Spirit AeroSystems (SPR) 31 Oct 182018 Q3 Earnings call transcript

Good morning ladies and gentlemen, and welcome to the Spirit AeroSystems Holdings, Incorporated Third Quarter 2018 Earnings Conference Call. My name is Rocco and I will be your coordinator today. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. to Investor presentation Relations. like Avey, to now of Director would turn over the Ryan I Please proceed.

and our and Spirit's Officer and earnings Avey Chief third you the ,Tom quarter and me Thank good questions. question Executive and outlook, Sanjay to XXXX call. morning. Gentile; take and Financial I'm your Vice Chief In Officer, President After and ask Spirit's to limit performance Welcome participate answer Spirit's to with that Executive today opening President Ryan we yourself question and our in comments segment, we to Sanjay regarding by please. everyone order Tom allow you will Kapoor. one

discussion are SEC filings Before earnings to projections at you we our goals any detailed release, I of to in the in that remind the need web involve risks, are end in today this likely in our which we statement forward-looking begin, our and or may include presentation.

you release over reminder, on you our use at today's addition, results. that, Chief website a in as to we like With In and Tom turn would slide And to broadcast our Officer, I discussing measures investor.spiritaero.com. for refer and disclosures can call reconciliation non-GAAP Gentile. earnings our we our of and the presentation presentation Executive follow to

Ryan, you, call. XXXX and earnings Thank good quarter morning Spirit's everyone. to third Welcome

makes a team. great different introduce to He from like at of his you fit number in as of Relations IR. this roles officially from I'd probably a which Investor with position. functions broad in brings started, for Ryan already the get of experience Spirit I Most previous Ryan Before working him our are a leader familiar new

already to new extending not. and he delighted does knows Ryan forward he meeting those with role are to and of of those he his you have you We his relationships looks in

third the quarter. to Turning

recovered consistency improve progress was to did. focus and Our supporting support on great to more In but very reasons. which quarter made customers schedule. during QX, during and for XXX our Boeing customers main continuing deliveries efficiency now did delivery We the we the we anticipated to fully deliveries good spend our than of improving our are

QX and avoiding reducing efficiencies, for expedited contractors the freight, reducing Our improving rest capacity. for of focus is and on now overtime, surge

Boeing on We requiring are out sequence day schedule no in shipping our expedited cost. freight fuselages XXX of factory and master every

customer. their manufacturing fuselage, dedication have scale, the We the rebuilt, We've so our proud of I a to high this of and are there improvement upgraded a to Boeing take hard recovering no the also shortages. work disruption significant we year, the small schedule to MAX all is the our for XXX environment team no system, NG risk thank in moment to want operational XXX transitioning accomplishment. rate I'm is like supplier seen from in of the teams. very Boeing performance while large

are handful or with to we source suppliers, dual disruptions. have we While most eliminate working work of still in-source a

two these routine labor traveled in factory a to targeted and for sight in to metrics over is key The our sequence cost down of QX XXXX. out us contract limits. Our and of levels work reduced and control line time provides with now with improvement balanced

importantly the second XX ramping Airbus the year increases preparing is Boeing which to including Boeing for main month Another AXXX, per year. next focus the of the across rate programs aircraft half and multiple has for XXX, been XXX,

supply ensure internally taking lessons year chain We in applying and transition. our smooth last and are a the to over learned them

per XX% productivity of of transition the month. hit the for early, ensure the aircraft Boeing receive employees per and the and higher training XX they ground on proper on-the-job these to brought of levels year. XXX, experience to next month we increased getting early we can when running employees required XX training aircraft have amount we already at By have in time Specifically for new employees on

transition other against we challenges MAX. of factor aircraft sourcing of to us the rate One we in due major With NG addition, protect dual have a aircraft this we shortages. Boeing In to this per execute experience increased our the is confident A XXX from which experienced any some Boeing preparation, with rate diligence the confidence in-sourcing are proactively break our to was the very of gives in year to XX suppliers, level producing our XX driver break to the MAX. parts the with XXX ability smooth month. or

