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Vought Aircraft Industries, Inc.:
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Summary of Financial Results
$ in millions
Three Months Ended Year Ended
------------------------- ---------------------------
December December December December
31, 31, 31, 31,
2007 2006 Change 2007 2006 Change
-------- -------- ------- --------- --------- -------
Revenue $ 394.9 $ 417.6 $(22.7) $1,625.5 $1,550.9 $ 74.6
Operating
income $ 18.9 $ 11.2 $ 7.7 $ 109.5 $ 31.7 $ 77.8
Net income
(loss) $ 3.1 $ (6.3) $ 9.4 $ 46.3 $ (36.7) $ 83.0
Adjusted
EBITDA(1) $ 69.9 $ 58.5 $ 11.4 $ 277.4 $ 184.5 $ 92.9
Free Cash
Flow(1) $ 33.1 $ 75.2 $(42.1) $ (23.2) $ 57.4 $(80.6)
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(1) Non-GAAP measure. A complete definition and reconciliation of
non-GAAP measures, identified by the number 1, is provided later in
the release.
Vought Aircraft Industries, Inc. today reported financial results
for its fourth quarter and year ending Dec. 31, 2007.
Fourth Quarter Results
Revenue for the three months ended Dec. 31, 2007 was $394.9
million, a decrease of $22.7 million or 5 percent, compared with
revenue of $417.6 million for the same period last year. Increased
commercial and business jet revenue resulting from increased
deliveries and price adjustments was offset by decreased military
revenue due to nonrecurring items recorded in 2006.
-- Commercial revenue increased by $11.3 million or 6 percent due
to increased deliveries and price adjustments.
-- Military revenue decreased $36.3 million or 22 percent,
primarily due to the absence of nonrecurring revenue recorded
in 2006 on the Global Hawk program and the completion of other
small military programs. This was partially offset by a $14.9
million increase in revenue for the H-60 program due to higher
deliveries.
-- Business jet revenue increased by approximately $2.3 million
or 3 percent primarily due to price adjustments.
Funded backlog increased 3 percent to $3.4 billion at the end of
the quarter compared to $3.3 billion for the same period last year,
primarily due to increased orders for military programs. Vought's
calculation of backlog includes only funded orders, which causes
backlog to be substantially lower than the estimated aggregate dollar
value of contracts and may not be comparable to others in the
industry.
Operating income for the fourth quarter of 2007 was $18.9 million,
an increase of $7.7 million compared to the same period last year. Net
Income for the fourth quarter of 2007 was $3.1 million, compared to a
net loss of $6.3 million for the same period last year. These
improvements are due to improved margins for many of programs
resulting from cost reduction initiatives, operational improvements,
increased prices and higher delivery rates. These improvements were
partially offset by continued investment in the 787 program.
Adjusted EBITDA(1), as defined in the company's senior secured
credit agreement, was $69.9 million for the fourth quarter of 2007,
compared to $58.5 million for the same period last year. The $11.4
million increase is driven by improved program margins as discussed
above.
Vought generated $33.1 million of Free Cash Flow(1) for the fourth
quarter of 2007 compared to $75.2 million in 2006. The decrease of
$42.1 million is primarily due to continued investment in the 787
program, which resulted in higher inventory balances in the fourth
quarter, as well as lower customer advances during the fourth quarter
of 2007. Net cash expenditures for the 787 program were $106.2 million
for the fourth quarter of 2007 including start-up, capital and
production costs.
"Vought's performance continued to improve in 2007. Our financial
results demonstrate the sustainability of improvements driven by our
operational excellence initiatives," said Vought's President and Chief
Executive Officer Elmer Doty. "We continue to drive manufacturing
improvements across all of our programs, with a particular focus on
our start-up efforts."
Year Ended Results
Revenue for the year ended Dec. 31, 2007 was $1,625.5 million, an
increase of $74.6 million or 5 percent, compared with revenue of
$1,550.9 million for the same period last year. Excluding $99.0
million of customer settlements recorded in the second quarter of
2006, revenue increased $173.6 million or 12 percent.
-- Commercial revenue increased by $95.2 million or 14 percent,
due to both increased deliveries and price adjustments.
Excluding the second quarter 2006 settlements of $70.0
million, commercial revenue increased $165.2 million or 26
percent.
-- Military revenue decreased $30.9 million or 6 percent.
