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Vought Aircraft Industries, Inc.:
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Summary of Financial Results
$ in millions
Three Months Ended Nine Months Ended
-------------------------- ---------------------------
September September September September
30, 24, 30, 24,
2007 2006 Change 2007 2006 Change
--------- --------- ------ --------- --------- -------
Sales $ 422.3 $ 354.4 $ 67.9 $1,230.6 $1,133.3 $ 97.3
Operating income
(loss) $ 14.3 $ 3.5 $ 10.8 $ 90.6 $ 20.5 $ 70.1
Net income
(loss) $ (2.1) $ (13.4) $ 11.3 $ 43.2 $ (30.4) $ 73.6
Adjusted
EBITDA (a) $ 49.9 $ 35.0 $ 14.9 $ 207.5 $ 126.0 $ 81.5
Free Cash Flow
(a) $ (27.0) $ (42.3) $ 15.3 $ (56.3) $ (17.8) $(38.5)
(a) Non-GAAP measure. A complete definition and reconciliation of non-
GAAP measures, identified with an asterisk, is provided later in the
release.
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Vought Aircraft Industries, Inc. today reported financial results
for its third quarter ending Sept. 30, 2007.
Third Quarter Results
Net sales for the three months ended Sept. 30, 2007 were $422.3
million, an increase of $67.9 million or 19 percent, compared with net
sales of $354.4 million for the same period last year.
-- Commercial net sales increased by $49.0 million or 31 percent,
due to increased deliveries and price adjustments, driven by
wide-body aircraft demand for both Boeing and Airbus.
-- Military net sales increased $8.6 million or 6 percent,
primarily due to $16.5 million of increased sales on the C-17
and H-60 programs partially offset by a decrease of $9.1
million relating to the C-5 program.
-- Business jet net sales increased by approximately $10.3
million or 16 percent primarily due to increased deliveries
and price adjustments.
Funded backlog increased 7 percent to $3.4 billion at the end of
the quarter compared to $3.2 billion for the same period last year,
primarily due to increased orders for the 787 program. Vought's
calculation of backlog includes only funded orders, which causes
backlog to be substantially lower than the estimated aggregate dollar
value of our contracts.
Operating income for the third quarter 2007 was $14.3 million, an
increase of $10.8 million compared to the same period last year. Net
loss for the third quarter 2007 was $2.1 million, compared to a loss
of $13.4 million for the same period last year. These improvements are
due to improved margins for many of the company's programs resulting
from cost reduction initiatives, operational improvements, increased
prices and higher delivery rates. These improvements were partially
offset by a loss recorded during the quarter for the H-60 program and
continued investment in the 787 program.
Adjusted EBITDA*, as defined in the company's senior secured
credit agreement, was $49.9 million for the third quarter of 2007,
compared to $35.0 million for the same period last year. The $14.9
million increase is due to both higher sales and improved program
margins as discussed above.
Free Cash Flow* was negative $27.0 million for the third quarter
of 2007 compared to negative $42.3 million in 2006. The improvement of
$15.3 million is primarily due to operational improvements and lower
capital expenditures. Total expenditures for the 787 program were $70
million for the quarter.
"We continue to see improvement in execution through our
operational excellence initiatives. Since embarking on this path in
2006, company wide we have seen a 35 percent reduction in quality
defect rate, a 28 percent increase in inventory turnover, and most
importantly a 38 percent reduction in occupational injury rate," said
Vought's President and Chief Executive Officer Elmer Doty. "We
continue to focus on operational excellence, and through a
concentrated effort we are now seeing signs of improvement that appear
sustainable across all of our major programs with only the H-60
program still needing significant attention."
Nine Months Ended Results
Net sales for the nine months ended Sept. 30, 2007 were $1,230.6
million, an increase of $97.3 million or 9 percent, compared with net
sales of $1,133.3 million for the same period last year. Excluding
$99.5 million of customer settlements recorded in the second quarter
of 2006, net sales increased $196.8 million or 19 percent.
-- Commercial net sales increased by $83.9 million or 16 percent,
primarily due to increased sales resulting from both increased
deliveries and price adjustments. Excluding the second quarter
2006 settlements of $70.5 million, commercial sales increased
$154.4 million or 34 percent.
-- Military net sales increased $5.4 million or 1 percent,
primarily due to sales increases of $56.9 million for the H-60
and C-17 programs. These increases were due to increased H-60
program deliveries and timing of deliveries for the C-17
program, partially offset by a decrease of $49.9 million of
non-recurring sales for the C-5 and Global Hawk programs
recognized during the nine months ended Sept. 24, 2006.