XXX derivatives different flow work processes, tools our same in different. and XX% about lines While MAX down It both parts. instructions, different different Boeing the is different factory, the has

was curve our our And in in a so factory there learning chain. supply and

XX per lines Next balanced XX% will significantly at which to year, capacity. month, have increased each with about will built-in year. This year, also to production the program track shift to our per and will help MAX, We're system any on lead XXX so XXX Boeing aircraft achieve this production XX% next month producing to will over about balanced aircraft model on surge three mix per we efficiency. Also, versus month disruption. productivity XX minimize XX

Hurricane manner team the Kinston, but this disruption situation orderly through able in of couple days our then also Our an significant We the reopened down Airbus was is for AXXX plant a caused three manage it. to Carolina to well. and in fuselage Florence North region effectively. ago, months factory performing shut

minor some up in we air While experienced built we previous had to us the buffer allowed shipments. months any disruption, avoid

buffer the working recovering hurricane. now is from team depleted Our rebuild the which we to

avoid we freight and in to mitigate disruptions be able With the in place, air factory future. the major will buffer

to closing the Asco continue on work also acquisition. We

rest the any These it issues anticipate fit to we review, about very of remain Phase and will be strategic X deal. they European close the economics Commission the impact enthusiastic the transaction. of continue course operations. of We be we the the will addressed that not that our issues nor with During to Asco identified we regarding deal, confident do the involve divestitures, do of the the requires

creation quarter. development additional and some rapid a to for infusion next in and prototyping, Innovation on research processes automation, reality. complex open virtual composite Turning site of new the focus Scotland at accomplishments the assembly and materials, Prestwick, announced will augmented to year. efforts our We third

trademarked also forgings We we to die announced new raw proprietary method process, research call extrusions. on efforts which at titanium temperatures such Joule Spirit expensive commercialize shaping Forming. techniques replace for which elevated more a as material has this and can

manufactured Norsk Additionally, Boeing components program. for we with structural XXX the Titanium to are qualification working additive first of titanium Spirit's initiate

the proud These accomplishments capabilities in future very highlight partner were the the programs. Innovation priority printed important supplier year. part for Montréal. to Best-in-Class Spirit's an by Innovation and that from for annual receive and current Spirit. end week last for of make us We expect their unique honored to have is the the conference first Airbus Award XD choice We aerospace flying of excited, at

to is in initial first Finally, growing we important delivered the and our defense sixth unit. already program article, we've started portfolio, and Sikorsky. final rate low test This the system production an CH-XXK demonstration on

over acquisition of to for revenue we the third earnings impact the and an Turning compared Asco of debt share the XX% per financials, billion; quarter of or adjusted refinancing, increase $X.XX $X.X reported $X.XX $XXX third to you of the detailed flow I'll Sanjay? flow this and turn million. last the it to Operating year. financial through point, Sanjay cash quarter was million At $XXX adjusted of lead was results. free cash

two and you, kids. a though young Ryan. Tom, my stop Tom treating. on And a And to hard I has add the move welcome and Many time everyone. actually kids he's going Ryan's and this me along, plenty his of call trick young happy today, Thank or have know Ryan very take to father to to let right. of just All call Halloween Ryan. even own you

summarize for me as quarter as financials Let well our third our XXXX. outlook

billion, and of X. Boeing that, increased quarter please XXX. the by Boeing on for of X% the XXX on with a Revenue period in driven lower revenue same $X.X slide ASC XXXX, as program result offset turn primarily deliveries program up from the recognized So, Boeing of higher deliveries the the XXX to and activity, defense lower adoption the partially program by XXX the was

Boeing including Airbus AXXX XXXs; XXX we quarter, XXX XX XXXs; Boeing delivered XX the and shipsets. Airbus For shipsets, XX XXXs; AXXXs; XXX Boeing

