delivery delays related to the product verification system as well as a higher cost profile maintained for a planned rate increase that has been delayed. The Boeing 777 program cumulative catch-up adjustments were primarily driven by schedule changes and higher production cost estimates. Excess capacity costs during the second quarter of 2024 were $46 million. In comparison, during the second quarter of 2023, Spirit recognized $105 million of net forward losses, $22 million of unfavorable cumulative catch-up adjustments and excess capacity costs of $53 million.
Second quarter 2024 EPS was $(3.56), compared to $(1.96) in the same period of 2023. Second quarter 2024 adjusted EPS* was $(2.73), which excludes the incremental deferred tax asset valuation allowance. In the same period of 2023, adjusted EPS* was $(1.46), which excluded the incremental deferred tax asset valuation allowance.
Cash
Cash from operations and free cash flow* during the second quarter of 2024 were negatively impacted by the Boeing 737 delivery delays related to the joint production verification process. Cash from operations and free cash flow* during the second quarter of 2023 reflects negative impacts to working capital resulting from rework and disruption related to the vertical fin attach fittings issue, work stoppage caused by the International Associate of Machinists and Aerospace Workers ("IAM") strike, as well as the expenditures for the anticipated increased production on the Boeing 737 program. The cash balance at the end of the second quarter of 2024 was $206 million.
Events in the first half of 2024 have resulted in significant reductions in projected revenue and cash flows this year. These recent events include the production and delivery process changes implemented by Boeing, lower than planned 737 production rates and the lack of price increases on Airbus programs. Management has developed plans to pursue various options to improve liquidity as needed and expects these plans to sufficiently improve the Company's liquidity. These plans are primarily dependent upon finalizations of active discussions related to the timing or amounts of repayment for certain customer advances and include the execution of the bridge term loan as discussed in the Subsequent Events section below, as well as the evaluation of additional strategies to improve liquidity to support operations.
Subsequent Events
On June 30, 2024, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Boeing. Upon completion of the merger, subject to the terms and conditions of the Merger Agreement, the Company would become a wholly owned subsidiary of Boeing. The closing of the transaction is expected to occur in mid-2025, subject to the completion of the divestiture of certain portions of Spirit's business related to the performance by Spirit and its subsidiaries of their obligations under their supply contracts with Airbus SE and other closing conditions, including approval of the Merger Agreement by Spirit shareholders and receipt of regulatory approvals.
On June 30, 2024, the Company entered into a term sheet with Airbus SE under which the parties have agreed to negotiate in good faith definitive agreements providing for the acquisition by Airbus SE or its affiliates of certain Spirit Airbus program assets.
On June 30, 2024, the Company entered into a delayed-draw bridge credit agreement that provides for a senior secured delayed-draw bridge term loan facility in an aggregate principal amount of $350 million. On July 18, 2024, Spirit borrowed $200 million under this bridge term loan facility.
Segment Results
Commercial
Commercial segment revenue in the second quarter of 2024 increased from the same period of the prior year, primarily due to higher production across most programs, partially offset by lower production volume on the Boeing 737 program. Operating margin for the second quarter of 2024 decreased compared to the same period of 2023, primarily driven by higher changes in estimates. In the second quarter of 2024, change in estimates for the segment included $212 million of net forward losses and $49 million of unfavorable cumulative catch-up adjustments. Additionally, during the second quarter of 2024, the Commercial segment included excess capacity costs of $44 million. In comparison, during the second quarter of 2023, the segment recognized $102 million of net forward losses, $16 million of unfavorable cumulative catch-up adjustments, excess capacity costs of $52 million, and strike disruption charges of $7 million.
Defense & Space
Defense & Space segment revenue in the second quarter of 2024 increased from the same period of the prior year, primarily due to higher activity on the Sikorsky CH-53K program in the current period, partially offset by lower production on the Boeing P-8 program. Operating margin for the second quarter of 2024 increased compared to the same period of 2023, primarily due to higher activities on the Sikorsky CH-53K, partially offset by higher costs on the Boeing P-8 program.
Aftermarket
Aftermarket segment revenue in the second quarter of 2024 increased from the same period of the prior year, primarily due to higher spare part sales. Operating margin in the second quarter of 2024 decreased compared to the second quarter of 2023, primarily due to sales mix.
2024 Financial Outlook
In light of the previously announced merger agreement with Boeing, and consistent with customary practice during the pendency of such transactions, Spirit will no longer provide guidance.