-- Business jet net sales increased by approximately $8.0 million
or 4 percent primarily due to increased deliveries and price
adjustments. Excluding the second quarter 2006 settlements of
$29.0 million, business jet sales increased $37.0 million or
20 percent.
Net income for the first nine months of 2007 was $43.2 million,
compared to a net loss of $30.4 million for the same period last year.
This increase of $73.6 million was primarily due to higher sales and
improved program margins resulting from cost reduction efforts,
operational improvements, price increases and higher delivery rates.
Adjusted EBITDA*, as defined in the company's senior secured
credit agreement, was $207.5 million for the first nine months of
2007, compared to $126.0 million for the same period last year. The
increase of $81.5 million is the result of both higher sales and
improved program margins as described above.
Free Cash Flow* was negative $56.3 million for the first nine
months of 2007, a decrease of $38.5 million from last year, primarily
due to customer settlements recorded in the second quarter of 2006.
Excluding the 2006 customer settlements, Free Cash Flow* in 2007
increased $50.0 million primarily due to operational improvements and
lower capital expenditures, partially offset by continued investment
in the 787 program and pension funding. For the nine months ended
Sept. 30, 2007, net cash expenditures for the 787 program were $180
million including start-up, capital and production costs offset by
advances and settlements.
787 Program Update
"Vought's major focus remains the successful startup of the 787
program, and we continue to make progress. At this point, all capital
process equipment is functioning properly and as expected. Our current
priorities involve completion of the numerous structural components
that are part of our final subassembly, and reducing the amount of
traveled work to our customer," said Doty. "We continue to monitor
cash flow as we invest in the start-up of this program."
Non-GAAP Measure Disclosure
EBITDA, Adjusted EBITDA and Free Cash Flow (indicated by an
asterisk *) 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
Friday, Nov. 9 at 2 p.m. Eastern time (1 p.m. Central time) to discuss
its third quarter results. To access the conference call, dial
(866)-271-0675 (United States) or (617)-213-8892 (International) with
passcode 70592672. 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 Nov. 16, which can be
accessed by dialing (888)-286-8010 (United States) or (617)-801-6888
(International) with passcode 42655496.
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 sales of approximately $1.6 billion and about 6,000
employees in nine U.S. locations.
Disclaimer on Forward-Looking Statements
This release contains forward-looking statements within the
meaning of section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements involve known and unknown risks and uncertainties. Vought's
actual financial results could differ materially from those
anticipated due to the company's dependence on conditions in the
airline industry, the level of new commercial aircraft orders,
production rates for commercial and military aircraft, the level of
defense spending, competitive pricing pressures, manufacturing
inefficiencies, start-up costs and possible overruns on new contracts,
technology and product development risks and uncertainties,
availability of materials and components from suppliers and other
factors beyond the company's control. Additional risk factors are
described in the company's filings with the SEC.
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Vought Aircraft Industries, Inc.
Consolidated Balance Sheets
($ in millions, except per share amounts)
September 30, December 31,
2007 2006
(unaudited)
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 39.9 $ 93.4
Accounts receivable 125.6 82.1
Inventories 332.9 337.8
Other current assets 6.6 7.3
------------- ------------
Total current assets 505.0 520.6
Property, plant and equipment, net 505.5 530.4
Goodwill 527.7 527.7
Identifiable intangible assets, net 58.0 64.9
Investment in joint venture 10.0 -
Debt origination costs, net and other
assets 12.5 15.1
------------- ------------
Total assets $ 1,618.7 $ 1,658.7
============= ============
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable, trade $ 115.6 $ 118.4
Accrued and other liabilities 65.8 76.2
Accrued payroll and employee benefits 33.3 40.8
Accrued post-retirement benefits-current 48.0 51.3
Accrued pension-current 94.3 25.6
Current portion of long-term bank debt 4.0 4.0
Capital lease obligation 0.5 1.3
Accrued contract liabilities 296.1 333.7
------------- ------------
Total current liabilities 657.6 651.3
Long-term liabilities:
Accrued post-retirement benefits 471.5 478.8
Accrued pension 268.0 352.0
Long-term bank debt, net of current
portion 410.0 413.0
Long-term bond debt 270.0 270.0
Other non-current liabilities 183.5 186.9
------------- ------------
Total liabilities 2,260.6 2,352.0
Stockholders' equity (deficit):
Common stock, par value $.01 per share;
50,000,000 shares authorized, 24,776,578
and 24,755,248 issued and outstanding at
September 30, 2007 and December 31,
2006, respectively 0.3 0.3
Additional paid-in capital 416.6 414.8
Shares held in rabbi trust (1.6) (1.6)
Stockholders' loans (1.0) (1.0)
Accumulated deficit (598.1) (641.3)
Accumulated other comprehensive loss (458.1) (464.5)
------------- ------------
Total stockholders' equity (deficit) $ (641.9) $ (693.3)
------------- ------------
Total liabilities and stockholders' equity
(deficit) $ 1,618.7 $ 1,658.7
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Vought Aircraft Industries, Inc.