Moving slide X. to

quarter Third quarter $X.XX to in third compared the $X.XX was XXXX. per of share adjusted earnings

driven legal This fees As all adjusted per was by reminder, related a a transaction costs, the the associated acquisition. derivative recovery and on in adjusted debt court excluded with decision. includes share excludes interest transaction, debt tax EPS of to a associated count primarily rate, with a lower share Asco lower instrument, recent also the and is all impact the costs The of financing costs. increase and the and earnings

ASC related of the improving had we we by our XXX in XXX in mentioned, the a the Airbus volume XXX program the XXX that are deliveries as on to recovery adoption increased offset are focused AXXX Boeing reduction and cost. schedule, program, on addition, on program, on increased program. now the costs Tom we But of production Boeing Boeing schedule In

program continued expect labor, on of expedited the declining we the and So fourth freight. cost of improvement in with levels XXX overtime elimination Boeing contract quarter and

claims to expect close in quarter. on the supplier and some also other fourth We

to $XXX agreement deliveries X. deliveries cash jointly is that pricing for last Asco by both further Now driven lower the turning million on cost was of agreement The payments. timing in I higher The these free Boeing the closure on on of is which of contract lower period items Spirit. and terms the time. currency XXX forward made efforts. Boeing this the reduction foreign offset cash into protect a $XXX resulted financing or a increased September by will we the that based the explain of risk-sharing and at Boeing the includes adjusted flow course XX, from flow. working cash the the of Boeing payment and XXX activities XXX, flow Spirit contract to year be the contract payment a to price taxes, made incentivizes subsequently exposure in offsetting XXX or same In Adjusting the to the quarter. rolled. approximately Boeing the the supplemental on currency And to affecting work the quarter. calculations value a free to XXXX associated Boeing Boeing currency an quarter entered free free slide on our couple contract excluded from fair was million on payment for a $XX the a annually risk-sharing to Asco. relation cash purchase payment contract program, reduce on by compared That on cash the fluctuations, price impacting Spirit on cash on forward results, companies either of initial capital, to want euro with price with to which based adjusted deal years, of by amount integration, certain adjusted settled Upon in impact cash of in advance purchase flow cash cost Based and which million to

the capital in Turning yearend conclude the to $XXX deployment next in second X, million. on total initiated quarter million repurchases XXXX will to $XXX ASR slide bringing by

With the acquisition shareholders free the but an years, towards return few coming we our the dividends deployment of with ASR returning to capital cash done remain any authorization are committed the flow conclusion past repurchase our repurchases component what and uses. consistent and balanced designated we XXX% capital and a $X deployment Asco, be approximately strategy, the to shareholders near-term, other share to board billion. have of our In strategic increased to of through absent over to will the important

program, that, was So, period quarter for revenue our primarily year, and performance look turn X% now segment million in $XXX let's at slide from the the on on slightly due let's of quarter. to margin basis, same Fuselage AXXX as after higher adoption ASC in $XXX the a in lower XX.X% margins X. in quarter, million, period to the the revenue in the partially to program, to the reversing XX% Operating the in deliveries estimate Boeing lower to and due for up was XXX XXX. offset impact, compared primarily the Airbus XX.X% change same second of third the last to work, adoption XXX Boeing by on by Fuselage increased margin Boeing improved On XX.X% higher partially ASC XXX offset year, XXX. compared due to on XXX the defense normalized last recognized segment the program quarter program, on due lower Boeing margin deliveries segment to

our improvement the margin further quarter expect in We we fourth the as efficiency improve production. of

was due quarter deliveries same period basis, a Propulsion program, the segment XXX X, segment On Now partially of lower XXX and in in million, to adoption ASC $XXX $XXX same reversing revenue turning XXX. to estimate program the the on this XX.X% higher period impact, segment year, last offset XX.X% the primarily normalized the changes in compared for on quarter. driven revenue to results. last Operating after by margin our XX.X% quarter program on estimates Boeing the Propulsion to Propulsion primarily million up Boeing due Slide in recognized in XX.X% the a unfavorable margin compared lower delivery was Boeing compared XXX the X% second change to for was the by in quarter. recognized to year,

