By Alwyn Scott
Aug 12 Spirit AeroSystems Holdings Inc,
a key supplier of aircraft components to Boeing, Airbus and
other plane makers, said its earnings swung to a loss in the
latest quarter due to $448 million in cost overruns on several
aircraft wing programs.
The big earnings surprise was flagged last week, when the
company warned it would take a pretax charge of $350 million to
$400 million and confirmed it was putting its troubled
wing-construction facilities in Oklahoma up for sale.
Spirit shares rose 96 cents to $25.60 in after-hours trading
following the news, but closed down 1.2 percent at $24.64 in
regulator trading in New York.
The latest hit comes on top of $590 million in cost-overrun
charges last October, bringing total writedowns in the past year
to more than $1 billion.
The company still faces questions about its ability to make
a profit from its Airbus A350 contract to make the center
fuselage section and major wing parts for the latest Airbus jet.
Since most of Spirit's development programs have had
significantly higher costs than expected, the A350 "is still the
shoe that has to drop," said Peter Arment, an aerospace analyst
at Sterne Agee brokerage firm in New York.
Analysts said the Oklahoma sale would remove the cost
overhang that has hammered earnings, including the charges that
hit results last year. But Spirit's employees might not accept a
change in the business and the Oklahoma unit could be difficult
to sell at a decent price.
"Things are moving in the right direction, but it's early,"
said Carter Copeland, an aerospace analyst at Barclays in New
Spirit was spun off from Boeing Co in 2005 and had
been mainly a so-called build-to-print operation, meaning its
engineering design work ability was limited, according to
industry sources. When it bid for contracts for additional work
to diversify away from dependence on Boeing, it underestimated
the cost of jobs and the engineering required by customers who
wanted "design and build" service.
On Monday the company posted a loss of $209.4 million, or
$1.47 a diluted share, compared with a profit of $34.9 million,
or 24 cents a share, a year earlier. Analysts had expected a
profit of 51 cents a share, according to Thomson Reuters
I/B/E/S. The company said revenue rose 13 percent to $1.52
The $448 million charge, which amounted to $2.61 a share,
relates to wing development work at the company's facilities in
Oklahoma and included work for General Dynamics Corp
Gulfstream business jets and Boeing 787s, 747 and 767s.
The company also produces components for Airbus,
Bombardier Inc and Mitsubishi Heavy Industries Ltd
The company also said its bankers had suspended loan
covenants to meet certain financial ratios until the end of next
year because of the charges. The covenants also were suspended
after the charge last October. The company said it had not
defaulted on its loans.