Additionally, due to the merger agreement announcement, no conference call will be held in conjunction with this release. Full details of the Company's financial results are available on the Company's Quarterly Report on Form 10-Q.
* Non-GAAP financial measure, see Appendix for definition and reconciliation
Cautionary Statement Regarding Forward-Looking Statements
You should read the discussion of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements appearing in the Company's Annual Report on Form 10-K and the Company's Quarterly Reports on Form 10-Q. The press release may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 "aim," "anticipate," "believe," "could," "continue," "estimate," "expect," "forecast," "goal," "intend," "may," "might," "model," "objective," "outlook," "plan," "potential," "predict," "project," "seek," "should," "target," "will," "would," and other similar words, or phrases, or the negative thereof, unless the context requires otherwise. These statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown, including, but not limited to, those described in the "Risk Factors" section of the 2023 Form 10-K. 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:
-- the continued fragility of the global aerospace supply chain including
our dependence on our suppliers, as well as the cost and availability of
raw materials and purchased components, including increases in energy,
freight, and other raw material costs as a result of inflation or
continued global inflationary pressures;
-- our ability and our suppliers' ability and willingness to meet stringent
delivery (including quality and timeliness) standards and accommodate
changes in the build rates or model mix of aircraft under existing
contractual commitments, including the ability or willingness to staff
appropriately or expend capital for current production volumes and
anticipated production volume increases;
-- our ability to maintain continuing, uninterrupted production at our
manufacturing facilities and our suppliers' facilities;
-- our ability, and our suppliers' ability, to attract and retain the
skilled work force necessary for production and development in an
extremely competitive market;
-- the effect of economic conditions, including increases in interest rates
and inflation, on the demand for our and our customers' products and
services, on the industries and markets in which we operate in the U.S.
and globally, and on the global aerospace supply chain;
-- the general effect of geopolitical conditions, including Russia's
invasion of Ukraine and the resultant sanctions being imposed in
response to the conflict, including any trade and transport
restrictions;
-- the recent outbreak of war in Israel and the Gaza Strip and the
potential for expansion of the conflict in the surrounding region, which
may impact certain suppliers' ability to continue production or make
timely deliveries of supplies required to produce and timely deliver our
products, and may result in sanctions being imposed in response to the
conflict, including trade and transport restrictions;
-- our relationships with the unions representing many of our employees,
including our ability to successfully negotiate new agreements, and
avoid labor disputes and work stoppages with respect to our union
employees;
-- the impact of significant health events, such as pandemics, contagions
or other public health emergencies (including the COVID-19 pandemic) or
fear of such events, on the demand for our and our customers' products
and services, the industries and the markets in which we operate in the
U.S. and globally;
-- the timing and conditions surrounding the full worldwide return to
service (including receiving the remaining regulatory approvals) of the
B737 MAX, future demand for the aircraft, and any residual impacts of
the B737 MAX grounding on production rates for the aircraft;
-- our reliance on The Boeing Company ("Boeing") and Airbus Group SE and
its affiliates (collectively, "Airbus") for a significant portion of our
revenues;
-- the business condition and liquidity of our customers and their ability
to satisfy their contractual obligations to the Company;
-- the certainty of our backlog, including the ability of customers to
cancel or delay orders prior to shipment on short notice, and the
potential impact of regulatory approvals of existing and derivative
models;
-- our ability to accurately estimate and manage performance, cost,
margins, and revenue under our contracts, and the potential for
additional forward losses on new and maturing programs;
-- our accounting estimates for revenue and costs for our contracts and
potential changes to those estimates;
-- our ability to continue to grow and diversify our business, execute our
growth strategy, and secure replacement programs, including our ability
to enter into profitable supply arrangements with additional customers;
-- the outcome of product warranty or defective product claims and the
impact settlement of such claims may have on our accounting assumptions;
-- competitive conditions in the markets in which we operate, including
in-sourcing by commercial aerospace original equipment manufacturers;
-- our ability to successfully negotiate, or re-negotiate, future pricing
under our supply agreements with Boeing, Airbus and other customers;