XX.X% Operating higher same the Airbus on XX again segment Wing due to million due driven in adoption segment lower XXX. quarter revenue recognized last in AXXX reversing segment same period normalized for to For And adoption program. in primarily due deliveries lower $XXX the and compared on down margins last basis margin to impact, partially second ASC in slide $XXX by offset to margin slightly our ASC compared to million, XXX, change in the was to terms, the program on revenue for Airbus quarter XXX period to of recognized Airbus XX% our Wing AXXX a program results, the estimate AXXX the the Boeing X, year, due revenue by higher Boeing was the And from lastly, program the XX.X% quarter. the the was pricing slide to program after XXX guidance. on turning XX.X% turning Wing year, on

lower state Our $X.X be updated $XXX $X.X $XXX cash to to guidance to to for increased new transition third and billion effective tax on credits quarter tax, and tax billion, million, between rate was due R&D $X.XX Reform $X.XX, adjusted XXXX, facilities. revenue to to share be of be to XX%, free the a Wichita which higher Tax approximately the earnings adjusted to credits million associated flow per investments our between at during XXXX, related finalized tax

We have over on continuously performance program, factory two this year substantial supply Boeing last from cost the has XXX the but recovering improved disruptions quarters. incurred

continued health, but cost supply mentioned, continued those fourth XX fourth stability and and our So the high to a in key per factors. year. transition The focus have quarter for is alive on next on now reduction preparing aircrafts smooth we and quarter Tom factory month confidence chain as

modest However, in and contractors, rely to more efficient, on we month becoming leads which well supply holiday the lower reduced of settlements over as especially recoveries. as recognitions times,

costs a guidance with financing. debt derivative transaction acquisition the As and interest any cost, the our of impact reminder, including does of Asco include impact associated the instruments, expenses, all not

closing So with to some that me hand back let Tom it for comments.

intent challenging and our of customer new over year we year meeting Sanjay. the perspective, and but Thanks, freight We production a been for the transition has reasons. from to of XXXX we contractors process, course time, expedited we supplier rates items kept over deliveries good operations Throughout disruptions. and like expectations. on expected, recovered focus an as the higher from and on than spent models more

We partner committed are our trusted being absolutely to to a customers.

improve recovery continuing quality. we that efficiency programs, and of schedule working are fully our Now on productivity on also driving to to recovered we deliveries focus on while the improving margins, we all are

market. the commercial backlog to Our aerospace end at demand an by at growth. the grew billion commercial driven aerospace time quarter, to exciting It of Spirit be strong third the reflecting the $XX and is traffic in

and are content programs the to have We best fortunate aerospace. significant in

growth. will of With next your be take planning which top year, to diligently continued we bottom increases that, happy across rate will and programs questions. We drive many these are line for

Thank you.

the Today's We question-and-answer will first Jon ahead. from now of begin question session. Please go comes Raviv Citi.

and Hey good thanks taking for morning the question.

Good morning.

have rates think year? was can and I little a what think wondering whether normalized to and raising achieved idea like margin could you Sanjay, you're you the upon XQ improve next you of that to bit or extent looks would production speak or maintain that while Tom what you in if that a you approached more

always was operating our a margin we we've Well, had balanced and in what very that stable Right. were would we when line mode. production be thought a normalized

XXXX. one is about month four were of years. for at model, the really Things We aircraft Back we've that per margins about type were stable. So basis, a then been so and were XX producing then NG; XX% on back XX.X%. normalized

been then, the since some margin have related So normalized think that's of is ASC changes there to tax what revenue Obviously XXX, we kind recognition, and reform. overall.

the naturally they we as margins what so, were now And then. on about back be based should higher that think

in mentioned, Sanjay improve our overall As did QX. over segment margins QX

were see don't in come – we're modest freight. QX XXXX, have and some for overall, schedule. more on Overtime any We fourth improvement additional reducing the is quarter. to XX.X% So, expect back about we to and they expedited contractors. do We're improvement starting down