Increases of $69.1 million due primarily to higher delivery
rates for the H-60 program and timing of deliveries for the
C-17 program were offset by a decrease of $100.0 million for
non-recurring revenue for the C-5, Global Hawk and 767 tanker
programs during 2006 and the completion of other small
military programs.
-- Business jet revenue increased by approximately $10.3 million
or 4 percent primarily due to increased deliveries and price
adjustments. Excluding the second quarter 2006 settlements of
$29.0 million, business jet revenue increased $39.3 million or
15 percent.
Net income for the year ended Dec. 31, 2007 was $46.3 million,
compared to a net loss of $36.7 million for the same period last year.
The $83.0 million improvement was primarily due to higher revenue and
improved program margins resulting from cost reduction efforts,
operational improvements, price increases and higher delivery rates.
Adjusted EBITDA(1), as defined in the company's senior secured
credit agreement, was $277.4 million for the year ended Dec. 31, 2007,
compared to $184.5 million for the same period last year. The increase
of $92.9 million is the result of both higher revenue and improved
program margins as described above.
Free Cash Flow(1) was negative $23.2 million for the year ended
Dec. 31, 2007, a decrease of $80.6 million from last year, primarily
due to the absence of customer settlements recorded in the second
quarter of 2006. Excluding the 2006 customer settlements, Free Cash
Flow from ongoing operations(1) increased in 2007 due to operational
improvements and lower capital expenditures, partially offset by
continued investment in the 787 program and the increased funding
requirements for our pension plans. For the year ended Dec. 31, 2007,
net cash expenditures for the 787 program were $286.1 million
including start-up, capital and production costs.
787 Program Update
"Vought's priority remains the successful execution of the 787
program. We have made great progress in overcoming initial supply
chain challenges, resulting in a significant improvement in the number
of parts installed since delivery of the first aft fuselage last May,"
said Doty. "As we invest in this program for production rate
readiness, we will continue to closely monitor our program performance
and cash flow."
The delays previously announced by Boeing are not expected at this
time to have a material impact on our working capital requirements. In
addition, our negotiations with Boeing regarding contractual matters
are ongoing. We believe that our current cash flows from operations
and amounts available under our revolving credit facility will be
sufficient to meet our current contractual requirements for at least
the next twelve months. However, we expect to need additional funding
from the customer or other third party sources to participate in
future derivatives of the 787 or other customer requested contract
modifications.
Non-GAAP Measure Disclosure
EBITDA, Adjusted EBITDA and Free Cash Flow (indicated by the
number(1)) as presented in this press release are supplemental
measures of performance and our ability to satisfy our debt covenants.
None of these measures is required by, or presented in accordance
with, Generally Accepted Accounting Principles (GAAP) in the United
States. EBITDA, Adjusted EBITDA and Free Cash Flow are not
measurements of our financial performance under GAAP and should not be
considered as alternatives to net income, operating income or any
other performance measures derived in accordance with GAAP or as
alternatives to cash flow from operating activities as measures of our
liquidity. The senior secured credit agreement signed in December 2004
contains maintenance ratios and other financial covenants that are
based on the calculation of Adjusted EBITDA. We believe it is
necessary to present Adjusted EBITDA to enable investors to assess the
strength of our underlying business. Reconciliation between these
measures and GAAP is presented at the end of this press release.
Conference Call Details
Vought Aircraft Industries, Inc. will host a conference call on
Thursday, March 13 at 2 p.m. Eastern time (1 p.m. Central time) to
discuss its fourth quarter results. To access the conference call,
dial (888) 679-8040 (United States) or (617) 213-4851 (International)
with passcode 90078004. Please call 10 minutes prior to the start
time.
If you cannot listen to the conference call at its scheduled time,
there will be a replay available through March 28, which can be
accessed by dialing (888)-286-8010 (United States) or (617)-801-6888
(International) with passcode 48413071.
Vought's conference call will be supplemented by a series of
slides appearing on the company's Web site. Listeners are encouraged
to view these materials in conjunction with the call. The presentation
will be posted on the home page of the Web site on the morning of the
call.
About Vought
Vought Aircraft Industries, Inc. (www.voughtaircraft.com) is one
of the world's largest independent suppliers of aerostructures.
Headquartered in Dallas, the company designs and manufactures major
airframe structures such as wings, fuselage subassemblies, empennages,
nacelles and other components for prime manufacturers of aircraft.