-- the possibility that our cash flows may not be adequate for our
additional capital needs;
-- any reduction in our credit ratings;
-- our ability to access the capital or credit markets to fund our
liquidity needs, and the costs and terms of any additional financing;
-- our ability to avoid or recover from cyber or other security attacks and
other operations disruptions;
-- legislative or regulatory actions, both domestic and foreign, impacting
our operations, including the effect of changes in tax laws and rates
and our ability to accurately calculate and estimate the effect of such
changes;
-- spending by the U.S. and other governments on defense;
-- pension plan assumptions and future contributions;
-- the effectiveness of our internal control over financial reporting;
-- the outcome or impact of ongoing or future litigation, arbitration,
claims, and regulatory actions or investigations, including our exposure
to potential product liability and warranty claims;
-- adequacy of our insurance coverage;
-- our ability to continue selling certain receivables through the
receivables financing programs;
-- our ability to effectively integrate recent acquisitions, along with
other acquisitions we pursue, and generate synergies and other cost
savings therefrom, while avoiding unexpected costs, charges, expenses,
and adverse changes to business relationships and business disruptions;
-- the risks of doing business internationally, including fluctuations in
foreign currency exchange rates, impositions of tariffs or embargoes,
trade restrictions, compliance with foreign laws, and domestic and
foreign government policies, and
-- risks and uncertainties relating to the merger transaction with Boeing
under the Merger Agreement (the "Boeing Merger Transaction") and the
disposition of the Spirit Airbus Business as contemplated by the term
sheet with Airbus SE (the "Airbus Business Disposition" and, together
with Boeing Merger Transaction, the "Transactions"), including, among
others, the possible inability of the Company and its subsidiaries to
negotiate and enter into definitive agreements with Airbus SE and its
affiliates with respect to the Airbus Business Disposition; the possible
inability of the parties to a Transaction to obtain the required
regulatory approvals for such Transaction and to satisfy the other
conditions to the closing of such Transaction (including, in the case of
the Boeing Merger Transaction, approval of the Merger Agreement by
Spirit stockholders) on a timely basis or at all; the possible
occurrence of events that may give rise to a right of one or more of the
parties to the Merger Agreement to terminate the Merger Agreement; the
risk that the Merger Agreement is terminated under circumstances
requiring the Company to pay a termination fee; the risk that the
Company is unable to consummate the Transactions on a timely basis or at
all for any reason, including, without limitation, failure to obtain the
required regulatory approvals, failure to obtain Spirit stockholder
approval of the Merger Agreement or failure to satisfy other conditions
the closing of either of the Transactions; the potential for the
announcement or pendency of the Transactions or any failure to
consummate the Transactions to adversely affect the market price of
Spirit common stock or the Company's financial performance or business
relationships; risks relating to the value of Boeing common stock to be
issued in the Boeing Merger Transaction; the possibility that the
anticipated benefits of the Transactions cannot be realized in full or
at all or may take longer to realize than expected; the possibility that
costs or difficulties related to the integration of the Company's
operations with those of Boeing will be greater than expected; risks
relating to significant transaction costs; the intended or actual tax
treatment of the Transactions; potential litigation or other legal or
regulatory action relating to the Transactions or otherwise relating to
the Company or other parties to the Transactions that could be
instituted against the Company or such other parties or Spirit's or such
other parties' respective directors and officers and the effect of the
outcome of any such litigation or other legal or regulatory action;
risks associated with contracts containing provisions that may be
triggered by the Transactions; potential difficulties in retaining and
hiring key personnel or arising in connection with labor disputes during
the pendency of or following the Transactions; the risk of other
Transaction-related disruptions to the business, including business
plans and operations, of the Company; the potential for the Transactions
to divert the time and attention of management from ongoing business
operations; the potential for contractual restrictions under the
agreements relating to the Transactions to adversely affect the
Company's ability to pursue other business opportunities or strategic
transactions; and competitors' responses to the Transactions.
These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You should review carefully the section captioned "Risk Factors" in the 2023 Form 10-K and the Company's subsequent Quarterly Reports on Form 10-Q for a more complete discussion of these and other factors that may affect our business.