So the going those an see year. margin in into will next in improvement QX

would this with So, we probably disruptions headwinds into fact we won't at basis normalized across encountered next above next end of the the up reflecting year we XXX say to programs. that would end in as have different be year, the We of year going be range. year, XX% that, where the again margins be had points the that some we this about the it's we go

So to we are expecting improvement. see

QX to the had see next improvement be continued that into modest taking we and since some changes have balanced the going we improvement that in account into think going XXXX, of margins roughly QX were year line You'll we the then. with we when had in in building in that's on back occurred

material you what increases step-downs, reduction tariffs, and material and margins customer were prices our things discounts still. of this and Obviously, to keep very and as always to flat to about the trying as run meant back so industry, offset are to like, fast escalation new labor, programs where said we're well just and in Now, stand productivity and like that offset those price in gets efforts we've they to us cost productivity have to back in in all XXXX. flat

Thank you much. very

our Please And Seifman from JPMorgan. next Seth question go ahead. of comes

Thanks morning. and much good very

Good morning, Seth.

we're just of the small in for same but expectations our year. next of all that a kind page terms so Sanjay, question on

costs be think kind the should next as a year adjusted we talked that deal, be there'll Asco an that excludes accretive next basis thinking it I accounting number of you be announced being number adjusted about you an with and when about purchase accounting GAAP that. impacts. about some on Should thinking we associated year purchase as those or

question The Seth, some second us a challenge whether always not. that's good question. to has find of trying they there's adjusted about and been quarter things challenge should certain have been the been that or including describing, Yeah, the acquisition the that Again, the the the for to we we can on. what accretion the bring us. that's associated for timing And so include then with you're benefits table for so

that get the to you've still working seen closed it Obviously, of are is trying we in terms the as about here. obviously challenge are acquisition. Now, the possible, but we confident as quickly timing

to timing with are sure of provide as make confident this and that's making we Again, you are terms guidance happen, always will thing bit. We we why this acquisition. predict while we as much that I'm little in we hesitating XXXX, can a things difficult in these clarity give on associated when will

terms that this without us and so costs, be to agree our our next we see tried the and year including back whether have we of what will you measure some accretion can to and I have excluding on. do core on and tried transparent things we on or are we transaction core Asco, the go that some then including not, so very completely year of of with to in performance the of One

best in page, we deal, this guidance. be transparency discussion. you report have can you to to how time all the that to have same till have our make that we the be that you'll wait show and complete on So, of would conclude we But we goal and we sure unfortunately, so Seth, terms that provide that in truly

Got modeling more Got one it. maybe And it. Thanks. then that's oriented.

start terms aircraft I in you that pace could when to Just at month XX expect that last state, that from aircraft on so the XXXX, year, higher in of to production out? additional XX color aircraft when you to to think, XXX when started move up in is steady make and Boeing fourth there you your you and when of thinking of happened be a quarter a about any about rolls and XX move give

first couple start the a we the because the fuselages like our get more the with And year. of kind aircraft of then early the part businesses in months just start year, because of of And obviously we fabrication to ahead part little a Well, ahead. into of this year. That's again they're of the Boeing assembly deliveries Renton. of bit XX of the toward the middle to

Got very Thanks it. much.

next Morgan from Rajeev question Lalwani comes our of Stanley. go And Please ahead.

Hi. morning, morning, Sanjay. Good Tom. Good

Hey, Rajeev.

