WICHITA, Kan., Feb. 12 /PRNewswire/ -- Hawker Beechcraft Acquisition Company, LLC (HBAC) reported net sales of $3.5 billion and operating income of $135.5 million for the 12 months ending Dec. 31, 2008.
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2008 net sales were significantly impacted by the four-week strike by the International Association of Machinists (IAM) in August. The strike disrupted manufacturing and assembly operations, which significantly reduced aircraft deliveries for the remainder of the year. During 2008, the Company delivered 441 business and general aviation aircraft, consisting of 160 business jet, 178 turboprop and 103 piston aircraft. Additional detail regarding 2008 aircraft deliveries is included in the Appendix. The strike also impacted sales volume in the Trainer Aircraft segment as discussed further in Segment Results.
Operating income for the year was also impacted by the reduced deliveries as a result of the strike. The strike resulted in lower Business and General Aviation segment aircraft deliveries and reduced production in the Trainer Aircraft segment, impacting overall operating income. Also included in 2008 results were charges of $91.1 million associated with increased costs to conform specific early-production Hawker 4000 units to the final type design and establish more normal production processes.
The Company recorded a net after-tax loss for the year of $139.9 million. The loss included the impact of a non-cash increase in tax expense of $108.7 million as a result of a valuation reserve recorded against the U.S. federal deferred tax assets in compliance with the prescribed GAAP accounting treatment for deferred tax assets.
Operating cash flow consumed during the 12 months ending Dec. 31, 2008, was $69.0 million and was significantly impacted by an increase in inventory associated with the reduced deliveries as a result of the strike and delays in deliveries of the Hawker 4000. The timing of the Hawker 4000 deliveries was impacted by certain product enhancements incorporated in the aircraft type design late in 2008 as well as others to be incorporated in 2009.
On Dec. 31, 2008, the Company had $377.6 million in cash and cash equivalents. In addition, its available revolving credit facility was undrawn. The Company believes that its cash on hand, anticipated cash from operations and, if required, borrowings under the revolving credit facility will be sufficient to meet its cash requirements through 2009.
Net bookings for the year were $4.8 billion and year end backlog was $7.6 billion. As the general economic environment has deteriorated, new order activity has declined and order cancellations have increased. The Company does not believe 2009 new bookings will reach recent year levels and anticipates declining backlog in 2009.
In response to weakness in the global economy and anticipated reduced aircraft production rates, the Company reduced its workforce by approximately 500 workers in November 2008 and, in early 2009, announced another 2,300 reductions to be completed by the end of the year. These reductions will decrease operating costs in 2009; however, the impact on the Company's 2008 results was not significant.
Segment Results
Business and General Aviation Aircraft
The Business and General Aviation segment recorded sales of $2,820.6 million and operating income of $24.7 million during 2008. In addition to the impact of the strike and the Hawker 4000 charges, segment results were also impacted by a $13.7 million charge recorded in the fourth quarter of 2008 to reduce the carrying value of used aircraft to current market value.
Trainer Aircraft
Sales in the Trainer Aircraft segment are principally comprised of revenue on the Joint Primary Aircraft Training System (JPATS) contract. The segment recorded sales of $338.2 million and operating income of $28.2 million during 2008. The segment's operating results were adversely impacted by reduced production as a result of the strike and by the June 2008 suspension of deliveries on the JPATS contract pending resolution of quality issues with a supplier's component. The quality issue was resolved and deliveries resumed in January 2009.
Customer Support
The Customer Support segment recorded sales of $522.8 million and operating income of $82.5 million during 2008. The segment was impacted by strategic pricing initiatives and improved cost productivity in both the spare parts and aircraft services operations.
The Appendix also includes the presentation of Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), a non-GAAP measure the Company believes is useful in evaluating the ability of issuers of "high-yield" securities to meet their debt service obligations. This measure is not intended as a substitute for results reported under GAAP and has been reconciled to the closest GAAP measure, Income Before Tax, in the Appendix.
The Company intends to file its 2008 Annual Report on Form 10-K with the Securities and Exchange Commission on or about Feb. 25, 2009. At that time, the Form 10-K will be available on the Company's Web site at www.hawkerbeechcraft.com.
Earnings Conference Call:
HBAC's earnings results conference call for the year ending Dec. 31, 2008, will be held Tuesday, March 3, 2009, at 9 a.m. CDT. To attend, register at https://cossprereg.btci.com/prereg/key.process?key=P4VXYTCNP. Once you register, you will be provided with dial-in numbers and pass codes needed to join the conference call. A recording of the earnings call will be posted to the Company's Web site on the afternoon of March 3, 2009, and will be available for 45 days.
Hawker Beechcraft Corporation is a world-leading manufacturer of business, special mission and trainer aircraft -- designing, marketing and supporting aviation products and services for businesses, governments and individuals worldwide. The company's headquarters and major facilities are located in Wichita, Kan., with operations in Salina, Kan.; Little Rock, Ark.; Chester, England, U.K.; and Chihuahua, Mexico. The company leads the industry with the largest number of factory-owned service centers and a global network of more than 100 factory-owned and authorized service centers. For more information, visit www.hawkerbeechcraft.com.