Table 1. Summary Financial Results (unaudited)
2nd Quarter Six Months
($ in millions, except per share data) 2024 2023 Change 2024 2023 Change
Net Revenues $1,492 $1,365 9 % $3,195 $2,796 14 %
Operating Loss ($331) ($120) ** ($859) ($216) **
Operating Loss as a % of Revenues (22.2 %) (8.8 %) ** (26.9 %) (7.7 %) **
Net Loss ($415) ($206) ** ($1,032) ($488) **
Net Loss as a % of Revenues (27.8 %) (15.1 %) ** (32.3 %) (17.4 %) **
Net Loss Per Share (Fully Diluted) ($3.56) ($1.96) (82 %) ($8.87) ($4.64) (91 %)
Adjusted Net Loss Per Share (Fully Diluted)* ($2.73) ($1.46) ** ($6.66) ($3.15) **
Fully Diluted Weighted Avg Share Count 116.6 105.2 116.4 105.1
** Represents an amount in excess of 100% or not meaningful.
Table 2. Cash Flow, Cash and Total Debt (unaudited)
2nd Quarter Six Months
($ in millions) 2024 2023 Change 2024 2023 Change
Cash used in Operations ($566) ($183) ** ($981) ($229) **
Purchases of Property, Plant & Equipment ($32) ($28) (11 %) ($60) ($51) (18 %)
Free Cash Flow* ($597) ($211) ** ($1,041) ($280) **
June 27, December 31,
Cash and Total Debt 2024 2023
Cash $206 $824
Total Debt $4,061 $4,084
** Represents an amount in excess of 100% or not meaningful.
Table 3. Segment Reporting (unaudited)
2nd Quarter Six Months
($ in millions) 2024 2023 Change 2024 2023 Change
Segment Revenues
Commercial $1,166.4 $1,083.0 7.7 % $2,522.5 $2,231.5 13.0 %
Defense & Space 224.4 189.6 18.4 % 475.2 378.0 25.7 %
Aftermarket 101.1 92.1 9.8 % 197.0 186.6 5.6 %
Total Segment Revenues $1,491.9 $1,364.7 9.3 % $3,194.7 $2,796.1 14.3 %
Segment (Loss) Earnings from Operations
Commercial ($270.5) ($72.9) ** ($755.4) ($118.4) **
Defense & Space 18.7 12.0 55.8 % 50.9 31.2 63.1 %
Aftermarket 17.5 24.3 (28.0 %) 34.7 43.5 (20.2 %)
Total Segment Operating (Loss) Earnings ($234.3) ($36.6) ** ($669.8) ($43.7) **
Segment Operating (Loss) Earnings as % of Revenues
Commercial (23.2 %) (6.7 %) ** (29.9 %) (5.3 %) **
Defense & Space 8.3 % 6.3 % 200 BPS 10.7 % 8.3 % 240 BPS
Aftermarket 17.3 % 26.4 % (910) BPS 17.6 % 23.3 % (570) BPS
Total Segment Operating (Loss) Earnings as % of Revenues (15.7 %) (2.7 %) ** (21.0 %) (1.6 %) **
Unallocated Expense
SG&A ($83.6) ($70.6) (18.4 %) ($165.1) ($148.0) (11.6 %)
Research & Development (13.4) (13.2) (1.5 %) (24.0) (23.8) (0.8 %)
Total Loss from Operations ($331.3) ($120.4) ** ($858.9) ($215.5) **
Total Operating Loss as % of Revenues (22.2 %) (8.8 %) ** (26.9 %) (7.7 %) **
** Represents an amount in excess of 100% or not meaningful.
Spirit Shipset Deliveries
(one shipset equals one aircraft)
2nd
Quarter Six Months
2024 2023 2024 2023
B737 27 74 71 169
B767 9 9 14 17
B777 8 7 16 14
B787 14 10 27 16
Total Boeing 58 100 128 216
A220 22 14 37 27
A320 Family 179 152 332 294
A330 9 9 16 18
A350 15 13 31 25
Total Airbus 225 188 416 364
Business/Regional Jet 53 54 99 108
Total 336 342 643 688
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
For the Three Months Ended For the Six Months Ended
---
June 27, June 29, June 27, June 29,
2024 2023 2024 2023
($ in millions, except per share data)
Net Revenues $1,491.9 $1,364.7 $3,194.7 $2,796.1
Operating costs and expenses
Cost of sales 1,725.4 1,395.5 3,863.7 2,827.7
Selling, general and administrative 83.6 70.6 165.1 148.0
Restructuring costs 0.8 0.9 0.8 7.2
Research and development 13.4 13.2 24.0 23.8
Other operating expense - 4.9 4.9
Total operating costs and expenses 1,823.2 1,485.1 4,053.6 3,011.6
Operating loss (331.3) (120.4) (858.9) (215.5)
Interest expense and financing fee amortization (82.3) (73.6) (162.5) (146.0)
Other income (expense), net 0.4 (9.9) 2.7 (127.3)
Loss before income taxes and equity in net loss of affiliates (413.2) (203.9) (1,018.7) (488.8)
Income tax (provision) benefit (2.1) (3.0) (13.1) 1.3
Loss before equity in net loss of affiliates (415.3) (206.9) (1,031.8) (487.5)
Equity in net income (loss) of affiliates 0.2 0.5 0.1 (0.2)
Net loss (415.1) (206.4) (1,031.7) (487.7)
Less noncontrolling interest in earnings of subsidiary (0.2) 0.1 (0.3) 0.2