Rajeev. Good morning,

to some of in up. Tom, margins. there on that a that it to or Would the in made to margin would of say and of back to number of it get be have And or that segment ahead I maybe XX% going follow improve a this come see the be XX.X% to you year? to quarter the first comments year fair the you'll sort be want is quick half just of next you continue then back you

on the Right. got going opposed the because be will Don't that should in margins but see. the mentioned, later. over or QX, But be the I levels When the it to in yet, as actually XX.X% exact we're date year part that we've we some an carry as to the improve first up year have the we XXXX. to first in of go year. get into part as to to will into start and continue momentum we to those get it so, we of Well, will

Okay.

we'll up And to level. get that

one quick for you. then, Sanjay, And it, Got

agreement you Was I out throw the that? You material think is Boeing original guide? carrying sharing Shouldn't with about How forward? going any risk that the be that numbers. don't we talked XXX. in the

Yeah.

was, also best we will repeat only I terms headwind. secrete are costs So, is tried is to cash was than I better it. in both into cash including significant advances, everybody – contributes my into back is basis, there and that on that are some out we payment way prepared cost huge delta the goes that the cash or your are obviously was like are questions made this Boeing a tailwind; that the the the your was then in what describe price you're Rajeev, a all if but And reduce taxes well There negotiated was our Irrespective, to I to QX we big span explanation ideas goes But the XXX sides of there deltas comments that so from associated, towards baked There we there suddenly QX And how downs arrangement. in have there think obviously clear which the the ideas just pricing the less year agreement future. one-time a from reason sharing in had this if delta are explain sharing, risk it as again, there that's no repeat, describe step there's how there, and The up last in Boeing obviously a want in was third on of with thus Boeing didn't are walk to out year. taxes of cash in broken could, step-down that these, some quarter, the some sharing cost as cetera. guidance. out et goes I put and pieces and I depends moving if This made flow the quarter trying in of profile is many volume. not a risk-sharing but into step-down back price between in which everybody a while is win-win I XXX. both cash

this surprise us. not So a is for least at

both how the I give right. how wanted You're specifics it, step-down The was in much terms risk-sharing. they're can't you and of mention I reason same. the was to much approximately

the away price a in future. on thinking that the in way was don't So different step-down walk to significant carry

was part the it guidance. But of

was part absolutely. it guidance, the Yes of

and you on congrats, Thank Great. Ryan, new the role.

Thanks.

question And Kahyaoglu our Jefferies. from comes Please of Sheila ahead. next go

morning and thanks time. Hi, for the good

Sheila. Good morning,

it. And so not sparing appreciate us off, Sanjay,

In just a a aircrafts factor. Can you step a step that, the transition? how things maybe improve that like it up went to transition could be would step the if month. XX about month, in they mix seems of risks that you to big model up as just current And aircrafts XX you you terms talk up was other maybe are as than just biggest through different do are the that the mix you and what the

Right.

suppliers. the us little balance off us of really which say particularly and Well, of got I'd ahead of some supplier this tilted some getting the bit our mean biggest more, lessons disruptions. I the probably out with learned were created a disruptions

their doing basics that outside more put hiring, parts, and sourcing multi-sourcing. because to to lot so as sometimes that us training. more dual less learning needed hiring. second year, part system. how risk, them there's we also because to there's but is learning the looking We and the concentration as in that do we're we that we multi-source in we their went curve, they're it were also assessments source of into a capacity, capacity that, of but mitigate learning really are things And suppliers They there's assess the hiring manage dual parts XX and people there's next that increase the sometimes of risk aircrafts. the a readiness insource doing one A supply so of in of chain, thing sufficient the were confidence we we're the a that our is always overall their lot production And rate MAX, we to more of gives other can

we've now of we've so XX one the aircrafts in year for done the done is this way things And hiring that advance.

we're train going reduce what they'll those to to need efficient. XX our So, as we time also give they way, very into well. system that and contractors so familiar people XX the the our gives now MAX, us experience, that's XX% by more production complete to them with effective be go more aircrafts, for right we're about know and help they're But it as us going and aircrafts, to on-the-job produce much and how at

second that's So, the thing.

