Vought Reports Third Quarter 2008 Financial Results

Business Wire, Nov 10, 2008

Highlights of Third Quarter 2008 Compared to Third Quarter 2007:

* Revenue increased 13 percent to $477.3 million

* Operating income increased by $16.0 million

* Net Income increased by $17.7 million

DALLAS -- Vought Aircraft Industries, Inc.:

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Vought Aircraft Industries, Inc. today reported financial results for its third quarter 2008 reflecting continued revenue and operating income growth. These improvements reflect operational changes Vought has made that have helped the company continue to perform well in a challenging environment. During the quarter, Vought continued to see strong top-line growth from new programs and is currently implementing additional operational changes to address the impact of the IAM (International Association of Machinists and Aerospace Workers) labor strikes at its Nashville site and at the recently resolved strike at Boeing.

"Our employees have worked hard to build a culture that can drive continuous improvements in operating performance. This quarter's results indicate that these efforts are succeeding, even in this challenging business environment," said Vought President and Chief Executive Officer Elmer Doty. "We will see some impact to our fourth quarter results, due to the labor strikes, but the impacts are manageable."

Third Quarter Results

Revenue for the three months ended Sept. 28, 2008 was $477.3 million, an increase of $55.0 million or 13 percent, compared with revenue of $422.3 million for the same period last year. Growth was driven by increases across all categories - commercial, military and business jets.

* Commercial revenue increased by $43.6 million or 21 percent primarily due to increased non-recurring revenue for the 747-8 program.

* Military revenue increased $2.6 million or 2 percent, primarily due to higher delivery rates on the H-60 program.

* Business jet revenue increased $8.8 million or 12 percent largely due to increased deliveries on Gulfstream products.

Funded backlog increased 15 percent to $3.9 billion at Sept. 28, 2008 principally due to increased orders on the 787 and H-60 programs, as well as the non-recurring start-up and development activities for the Boeing 747-8 and the Cessna Citation Columbus 850 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 the backlogs of others in the industry.

Operating income for the third quarter was $30.3 million, an increase of $16.0 million over last year. The improved operating income includes higher military program margins of $28.5 million resulting from the absence of losses on H-60 recorded during 2007 and a $14.3 million decrease in 787 period expenses. These improvements were partially offset by lower commercial program margins of $21.5 million resulting from the absence of favorable contract changes recorded in 2007.

Net income for the three months ended Sept. 28, 2008 was $15.6 million, an improvement of $17.7 million over last year. A $1.6 million gain on asset sales combined with the increase in operating income mentioned above led to the increase in net income.

Adjusted EBITDA1, as defined in the company's senior secured credit agreement, was $54.9 million for the third quarter of 2008, compared with $49.9 million for the same period last year. The $5.0 million increase is principally due to the changes in commercial and military program margins discussed above.

Vought had negative $118.2 million of Free Cash Flow1 for the third quarter of 2008 compared with negative $27.0 million in 2007. The decrease of $91.2 million is primarily due to planned ongoing working capital requirements for the 787 program, timing of customer receipts and higher pension funding requirements. Cash expenditures for the 787 program, excluding customer advances, were $67 million for the third quarter of 2008, including start-up costs, capital expenditures and working capital production costs.

With respect to certain of its Commercial programs, Vought has implemented a number of operational changes to slow production levels in response to the recently resolved Boeing IAM strike including reducing overtime, redeploying employees, and eliminating the use of outside contractors. These changes will remain in place into the first quarter of 2009 based on the current anticipated delivery schedule to Boeing. Production levels will likely increase in the future when Boeing increases its production rates. Vought's goal is to mitigate the impacts on its operating results as well as its employees while still continuing to support customer requirements.

At its North Charleston facility, in response to the Boeing IAM strike and Boeing 787 delays, Vought has implemented a temporary shutdown of the bond fabrication operation and expects to extend the temporary shutdown to the production assembly areas. The length of the temporary shutdown will be determined by the length of additional delays in the 787 production schedule from Boeing.