Net loss attributable to common shareholders $(415.3) $(206.3) $(1,032.0) $(487.5)
Loss per share
Basic $(3.56) $(1.96) $(8.87) $(4.64)
Diluted $(3.56) $(1.96) $(8.87) $(4.64)
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
June 27,
2024 December 31, 2023
($ in millions)
Assets
Cash and cash equivalents $206.0 $823.5
Restricted cash - 0.1
Accounts receivable, net 560.0 585.5
Contract assets, short-term 1,005.3 522.9
Inventory, net 1,893.3 1,767.3
Other current assets 60.9 52.5
Total current assets 3,725.5 3,751.8
Property, plant and equipment 2,008.1 2,084.2
Right of use assets 88.8 92.1
Contract assets, long-term 16.0
Pension assets 41.4 33.5
Restricted plan assets 50.3 61.1
Deferred income taxes 0.1 0.1
Goodwill 631.2 631.2
Intangible assets, net 188.6 196.2
Other assets 108.6 99.9
Total assets $6,858.6 $6,950.1
Liabilities
Accounts payable $1,113.9 $1,106.8
Accrued expenses 429.1 420.1
Profit sharing 41.8 15.7
Current portion of long-term debt 77.4 64.8
Operating lease liabilities, short-term 9.6 9.1
Advance payments, short-term 102.9 38.3
Contract liabilities, short-term 165.1 192.6
Forward loss provision, short-term 351.7 256.6
Deferred revenue and other deferred credits, short-term 57.7 49.6
Other current liabilities 505.4 44.7
Total current liabilities 2,854.6 2,198.3
Long-term debt 3,984.0 4,018.7
Operating lease liabilities, long-term 80.4 84.3
Advance payments, long-term 257.9 301.9
Pension/OPEB obligation 28.4 30.3
Contract liabilities, long-term 181.4 161.3
Forward loss provision, long-term 568.3 224.1
Deferred revenue and other deferred credits, long-term 55.1 76.7
Deferred grant income liability - non-current 26.9 25.8
Deferred income taxes 18.7 9.1
Other non-current liabilities 316.4 315.5
Stockholders' Equity
Common stock, Class A par value $0.01, 200,000,000 shares authorized, 1.2 1.2
116,619,149 and 116,054,291 shares issued and outstanding, respectively
Additional paid-in capital 1,448.5 1,429.1
Accumulated other comprehensive loss (94.9) (89.6)
Retained earnings (415.7) 616.3
Treasury stock, at cost (41,587,480 shares each period, respectively) (2,456.7) (2,456.7)
Total stockholders' equity (1,517.6) (499.7)
Noncontrolling interest 4.1 3.8
Total equity (1,513.5) (495.9)
Total liabilities and equity $6,858.6 $6,950.1
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months Ended
June 27, June 29,
2024 2023
Operating activities ($ in millions)
Net loss $(1,031.7) $(487.7)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense 155.6 157.7
Amortization of deferred financing fees 3.4 3.5
Accretion of customer supply agreement 1.4 1.2
Employee stock compensation expense 20.7 19.8
Loss from derivative instruments 2.1
(Gain) loss from foreign currency transactions (5.3) 8.5
Loss on disposition of assets 0.8 0.3
Deferred taxes 10.2 (11.5)
Pension and other post-retirement plans (income) expense (5.6) 62.6
Grant liability amortization (0.6) (0.6)
Equity in net loss (income) of affiliates (0.1) 0.2
Forward loss provision 439.4 (32.5)
Gain on settlement of financial instrument (0.8) (0.9)
Change in fair value of acquisition consideration and settlement (2.4)
Gain on settlement of New Market Tax Credit incentive program (5.7)
Changes in assets and liabilities
Accounts receivable, net 30.6 (17.1)
Inventory, net (131.9) (161.4)
Contract assets (498.8) (92.7)
Accounts payable and accrued liabilities 7.6 88.8
Profit sharing/deferred compensation 26.1 (26.9)
Advance payments 20.6 41.1
Income taxes receivable/payable 1.4 7.2
Contract liabilities (7.3) (7.3)
Pension plans employer contributions (1.4) 178.4
Deferred revenue and other deferred credits (11.2) 21.7
Other 1.5 18.9
Net cash used in operating activities (981.1) (229.0)
Investing activities
Purchase of property, plant and equipment (60.3) (51.3)
Net cash used in investing activities (60.3) (51.3)
Financing activities
Customer financing 465.0 180.0
Borrowings under revolving credit facility 1.6
Principal payments of debt (30.9) (31.2)
Payments on term loans (1.5) (1.5)
Payment on financing of New Market Tax Credit incentive program (1.9)