we're we've per day. And each I days two XX going the production have producing think that that's so of capacity, manufacturing balanced it going next one have lines month, per aircrafts comments capacity. to is But that is my surge I that third our mentioned year surge line. in in we're to three

does better. were something month at line that had What to two it XX aircrafts if able at wrong, about we So, a we and we're was which a we reproducing absorb lines producing bit aircrafts had XX at third when aircrafts. XX we're go is then little a

line, that factory. third And two a had of called that an so basically meant disruption lines lines in was and one-day what two-day imbalance. we the so the we was lots that We line had that

hire source experience. so advance disruption and on-the-job better that year, the we'll assessments; because are done three dual they readiness have then multi-source in trained we've lines, we have And and more. balanced finally, they it's we Next less supplier people

line. the So I will lot think the on all we confidence of give XX aircrafts next factors BoeingXXX a those go year us on as

Very helpful. Thanks, Tom.

ahead. go Rumohr from Cowen. question today's Please comes next And von of Cai

very Thank much. you

So a or that you the You recovery, the secondly, the was through third have kind you big did was of sharing, flow did And risk on XXX in Boeing for – that legal a reserve had that quarter? specify. didn't that? P&L how

Yeah.

me take Cai, So, let those.

yes, footnotes that quarter. associated with that's there to and settlement yeah, BoeingXXX guys Ryan program, arrangement, that be settlement about part balance is said, forward this messy legal in be it we it's million; in out through zero grow I in contract there's you provisions a the it's So closed Hartner whole of over the sheet, obviously of a (XX:XX:XX) $XX that think, right it's enough guidance. happened accrued think time. on really down the our like to liabilities the legal so it's our This doesn't because part that to happened through that think, But, will that's and this It The I if would also P&L. loss – I sharing go our I go is finally happy risk and to settlement, of and something the costs is areas, the disclosures. float the want program. There's – different the the the some where you leads now take have between that margin little

balance likely so them And add EACs. routine what take got sheet we baked we a our we into take are to and we he'd but do because to through and of approve be So that. you up, conclude the line on for yes happy it know to couple do it that's

it's so Cai, said, what Sanjay a it's deferred as and Yeah, year, year. by happened last based on

obviously So we all have that and... information

Right.

going ...well year. of to following it's be what for the advance in

Terrific.

done you and to to Just expect a it's quick get to divestitures? When the the that if one, issue Asco, related basically going not is to what you are do re-file. have

Right, countries, Bell would related to that looked set It's were this consortiums days in in it's to XXXXs Airbus. the they to only so what each each some the and old the established that of called Airbus so obviously very of the at. historic and deal they something of a when that's the in early Airbus these one back structures country entity structure asked that -- with have -- look us at up well in commission is

on constructively of Airbus at then Airbus relook Bell and entity, been going it working this the resubmit. topic, resolve we're with So, this structure and we've very to and

clearly, as to want too that at a get manner. to I don't long. said, be remain that Commission issues the confident we that understand in issues so we very we And So address we the deal expect timely we closed Rights. We once the do the can

you. Thank

go our comes Bernstein from question excuse today of Finbar me. Research, And next Sheehy Please ahead.

Hey, good morning.

Good morning.

deliveries. a sheet? provision in future? your the be you to something coming that the some the and that I assertions delays with make to looking Have is to assume we there that the out you XXX somewhere be on sequence look appears You balance can mentioned income statement, from accruing for forward Boeing that Boeing that would of will suppliers. and connection in been or in assertions similarly recoveries Does that

claim, Yeah. puts Well, have related typical of a very There's as we've takes with drivers been with so a these in expected, in complicated. very and they And Boeing the as discussions made to lot they things, disruptions. are what of terms are.

