Vought Reports Fourth Quarter, Year-End 2008 Financial Results

Business Wire, March 12, 2009

2008 Compared with 2007:

• Revenue increased 11 percent to $1,796.6 million
• Net Income increased by $47.4 million

DALLAS -- Vought Aircraft Industries, Inc.:

[Table Omitted]

Vought Aircraft Industries, Inc. today reported financial results for its fourth quarter and year ended Dec. 31, 2008, reflecting continued annual revenue and net income growth despite pressure from recent headwinds.

"Our 2008 results were tempered by several factors, the 787 program delay, the Boeing strike, the IAM strike at our Nashville facility and ongoing pension funding requirements. Even with these challenges, our operational improvements enabled us to show some steady progress for the year," said Vought President and Chief Executive Officer Elmer Doty. "As we move into 2009, we are ready to quickly adjust to changing conditions in our marketplace. Our balanced military and commercial portfolio will serve us well in these challenging times."

On Jan. 15, 2009 IAM-represented employees at the Nashville site ratified a new collective bargaining agreement ending the strike that began on Sept. 27, 2008. Although the company was able to use contract labor to continue production during the course of the strike, and achieved 98 percent of scheduled deliveries for the year, the strike resulted in a negative impact of approximately $38.3 million to operating results as discussed below.

Higher pension expense and funding requirements, driven by the reduction in the asset values of pension plans, also negatively impacted Vought’s earnings and cash flow for 2008.

Fourth Quarter Results

Revenue for the fourth quarter of 2008 was $413.2 million, an increase of $18.3 million or 5 percent, compared with revenue of $394.9 million for the same period last year. Growth was driven by increases in the company’s military business.

• Commercial revenue decreased by $17.0 million or 9 percent primarily due to fewer deliveries on Boeing programs as a result of the Boeing strike and completion of the 747-400 program.
• Military revenue increased $35.7 million or 27 percent, primarily due to favorable timing of C-17 and Global Hawk deliveries and higher deliveries for the V-22 program.
• Business jet revenue remained relatively flat during the period.

Vought recorded an operating loss for the fourth quarter of $14.4 million, a decline of $33.3 million from our operating income of $18.9 million last year. Program margins recorded during the quarter included $38.3 million of additional costs related to the strike at our Nashville facility as well as $17.3 million of impact related to higher projected future pension expenses applied to programs. These lower program margins were partially offset by a $20.6 million decrease in 787 period expenses during 2008 as the start-up phase of that program comes to an end.

The net loss for the fourth quarter of 2008 was $29.9 million, a decline of $33.0 million from last year’s fourth quarter net income of $3.1 million. This change was also the result of the operating income items discussed above.

Adjusted EBITDA1, as defined in the company’s senior credit agreement, was $58.7 million for the fourth quarter of 2008, compared with $69.9 million for the same period last year. The $11.2 million decrease is principally due to lower margins resulting from the higher projected future pension expenses.

Vought had negative $35.1 million of Free Cash Flow1 for the fourth quarter of 2008 compared with positive $33.1 million in 2007. The decrease of $68.2 million is primarily due to higher working capital requirements for the 787 program and the impact of the Nashville strike.

Cash expenditures for the 787 program, excluding customer advances, were $45.4 million for the fourth quarter of 2008. These expenditures include start-up costs, capital expenditures and working capital production costs.

Year-End Results

Revenue for the year ended Dec. 31, 2008 was $1,796.6 million, an increase of $171.1 million or 11 percent, compared with the same period last year.

• Commercial revenue increased $75.2 million, or 9 percent. Revenue for Boeing programs increased $59.1 million primarily due to increased non-recurring sales for the 747-8 program and initial deliveries on the 787 program. In addition, revenue for Airbus programs increased $16.1 million primarily due to higher deliveries.
• Military revenue increased $77.4 million, or 15 percent, primarily due to higher delivery rates on the H-60 and the V-22 programs.
• Business jet revenue increased $18.5 million, or 6 percent, primarily due to increased deliveries to Gulfstream and the initial non-recurring revenue on the Cessna Citation Columbus – Model 850 program.