Backlog Continues To Grow As Well. Boisture Says 2011 Is "Encouraging"

Hawker Beechcraft Acquisition Company delivered 66 aircraft in the first quarter of 2011 versus 50 in the first quarter of 2010. In addition, the Company ended the first quarter of 2011 with a $122 million higher backlog than 2010 year-end backlog. “We are coming off of a solid 2010 and our momentum into 2011 is encouraging,” said Bill Boisture, HBC Chairman and CEO. “While the first quarter is historically a quieter one for the industry, we believe the uptick in our aircraft shipments and increased backlog is evidence of the ongoing demand for our products.”

Bill Boisture

The Company reported net sales for the three months ended March 31, 2011, of $558.4 million, a modest decrease of $9.8 million compared to the same period of 2010. Additional information is provided in the Business Segment Summary section below. During the three months ended March 31, 2011, the Company recorded an operating loss of $37.9 million, an increased loss of $12.8 million compared to $25.1 million during the same period of 2010. Additional information is provided in the Business Segment Summary section below. On March 31, 2011, the Company’s cash and cash equivalents balance was $310.7 million as compared to $422.8 million on Dec. 31, 2010. The decrease was partially due to negative operating cash flow from changes in advance payment balances, cash payments made under performance incentive plans, and increases in inventory. In addition, during the first quarter of 2011, the Company made a debt principal prepayment of approximately $45 million as a result of excess cash flow generated in 2010 as required by the Company’s credit agreement.  The Company’s backlog as of March 31, 2011, was $122 million higher than at year-end 2010. Backlog was $1.5 billion on March 31, 2011, as compared to $1.4 billion on Dec. 31, 2010, with new orders of $714 million exceeding cancellations of $33 million. Approximately 45 percent of the backlog on March 31, 2011, represented orders that are not expected to be delivered in the next 12 months.

Aircraft deliveries in the Business and General Aviation (B&GA) segment were up versus the first quarter of 2010 with 45 deliveries in the first quarter 2011 versus 34 deliveries in the same period of 2010. The B&GA segment reported sales of $286.2 million in the first quarter 2011, which was a decrease of $48.9 million versus the first quarter 2010 sales of $335.1 million. The revenue decrease was attributed to the delivery of a higher percentage of lower priced aircraft in the first quarter 2011 versus the same period of 2010. In addition, revenues from the sale of used aircraft received as trade-ins were lower by $20.7 million, which was due to the Company’s continued low inventory of pre-owned aircraft.

“We continue to experience significant losses in our B&GA segment,” Boisture said. “This was driven in large part by loss making aircraft charges, higher sales and marketing expenses related to our international expansion, expenses associated with our cost reduction initiatives, and continuing weakness in the general aviation market. Due to strong sales in the fourth quarter of 2010, we started the year with fewer jets in inventory, which in turn led to four fewer jet deliveries compared to the first quarter of last year. However, we delivered 15 more Beechcraft aircraft versus last year – including several special mission aircraft – which speaks to the market recognizing the inherent attributes of Beechcraft products’ efficiency and utility, especially in a down market.”

Deliveries in the Trainer/Attack Aircraft segment were up versus the first quarter 2010 with 21 deliveries in the first quarter 2011 versus 16 deliveries in the same period of 2010. The Trainer/Attack Aircraft segment reported sales of $176.6 million in the first quarter 2011, which was an increase of $34.2 million versus the first quarter 2010 sales of $142.4 million. The increase in revenue was primarily due to increased volume on international trainer contracts. "Our Trainer/Attack segment remains solid for the Company,” Boisture said. “We are working hard to keep this strong position with our Government Business team aggressively pursuing opportunities around the globe. We had a good showing of our T-6C in Australia earlier this year, where we’ve teamed with Raytheon Australia and BAE Systems Australia to meet requirements for Australia’s pilot training system. “We look for this segment to be further diversified in the near future with the addition of our AT-6 Light Attack aircraft, which continues to exhibit superior performance in a variety of operating and weapons assessments. The U.S. Air Force (USAF) is expected to competitively award a Light Air Support contract within the next several months. We continue to believe the AT-6 will integrate nicely into existing fielded operational platforms and be well suited for the missions of the 21st Century USAF.”

In an effort to be more in line with global growth markets, the Company continues to right-size its business footprint and broaden its supply base, including the recent opening of its newest facility in Chihuahua, Mexico. In the area of product development, testing of the new Hawker 200 is meeting or exceeding all of its performance targets. Further, the Company received $10 million in January, as a result of its agreement with the State of Kansas, to develop new products and enhance existing aircraft. Finally, approximately 250 employees are benefitting from the Company’s tuition reimbursement program that is also being funded by the State as a result of this agreement.

“There are many positive things going on at HBC beyond our increased shipments and backlog this quarter,” Boisture said. “We continue to transform our business and are making great strides in becoming a smaller, more agile Company. Our people are benefiting from new education and training programs and we are aggressively hiring in key areas of the business like Engineering and Marketing. While 2011 will continue to present challenges as we work our way through what remains to be a soft market, we are confident that we are making sound business decisions and have a unique, diversified product mix.”

FMI: www.hawkerbeechcraft.com