This release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including statements that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on management's assumptions and assessments in light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results may differ significantly from those envisaged by our forward-looking statements. Among the factors that could cause actual results to differ materially from those described or implied in the forward-looking statements are general business and economic conditions, production delays resulting from lack of regulatory certifications and other factors, competition in our existing and future markets, lack of market acceptance of our products and services, the substantial leverage and debt service resulting from our indebtedness, loss or retirement of key executives and other risks disclosed in our filings with the Securities and Exchange Commission.
Appendix
Hawker Beechcraft Acquisition Company, LLC
Consolidated Statements of Operations (Unaudited)
(In millions)
Successor Predecessor
Year Nine Months Three Months Year
Ended Ended Ended Ended
December 31, December 31, March 25, December 31,
2008 2007 2007 2006
Sales $3,546.5 $2,793.4 $670.8 $3,095.4
Cost of sales 3,021.7 2,369.6 558.6 2,585.1
Gross profit 524.8 423.8 112.2 510.3
Selling, general
and administrative
expenses 279.1 205.4 59.5 211.0
Research and
development
expenses 110.2 70.1 21.3 83.2
Operating income 135.5 148.3 31.4 216.1
Intercompany interest
expense, net - - 15.8 91.6
Interest expense 205.9 158.6 - 1.1
Interest income (8.5) (6.3) (0.9) (15.7)
Other income, net (2.4) 1.0 (0.1) (1.5)
Non-operating
expense, net 195.0 153.3 14.8 75.5
Income (loss)
before taxes (59.5) (5.0) 16.6 140.6
Provision for
(benefit from)
income taxes 80.4 (5.8) 6.4 50.5
Net income (loss) $(139.9) $0.8 $10.2 $90.1
Hawker Beechcraft Acquisition Company, LLC
Consolidated Statements of Financial Position (Unaudited)
(In millions)
December 31, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $377.6 $569.5
Accounts and notes receivable, net 103.0 80.3
Unbilled revenue 35.9 24.1
Inventories, net 1,782.3 1,289.3
Current deferred income tax asset 43.2 47.9
Prepaid expenses and other current assets 32.5 60.5
Total current assets 2,374.5 2,071.6
Property, plant and equipment, net 641.8 655.7
Goodwill 599.6 716.0
Intangible assets, net 1,049.5 1,118.2
Non-current deferred income tax asset 91.6 -
Other assets, net 65.4 113.7
Total assets $4,822.4 $4,675.2
Liabilities and Equity
Current liabilities
Notes payable and current portion of
long-term debt $126.6 $69.6
Advance payments and billings in excess
of costs incurred 507.4 541.2
Accounts payable 404.3 323.6
Accrued salaries and wages 56.6 60.5
Current deferred income tax liability 72.4 -
Accrued interest payable 25.9 25.4
Other accrued expenses 280.3 168.7
Total current liabilities 1,473.5 1,189.0
Long-term debt 2,364.2 2,377.3
Accrued retiree benefits and other long-term
liabilities 450.9 103.0
Non-current deferred income tax liability 84.1 1.5
Total liabilities 4,372.7 3,670.8
Paid-in capital 996.8 989.2
Accumulated other comprehensive income (loss) (408.0) 14.4
Retained earnings (deficit) (139.1) 0.8
Total equity 449.7 1,004.4
Total liabilities and equity $4,822.4 $4,675.2
Hawker Beechcraft Acquisition Company, LLC
Consolidated Statements of Cash Flow (Unaudited)
(In millions)
Successor Predecessor
Year Nine Months Three Months Year
Ended Ended Ended Ended
December 31, December 31, March 25, December 31,
2008 2007 2007 2006
Cash flows from
operating activities:
Net income (loss) $(139.9) $0.8 $10.2 $90.1
Adjustments to
reconcile net
income (loss)
to net cash
provided by
(used in)
operating
activities:
Depreciation 85.6 60.5 18.6 75.3
Amortization
of intangible
assets 73.3 54.7 3.3 12.8
Amortization
of debt
issuance costs 9.6 7.2 - -
Amortization
of deferred
compensation 4.0 6.6 - -
Stock-based
compensation 7.6 12.5 1.2 5.3
Current and
deferred
income taxes 79.0 (6.0) (10.3) 8.5
Gain on sale
of property,
plant and
equipment 0.9 - - (0.3)
Changes in assets
and liabilities:
Accounts
receivable, net (23.1) 10.1 8.6 38.1
Unbilled revenue,
advanced
payments and
billings in
excess of
costs incurred (45.6) 205.4 (81.0) 100.2