Vought has annual revenue of approximately $1.6 billion and about
6,500 employees in nine U.S. locations.
Disclaimer on Forward Looking Statements
This release contains forward-looking statements within the
meaning of section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements involve known and unknown risks and uncertainties. Vought's
actual financial results could differ materially from those
anticipated due to the company's dependence on conditions in the
airline industry, the level of new commercial aircraft orders,
production rates for commercial and military aircraft, the level of
defense spending, competitive pricing pressures, manufacturing
inefficiencies, start-up costs and possible overruns on new contracts,
technology and product development risks and uncertainties,
availability of materials and components from suppliers and other
factors beyond the company's control. Additional risk factors are
described in the company's filings with the SEC.
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Vought Aircraft Industries, Inc.
Consolidated Balance Sheets
($ in millions, except per share amounts)
December 31,
2007 December 31,
(unaudited) 2006
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 75.6 $ 93.4
Trade and other receivables 81.4 82.1
Inventories 362.8 337.8
Other current assets 6.4 7.3
------------ ------------
Total current assets 526.2 520.6
Property, plant and equipment, net 507.0 530.4
Goodwill 527.7 527.7
Identifiable intangible assets, net 40.1 64.9
Investment in joint venture 11.5 -
Debt origination costs, net and other
assets 8.4 15.1
------------ ------------
Total assets $ 1,620.9 $ 1,658.7
============ ============
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable, trade $ 178.7 $ 118.4
Accrued and other liabilities 74.1 72.0
Accrued payroll and employee benefits 48.2 45.0
Accrued post-retirement benefits-current 47.2 51.3
Accrued pension-current 0.7 25.6
Current portion of long-term bank debt 4.0 4.0
Capital lease obligation - 1.3
Accrued contract liabilities 230.4 333.7
------------ ------------
Total current liabilities 583.3 651.3
Long-term liabilities:
Accrued post-retirement benefits 482.0 478.8
Accrued pension 361.2 352.0
Long-term bank debt, net of current
portion 409.0 413.0
Long-term bond debt 270.0 270.0
Other non-current liabilities 181.2 186.9
------------ ------------
Total liabilities 2,286.7 2,352.0
Stockholders' equity (deficit):
Common stock, par value $.01 per share;
50,000,000 shares authorized,
24,768,991 and 24,755,248 issued and
outstanding at December 31, 2007 and
December 31, 2006, respectively 0.3 0.3
Additional paid-in capital 417.4 414.8
Shares held in rabbi trust (1.6) (1.6)
Stockholders' loans - (1.0)
Accumulated deficit (595.0) (641.3)
Accumulated other comprehensive loss (486.9) (464.5)
------------ ------------
Total stockholders' equity (deficit) $ (665.8) $ (693.3)
------------ ------------
Total liabilities and stockholders' equity
(deficit) $ 1,620.9 $ 1,658.7
============ ============
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Vought Aircraft Industries, Inc.
Consolidated Statements of Operations
($ in millions)
(unaudited)
For the Three Months
Ended For the Year Ended
------------------------- -------------------------
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenue $ 394.9 $ 417.6 $ 1,625.5 $ 1,550.9
Costs and expenses
Cost of sales 297.8 334.6 1,269.3 1,274.2
Selling,
general and
administrative
expenses 78.2 70.9 246.7 236.0
Impairment
charge - 0.9 - 9.0
------------ ------------ ------------ ------------
Total costs
and
expenses 376.0 406.4 1,516.0 1,519.2
------------ ------------ ------------ ------------
Operating income 18.9 11.2 109.5 31.7
Other income
(expense)
Interest income 0.5 0.3 3.6 1.4
Other loss - (0.4) (0.1) (0.5)
Equity in loss
of joint
venture (1.6) (2.0) (4.0) (6.7)
Interest
expense (15.3) (17.3) (62.6) (64.5)
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 2.5 (8.2) 46.4 (38.6)
Income tax expense
(benefit) (0.6) (1.9) 0.1 (1.9)
------------ ------------ ------------ ------------
Net income (loss) $ 3.1 $ (6.3) $ 46.3 $ (36.7)
============ ============ ============ ============
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Vought Aircraft Industries, Inc.