Consolidated Statements of Operations
($ in millions)
(unaudited)
For the Three For the Nine Months
Months Ended Ended
------------------- -------------------
September September September September
30, 24, 30, 24,
2007 2006 2007 2006
--------- --------- --------- ---------
Net sales $ 422.3 $ 354.4 $1,230.6 $1,133.3
Costs and expenses
Cost of sales 353.2 294.6 971.5 939.6
Selling, general and
administrative expenses 54.8 56.7 168.5 165.1
Impairment charge - (0.4) - 8.1
--------- --------- --------- ---------
Total costs and expenses 408.0 350.9 1,140.0 1,112.8
--------- --------- --------- ---------
Operating income 14.3 3.5 90.6 20.5
Other income (expense)
Interest income 0.9 0.6 3.1 1.1
Other income (loss) - - (0.1) (0.1)
Equity in earnings (loss) of
joint venture (1.7) (1.5) (2.4) (4.7)
Interest expense (15.7) (16.0) (47.3) (47.2)
--------- --------- --------- ---------
Income (loss) before income
taxes (2.2) (13.4) 43.9 (30.4)
Income taxes 0.1 - (0.7) -
--------- --------- --------- ---------
Net income (loss) $ (2.1) $ (13.4) $ 43.2 $ (30.4)
========= ========= ========= =========
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Vought Aircraft Industries, Inc.
Consolidated Statements of Cash Flows
($ in millions) (Unaudited)
Nine Months Ended
-------------------
September September
30, 24,
2007 2006
--------- ---------
Operating activities
Net income (loss) $ 43.2 $ (30.4)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 47.8 44.2
Impairment charge - 8.1
Non-cash stock compensation (income) expense 1.8 -
Equity in losses of joint venture 2.4 4.7
Loss from asset sales 0.7 0.9
Changes in current assets and liabilities:
Accounts receivable (43.5) (5.9)
Inventories, net of advances and progress
billings 4.9 (49.7)
Other current assets 0.7 0.3
Accounts payable, trade (2.8) (2.4)
Accrued payroll and employee benefits (7.5) (4.6)
Accrued and other liabilities 54.9 19.1
Accrued contract liabilities (37.6) 96.1
Other assets and liabilities--long-term (81.4) (6.3)
--------- ---------
Net cash provided by (used in) operating
activities (16.4) 74.1
Investing activities
Capital expenditures (39.9) (91.9)
Proceeds from sale of assets 23.1 0.3
Investment in joint venture (16.5) -
--------- ---------
Net cash provided by (used in) investing
activities (33.3) (91.6)
Financing activities
Proceeds from short-term bank debt - 155.0
Payments on short-term bank debt - (155.0)
Payments on long-term bank debt (3.0) (2.0)
Payments on capital leases (0.8) (0.6)
Proceeds from sale of common stock - 0.4
Proceeds from repayment of stockholder loans - 0.1
Proceeds from governmental grants - 17.4
--------- ---------
Net cash provided by (used in) financing
activities (3.8) 15.3
Net increase (decrease) in cash and cash
equivalents (53.5) (2.2)
Cash and cash equivalents at beginning of period 93.4 10.1
--------- ---------
Cash and cash equivalents at end of period $ 39.9 $ 7.9
========= =========
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Vought Aircraft Industries Inc.
