Spirit AeroSystems Announces Strong Second Quarter 2017 Operating Results; Signs MOU for Long-Term Agreement with Boeing to Settle Open Issues; Increases Share Repurchase Authorization up to $1 Billio

WICHITA, Kan., Aug. 2, 2017

Table 1.  Summary Financial Results (unaudited)
	2nd Quarter			Six Months
($ in millions, except per share data) ARIVA.DE Börsen-Geflüster Kurse Spirit Aerosystems 31,80 $ +0,82%	2017	2016	Change	2017	2016	Change
Revenues	$1,826	$1,830	0%	$3,520	$3,512	0%
Operating (Loss) Income	($83)	$83	(199%)	$131	$350	(63%)
Operating (Loss) Income as a % of Revenues	(4.5%)	4.6%	(910) BPS	3.7%	10.0%	(630) BPS
Net (Loss) Income	($57)	$45	(227%)	$85	$216	(61%)
Net (Loss) Income as a % of Revenues	(3.1%)	2.4%	(550) BPS	2.4%	6.2%	(380) BPS
Earnings Per Share (Fully Diluted)	($0.48)	$0.35	(237%)	$0.71	$1.65	(57%)
Adjusted Earnings Per Share (Fully Diluted)*	$1.57	$1.21	30%	$2.76	$2.51	10%
Fully Diluted Weighted Avg Share Count	118.2	129.3		119.8	130.9

"We delivered a record 424 shipsets compared to 408 shipsets in the same period last year, primarily driven by the ramp-up in production rates on the 737, the A320, and the A350 programs; our supply chain cost reduction initiatives are gaining traction; and we are finally fully-recovered in Kinston and back to our normal mode of sea transportation, following Hurricane Matthew last October," Spirit President and CEO Tom Gentile said. 

"In addition, Spirit recently made several announcements regarding the growth of our global fabrication business. We announced the creation of a new five-axis fabrication center of excellence and the expansion of our chemical processing capabilities on our Wichita, Kansas, campus. We also announced the creation of a new three- and four-axis fabrication center of excellence in McAlester, Oklahoma, and the expansion of our manufacturing facilities in Malaysia," Gentile added. "All of these initiatives solidify Spirit as a world leader in the fabrication of detailed parts for the commercial and military aerospace industry."

"Importantly, we are pleased to announce the exciting news that we have reached an agreement with our largest customer, Boeing, into 2022 on open commercial issues related to a range of programs, including the 737 MAX and the 787. We have signed an MOU reflecting our agreement and will now be working on formal amendments to the program agreements," Gentile said. "Overall, by addressing a range of programs and not just 787 pricing, the MOU reduces much uncertainty that has long existed in the relationship with our largest customer and preserves our ability to meet our long-term cash flow goals," Gentile said. 

The MOU requires that the parties negotiate and execute Definitive Documentation, as defined in the MOU, in the third quarter of 2017. Spirit management believes the agreement will be completed and executed in the third quarter; however, there can be no assurance that Definitive Documentation will ultimately be executed and that Spirit's dispute with Boeing will be resolved pursuant to the MOU.

"One of the biggest challenges in our discussions with Boeing has been 787 pricing. As part of this new MOU with Boeing, we are extending the block from 1003 units to 1300 units and establishing a planning block through line unit 1405. Although the 787 contract had agreed price step-downs for the 787-8, we had never agreed with Boeing on pricing for the 787-9 and -10. We have now agreed on modified step-down pricing for the 787-9 and -10 through line unit 1405. As a result of the MOU, we have recognized a reach-forward loss of $353 million on the 787 program," Gentile remarked. "The agreement also includes a commitment from both organizations to work together on joint cost reduction efforts with financial incentives for both parties," Gentile added.

"In addition to addressing open commercial issues, Spirit has also agreed with Boeing that we will jointly study advanced aerostructures and manufacturing processes," Gentile said.

Revenue

Spirit's second quarter 2017 revenue was $1.8 billion, consistent with the same period of 2016, primarily driven by higher production deliveries on the Boeing 737 and Airbus A350 XWB programs, offset by lower production deliveries on the Boeing 777 program and decreased Global Customer Support & Services (GCS&S) activity. (Table 1)

Spirit's backlog at the end of the second quarter of 2017 was approximately $46 billion, with work packages on all commercial platforms in the Boeing and Airbus backlog.

Earnings

Operating income for the second quarter of 2017 was $(82.8) million, down compared to $83.3 million in the same period of 2016, reflecting the impact of the MOU with Boeing, partially offset by increased sales on higher-profit programs and the reversal of a litigation reserve, as well as the absence of the charges recognized during the second quarter of 2016 associated with the Airbus settlement. Second quarter reported EPS was $(0.48), or $1.57* per share adjusted to exclude the impact of the MOU with Boeing, compared to $0.35 EPS (or $1.21* adjusted) in the same period of 2016. (Table 1)

"Given the strong performance in the first half of 2017, we are raising our full-year adjusted earnings per share* guidance by $0.40 to a new range of $5.00 - $5.25 per share from the previous guidance range of $4.60 - $4.85," Gentile said.

Cash

Free cash flow* in the second quarter of 2017 was $175 million, up 9 percent compared to free cash flow of $161 million in the same quarter last year. (Table 2)

"Additionally, we are raising our free cash flow* guidance to $500-$550 from the previous range of $450-$500," Gentile added.

Cash balance at the end of the quarter was $697 million. The company's $650 million revolving credit facility remained undrawn at the end of the quarter.

"In the second quarter, we repurchased 2.2 million shares for $126 million. Year-to-date we have deployed a total of $208 million and repurchased 3.6 million shares under the existing authorization of up to $600 million," Gentile concluded. "The Board has authorized an increase in our share repurchase program of $400 million, resulting in a total program authorization of $1 billion. With the shares repurchased in the first half of 2017, we have approximately $800 million of this authorization remaining."

Table 2.  Cash Flow and Liquidity (unaudited)
	2nd Quarter		Six Months
($ in millions)	2017	2016	2017	2016
Cash from Operations	$222	$215	$334	$309
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