Consolidated Statements of Cash Flows
($ in millions)
Year Ended
-------------------------
December 31,
2007 December 31,
(Unaudited) 2006
------------ ------------
Operating activities
Net income (loss) $ 46.3 $ (36.7)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 63.7 59.4
Impairment charge - 9.0
Non-cash stock compensation expense 5.2 3.0
Equity in losses of joint venture 4.0 6.7
Loss from asset sales 1.9 1.7
Changes in current assets and liabilities:
Trade and other receivables 0.7 8.7
Inventories (25.0) 2.3
Other current assets 0.9 0.5
Accounts payable, trade 60.3 (4.5)
Accrued payroll and employee benefits 0.8 7.2
Accrued and other liabilities (26.9) (8.0)
Accrued contract liabilities (103.3) 117.7
Other assets and liabilities--long-term 5.6 5.8
------------ ------------
Net cash provided by operating activities 34.2 172.8
Investing activities
Capital expenditures (57.4) (115.4)
Proceeds from sale of assets 24.3 12.7
Investment in joint venture (16.5) -
------------ ------------
Net cash used in investing activities (49.6) (102.7)
Financing activities
Proceeds from short-term bank debt 20.0 225.0
Payments on short-term bank debt (20.0) (225.0)
Payments on long-term bank debt (4.0) (4.0)
Payments on capital leases (1.3) (0.7)
Proceeds from sale of common stock - 0.4
Proceeds from repayment of stockholder
loans 0.8 0.1
Proceeds from governmental grants 2.1 17.4
------------ ------------
Net cash provided by (used in) financing
activities (2.4) 13.2
Net increase (decrease) in cash and cash
equivalents (17.8) 83.3
Cash and cash equivalents at beginning of
period 93.4 10.1
------------ ------------
Cash and cash equivalents at end of period $ 75.6 $ 93.4
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Vought Aircraft Industries Inc.
Supplemental Financial Data
($ in millions)
(Unaudited)
Three Months Year
Ended Ended
---------------------------- --------------------------
December December December December
31, 31, 31, 31,
2007 2006 Change 2007 2006 Change
--------- --------- -------- --------- -------- -------
Revenue as
Reported:
Commercial $ 185.4 $ 174.1 $ 11.3 794.5 $ 699.3 $ 95.2
Military 131.5 167.8 (36.3) 530.0 560.9 (30.9)
Business jets 78.0 75.7 2.3 301.0 290.7 10.3
--------- --------- -------- --------- -------- -------
Total $ 394.9 $ 417.6 $ (22.7) $1,625.5 $1,550.9 $ 74.6
========= ========= ======== ========= ======== =======
Settlements
Commercial $ - $ - $ - $ - $ 70.0 $(70.0)
Military - - - - -
Business jets - - - - 29.0 (29.0)
--------- --------- -------- --------- -------- -------
Total $ - $ - $ - $ - $ 99.0 $(99.0)
========= ========= ======== ========= ======== =======
Revenue (Excluding 2006
Settlements)
Commercial $ 185.4 $ 174.1 $ 11.3 $ 794.5 $ 629.3 $165.2
Military 131.5 167.8 (36.3) 530.0 560.9 (30.9)
Business jets 78.0 75.7 2.3 301.0 261.7 39.3
--------- --------- -------- --------- -------- -------
Total $ 394.9 $ 417.6 $ (22.7) $1,625.5 $1,451.9 $173.6
========= ========= ======== ========= ======== =======
Three Months Year
Ended Ended
------------------- ------------------
December December December December
31, 31, 31, 31,
2007 2006 2007 2006
--------- --------- -------- ---------
% Mix for Revenue
(Excluding 2006
Settlements)
Commercial 46% 42% 49% 43%
Military 33% 40% 33% 39%
Business jets 21% 18% 18% 18%
--------- --------- -------- ---------
Total 100% 100% 100% 100%
========= ========= ======== =========
Year
Ended
----------------------------
December December
31, 31,
2007 2006 Change
--------- --------- --------
Revenue
Backlog
Commercial $2,073.0 $2,152.0 $ (79.0)
Military 713.0 575.6 137.4
Business jets 608.9 563.4 45.5
--------- --------- --------
Total
revenue
backlog $3,394.9 $3,291.0 $ 103.9
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Vought Aircraft Industries, Inc.