Supplemental Financial Data
($ in millions)
(Unaudited)
Three Months Nine Months
Ended Ended
----------------------------- ---------------------------
September September September September
30, 24, 30, 24,
2007 2006 Change 2007 2006 Change
--------- --------- --------- --------- --------- -------
Sales as
Reported:
Commercial $ 205.1 $ 156.1 $ 49.0 $ 609.1 $ 525.2 $ 83.9
Military 142.2 133.6 8.6 398.5 393.1 5.4
Business jets 75.0 64.7 10.3 223.0 215.0 8.0
--------- --------- --------- --------- --------- -------
Total $ 422.3 $ 354.4 $ 67.9 $1,230.6 $ 1,133.3 $ 97.3
========= ========= ========= ========= ========= =======
2006
Settlements
Commercial $ - $ - $ - $ - $ 70.5 $(70.5)
Military - - - -
Business jets - - - - 29.0 (29.0)
--------- --------- --------- --------- --------- -------
Total $ - $ - $ - $ - $ 99.5 $(99.5)
========= ========= ========= ========= ========= =======
Sales
(Excluding
2006
Settlements)
Commercial $ 205.1 $ 156.1 $ 49.0 $ 609.1 $ 454.7 $154.4
Military 142.2 133.6 8.6 398.5 393.1 5.4
Business jets 75.0 64.7 10.3 223.0 186.0 37.0
--------- --------- --------- --------- --------- -------
Total $ 422.3 $ 354.4 $ 67.9 $1,230.6 $ 1,033.8 $196.8
========= ========= ========= ========= ========= =======
Three Months Nine Months
Ended Ended
------------------- -------------------
September September September September
30, 24, 30, 24,
2007 2006 2007 2006
--------- --------- --------- ---------
% Mix for
Sales
(Excluding
2006
Settlements)
Commercial 48% 44% 50% 44%
Military 34% 38% 32% 38%
Business jets 18% 18% 18% 18%
--------- --------- --------- ---------
Total 100% 100% 100% 100%
========= ========= ========= =========
Nine Months
Ended
-----------------------------
September September
30, 24,
2007 2006 Change
--------- --------- ---------
Sales Backlog
Commercial $2,139.2 $1,982.0 $ 157.2
Military 549.4 613.7 (64.3)
Business jets 685.1 569.0 116.1
--------- --------- ---------
Total
sales
backlog $3,373.7 $3,164.7 $ 209.0
========= ========= =========
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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 For the Nine Months
Months Ended Ended
------------------- -------------------
September September September September
30, 24, 30, 24,
2007 2006 2007 2006
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities $ (18.1) $ (25.4) $ (16.4) $ 74.1
Interest expense, net 14.8 15.4 44.2 46.1
Income tax (0.1) - 0.7 -
Stock compensation expense (0.1) - (1.8) -
Equity in losses of joint
venture (1.7) (1.5) (2.4) (4.7)
Loss from asset sales (0.1) (0.2) (0.7) (9.0)
Debt amortization costs (0.9) (0.8) (2.3) (2.3)
Changes in operating assets
and liabilities 35.3 28.7 112.3 (46.6)
--------- --------- --------- ---------
EBITDA 29.1 16.2 133.6 57.6
Non-recurring investment in
Boeing 787 (a) 20.3 21.1 70.0 59.9
Unusual charges - Plant
consolidation & other non-
recurring program costs (b) - 1.3 0.1 (0.3)
Loss on disposal of
property, plant and
equipment (c) 0.1 0.2 0.7 9.0
Pension & OPEB curtailment
and non-cash expense (d) - (3.8) - (1.3)
Other (e) 0.4 - 3.1 1.1
--------- --------- --------- ---------
Adjusted EBITDA $ 49.9 $ 35.0 $ 207.5 $ 126.0
========= ========= ========= =========
Vought Aircraft Industries, Inc.
Reconciliation of Non-GAAP Measures
Free Cash Flow
(Unaudited)
($ in millions)
For the Three For the Nine Months
Months Ended Ended
------------------- -------------------
September September September September
30, 24, 30, 24,
2007 2006 2007 2006
--------- --------- --------- ---------
Cash flow provided by (used
in) operating activities $ (18.1) $ (25.4) $ (16.4) $ 74.1
Less: Capital expenditures (8.9) (16.9) (39.9) (91.9)
--------- --------- --------- ---------
Free Cash Flow $ (27.0) $ (42.3) $ (56.3) $ (17.8)
========= ========= ========= =========
2006 Settlements - - - (88.5)
--------- --------- --------- ---------
Free Cash Flow from Ongoing
Operations $ (27.0) $ (42.3) $ (56.3) $ (106.3)
========= ========= ========= =========
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