Inventories, net (280.0) 131.4 (87.9) (150.2)
Prepaid
expenses and
other current
assets 7.5 (7.6) 33.2 (10.0)
Accounts payable 80.7 (25.1) (6.7) 86.4
Accrued salaries
and wages (3.9) 26.2 0.3 (9.4)
Other accrued
expenses 117.4 31.3 (15.9) (27.7)
Pension and
other changes,
net (34.9) 31.9 3.5 (16.7)
Income taxes
paid (7.6) (1.1) - -
Sale of
financing
receivables - - - 102.2
Origination of
financing
receivables - - (20.6) (210.5)
Collection of
financing
receivables
not sold 0.4 40.4 36.2 275.6
Net cash
provided by
(used in)
operating
activities (69.0) 579.2 (107.3) 369.7
Cash flows
from investing
activities:
Expenditures
for property,
plant and
equipment (70.2) (61.3) (26.2) (46.1)
Additions to
computer
software (4.7) (5.1) (1.1) (1.7)
Proceeds from
sale of fuel
and line
operations, net 123.6 - - -
Proceeds from
sale of property,
plant and
equipment 1.4 0.1 0.8
Proceeds from
sale of product
line - 2.5
Acquisition of
business, net
of cash
acquired - (3,216.5) - -
Net cash
provided by
(used in)
investing
activities 50.1 (3,280.3) (27.3) (47.0)
Cash flows from
financing
activities:
Payment of
notes payable (157.3) (24.4) - -
Payment of
term loan (13.0) (9.7) - -
Equity
contributions - 976.7 - -
Issuance of
long-term debt - 2,400.0 - -
Debt issuance
costs - (72.0) - -
Net transfers
from Raytheon - - 117.4 (323.8)
Net cash
provided by
(used in)
financing
activities (170.3) 3,270.6 117.4 (323.8)
Effect of
exchange rates
on cash and cash
equivalents (2.7) - - 1.3
Net increase
(decrease) in
cash and cash
equivalents (191.9) 569.5 (17.2) 0.2
Cash and cash
equivalents at
beginning of
period 569.5 - 25.9 25.7
Cash and cash
equivalents at
end of period $377.6 $569.5 $8.7 $25.9
Hawker Beechcraft Acquisition Company, LLC
Segment Results (Unaudited)
(In millions)
Successor Predecessor
Year Nine Months Three Months Year
Ended Ended Ended Ended
December 31, December 31, March 25, December 31,
Sales 2008 2007 2007 2006
Business and
General Aviation $2,820.6 $2,211.9 $490.6 $2,246.6
Trainer Aircraft 338.2 266.0 91.2 420.0
Customer Support 522.8 418.8 116.4 551.4
Eliminations (135.1) (103.3) (27.4) (122.6)
Total $3,546.5 $2,793.4 $670.8 $3,095.4
Operating Income
Business and
General Aviation $24.7 $85.6 $8.9 $134.9
Trainer Aircraft 28.2 14.1 12.2 52.0
Customer Support 82.5 46.0 9.6 30.6
Eliminations 0.1 2.6 0.7 (1.4)
Total $135.5 $148.3 $31.4 $216.1
Hawker Beechcraft Acquisition Company, LLC
Aircraft Delivery Units
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
Hawker 4000 3 - 6 -
Hawker 900XP 17 24 50 32
Hawker 800/850XP 4 5 15 35
Hawker 750 8 - 23 -
Hawker 400XP 16 14 35 41
Premier 8 22 31 54
King Airs 66 55 78 157
Pistons 32 30 103 111
Business & General
Aviation Total 154 150 441 430
T-6 - - 36 25
Total Deliveries 154 150 477 455
Hawker Beechcraft Acquisition Company, LLC
Adjusted Earnings Before Interest, Tax, Depreciation and Amortization
(EBITDA)
Trailing Four Quarters For The Period Ended
December 31, 2008
(In millions)
Trailing December 31, September 28, June 29, March 30,
12 Months 2008 2008 2008 2008
Income (loss)
before income
taxes $(59.5) $(17.9) $(31.6) $39.3 $(49.3)
Interest
expense, net 197.4 54.9 48.0 $46.9 $47.6
Operating income
adjustments:
Depreciation and
amortization,
including as a
result of
purchase
accounting 158.9 41.1 39.7 39.4 38.7
EBITDA $296.8 $78.1 $56.1 $125.6 $37.0
Adjustments to
EBITDA:
Transition
expenses to
establish
services
previously
performed by
Raytheon Company 0.4 (0.1) - - 0.5
Exclude income
statement impact
of inventory
step-up
resulting from
purchase
accounting 11.4 2.3 0.8 3.7 4.6
Exclude loss
recognized on
derivative
instruments
no longer
expected to
be effective
hedges 19.4 19.4 - - -
Exclude
severance
costs recorded
during the
period 1.0 1.0 - - -
Exclude non-cash
stock-based
and deferred
compensation 9.6 1.7 (0.8) 3.8 4.9
Adjusted EBITDA $338.6 $102.4 $56.1 $133.1 $47.0
Adjusted EBITDA is a non-GAAP financial measure that is useful in
evaluating the ability of issuers of "high-yield" securities to meet
their debt service obligations. It is not intended as a substitute for
an evaluation of our results as reported under GAAP and is presented for
informational purposes only.