Reconciliation of Non-GAAP Measures
In addition to disclosing results that are determined in
accordance with U.S. generally accepted accounting principles (GAAP),
we also disclose non-GAAP results that exclude certain significant
charges or credits that are important to an understanding of the
company's ongoing operations. We provide reconciliations of these
non-GAAP measures to the most comparable GAAP reporting. We believe
that discussion of these non-GAAP measures excluding certain
significant charges or credits provides additional insights into
underlying business performance. EBITDA, Adjusted EBITDA and Free Cash
Flow are not measures recognized under GAAP. The determination of
significant charges or credits may not be comparable to similarly
titled measures used by other companies and may vary from quarter to
quarter.
We also believe that the inclusion of Adjusted EBITDA and Free
Cash Flow is appropriate to provide additional information to
investors because these non-GAAP financial measures are used by
securities analysts, bondholders, and other investors as important
measures of assessing:
-- our operating performance across periods on a consistent
basis;
-- our ongoing ability to meet our obligations and manage our
levels of indebtedness; and
-- our liquidity and covenant compliance to evaluate the relative
risk of an investment in our securities.
Because not all companies use identical calculations, the
presentation of Adjusted EBITDA and Free Cash Flow may not be
comparable to other similarly titled measures of other companies.
Adjusted EBITDA and Free Cash Flow have limitations as analytical
tools and such measures should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP. Some of
the limitations of these non-GAAP financial measures are:
-- they do not reflect our cash expenditures, or future
requirements, for all contractual commitments;
-- they do not reflect our significant interest expense, or the
cash requirements necessary to service our indebtedness;
-- they do not reflect cash requirements for the payment of
income taxes when due;
-- Free Cash Flow does not represent residual cash flow available
for discretionary expenditures, because debt service
requirements and other non-discretionary expenditures are not
deducted;
-- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to
be replaced in the future and Adjusted EBITDA does not reflect
any cash requirements for such replacements; and
-- they do not reflect the impact of earnings or charges
resulting from matters we consider not to be indicative of our
ongoing operations but may nonetheless have a material impact
on our results of operations.
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Vought Aircraft Industries, Inc.
Reconciliation of Non-GAAP Measures
Adjusted EBITDA
(Unaudited)
($ in millions)
For the Three Months
Ended For the Year Ended
---------------------- ----------------------
December December December December
31, 31, 31, 31,
2007 2006 2007 2006
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities $ 50.6 $ 98.7 $ 34.2 $ 172.8
Interest expense,
net 14.8 17.0 59.0 63.1
Income tax expense
(benefit) (0.6) (1.9) 0.1 (1.9)
Stock compensation
expense (3.4) (3.0) (5.2) (3.0)
Equity in losses of
joint venture (1.6) (2.0) (4.0) (6.7)
Loss from asset
sales and other
losses (1.1) (2.4) (1.8) (11.4)
Debt amortization
costs (0.8) (0.3) (3.1) (3.1)
Changes in operating
assets and
liabilities (25.4) (83.1) 86.9 (129.7)
---------- ---------- ---------- ----------
EBITDA $ 32.5 $ 23.0 $ 166.1 $ 80.1
---------- ---------- ---------- ----------
Non-recurring
investment in
Boeing 787 25.9 30.2 95.9 90.1
Unusual charges -
Plant consolidation
& other non-
recurring program
costs 6.0 1.6 6.1 1.3
Loss on disposal of
property, plant and
equipment 1.2 1.7 1.9 10.7
Pension & OPEB
curtailment and
non-cash expense - (2.1) - (3.4)
Other 4.3 4.1 7.4 5.7
---------- ---------- ---------- ----------
Adjusted EBITDA $ 69.9 $ 58.5 $ 277.4 $ 184.5
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Vought Aircraft Industries, Inc.
Reconciliation of Non-GAAP Measures
Free Cash Flow
(Unaudited)
($ in millions)
For the Three Months
Ended For the Year Ended
---------------------- ----------------------
December December December December
31, 31, 31, 31,
2007 2006 2007 2006
---------- ---------- ---------- ----------
Cash flow provided by
(used in) operating
activities $ 50.6 $ 98.7 $ 34.2 $ 172.8
Less: Capital
expenditures (17.5) (23.5) (57.4) (115.4)
---------- ---------- ---------- ----------
Free Cash Flow $ 33.1 $ 75.2 $ (23.2) $ 57.4
========== ========== ========== ==========
2006 Settlements - - - (82.0)
---------- ---------- ---------- ----------
Free Cash Flow from
Ongoing Operations $ 33.1 $ 75.2 $ (23.2) $ (24.6)
========== ========== ========== ==========
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