Taxes paid related to net share settlement awards (5.1) (5.9)
Proceeds from issuance of ESPP stock 3.8 2.6
Debt issuance and financing costs (0.5) (0.5)
Net cash provided by financing activities 428.9 145.1
Effect of exchange rate changes on cash and cash equivalents 0.7 4.8
Net decrease in cash, cash equivalents, and restricted cash for the period (611.8) (130.4)
Cash, cash equivalents, and restricted cash, beginning of period 845.9 678.4
Cash, cash equivalents, and restricted cash, end of period $234.1 $548.0
Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
---
For the Six Months Ended
June 27, June 29,
2024 2023
Cash and cash equivalents, beginning of the period $823.5 $658.6
Restricted cash, short-term, beginning of the period 0.1 0.2
Restricted cash, long-term, beginning of the period 22.3 19.6
Cash, cash equivalents, and restricted cash, beginning of the period $845.9 $678.4
Cash and cash equivalents, end of the period $206.0 $525.7
Restricted cash, short-term, end of the period 0.2
Restricted cash, long-term, end of the period 28.1 22.1
Cash, cash equivalents, and restricted cash, end of the period $234.1 $548.0
Appendix
In addition to reporting our financial information using U.S. Generally Accepted Accounting Principles (GAAP), management believes that certain non-GAAP measures (which are indicated by * in this press release) provide investors with important perspectives into the company's ongoing business performance. The non-GAAP measures we use in this press release are (i) adjusted diluted earnings (loss) per share and (ii) free cash flow, which are described further below. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define and calculate the measures differently than we do, limiting the usefulness of the measures for comparison with other companies.
Adjusted Diluted Earnings (Loss) Per Share. To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings (loss) per share (Adjusted EPS). This metric excludes various items that are not considered to be directly related to our operating performance. Management uses Adjusted EPS as a measure of business performance, and we believe this information is useful in providing period-to-period comparisons of our results. The most comparable GAAP measure is diluted earnings (loss) per share.
Free Cash Flow. Free Cash Flow is defined as GAAP cash provided by (used in) operating activities (also referred to herein as "cash from operations"), less capital expenditures for property, plant and equipment. Management believes Free Cash Flow provides investors with an important perspective on the cash available for stockholders, debt repayments including capital leases, and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation. Free Cash Flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures. The most comparable GAAP measure is cash provided by (used in) operating activities. Management uses Free Cash Flow as a measure to assess both business performance and overall liquidity.
The tables below provide reconciliations between the GAAP and non-GAAP measures.
Adjusted EPS
2nd Quarter Six Months
2024 2023 2024 2023
GAAP Diluted Loss Per Share ($3.56) ($1.96) ($8.87) ($4.64)
Deferred Tax Asset Valuation Allowance (a) 0.83 0.50 2.21 1.01
Pension Termination Charges (b) 0.48
Adjusted Diluted Loss Per Share ($2.73) ($1.46) ($6.66) ($3.15)
Diluted Shares (in millions) 116.6 105.2 116.4 105.1
(a) Represents the deferred tax asset valuation allowance (included in Income tax provision)
(b) Represents the net non-cash charges related to the termination of the U.S. Pension Value Plan A
(included in Other income)
Free Cash Flow
2nd Quarter Six Months
($ in millions) 2024 2023 2024 2023
Cash from Operations ($566) ($183) ($981) ($229)
Capital Expenditures (32) (28) (60) (51)
Free Cash Flow ($597) ($211) ($1,041) ($280)
View original content to download multimedia:https://www.prnewswire.com/news-releases/spirit-aerosystems-reports-second-quarter-2024-results-302214664.html
SOURCE Spirit Aerosystems