and So situations sorts the long-term broad encountered as we'll expect And we're We've usually going do, and them. relationship we through have that with resolve that to context with this we a that's Boeing. very these sort of before, with in how deep process situation deal them. evaluating of of of we

the provision So should it as nothing I there's in for reflects that take that result then? the

expediting all of our Remember, Finbar, at with FoV in we've big mean, transfer Wichita. deliveries, Boeing expediting how a that chunk costs. title Well, been we of obviously I

through costs been has and expect our and really all obviously incurred, we've et back recovery that obviously there costs And what terms that recovery, expediting claim, supply so others, and due come remember already. Boeing have after already. the that P&L had were Along of trying so the through talk about been the I to a that a out we've we ongoing, has there us them. with to are significant all to to have been in the of I sure the of some factory fact quite up cost in in and if suppliers, year, own us disruption claims P&L used related close that flown discussions make of and the flowing cetera, was we to our the mean of obviously are that a we And people, those and some in helped have about transparent Boeing if you lot earlier really talked all mechanics

expect have with you if closed or had to insurance And we'd remember several, remember close on our and we hurricane also more fourth related may some quarter. We the claims already carriers. in some then in

that that While about this good is of we're factories. improvements terms of make mentioned that that our used to of and will close feeling finalize, to happen on on that, I And we as we that we with in so along results in again operationally our just assure year we deliver well. we sure also some the expect not do map closing on activity that the

Okay. Thanks.

the from Peter comes today Baird. of go question next Arment Please ahead. our And

morning, Sanjay. Good Tom, yes. Oh,

Good morning.

morning. Good

Sanjay, than just settlement, flow a on because that clarification legal the seemed guess lower through I usual? in just the it SG&A

Peter. did. it Yes it Yes did. did, Yes it

Okay.

to Okay your you great. some or some pursuits there then Maybe going. how goal to that. guess a business. just defense ramp could us on that of of I defense update and Tom, had Appreciate you've And up continue just, the is

CH-KXX mentioned You the but other [CH-XXK] (sic) efforts.

over will This the $XXX year, it the to Right. it goal nice have, Well, $X it's this year. we million from to had as we billion about time. so year but it about $XXX million; went get year said growth And the that CH-XXK. is be we programs this last

We also named suppliers will the all the these future. on into grow get to production one development full in but are are early and in B-XX. Obviously, of of programs rate seven they continue stages

well. start defense as bid huge but also packages get our have small add existing been where to where on expand with work work small did our we a material doing success that relationships if scope the activity. or some up. contracts programs to Nothing that. some have lot to to And on we We're in fabrication have start can to we some tier-X We area yet continue we the to primes have see on will work

a So, to remains on coming we in to growth some of we're new on we're that for are, in programs addition looking very on, us It programs the defense. terms the the where progress of bid with and also up. existing priority are pleased

color. I appreciate Thanks. the

go Fargo. Wells today from next comes And question our ahead. Sam Pearlstein Please of

morning. Good

Sam. Good morning,

morning, Good Sam.

is back the to of presumed guess until is likely a follow Asco just I going this And it's and quarter year part it? way that sounds is question we should something same right be early the the running $X.XX closures about on wanted it think have next closes. this to to like I about up the that

the happens. we of are on I integration do expense on doesn't Asco so end one a be again, and charges take associated Yeah, that's an be the to But acquisition, it'd depends costs or to the the the mean, obviously that or fees to million this are the really thing Yeah, end related a lowers expense that of The to of every or that some yes, decide interest that and where ongoing, which bucks going the continue. And whether going how be obviously at we'll our it market Sam, into to and are either separate. we going question euro hedge really whatever sort legal there million are we this cost interest year, inside three diligence can't so costs year. the other of marking buy that back types least quarter probably predict is continue. change the with adjustment we the whether few keep Then and we an $XXX – obviously the disagree, the we at that's that or that exclusions two quarter. guidance at either or will earlier dollar baked have it that's next of something But, again second stage we'd agree the costs day. at the will is interest

the of fundamentally over, we the it's the are to that's me hard of for the are this costs interest one But, yeah, diligence that other cost predict. So, integration the stage, at refinancing for acquisition-related broadly kind and excluding the moment. it's that

very way costs resubmit issue commission, is and going process integration did it Phase investigation would would the it, has obviously a we which But X slowed into XX-day application, have we we elected X as more And a Rather into deliberate. longer through withdraw raised with Sam, we those go was go down which to what say, than been some that our of we've address the Phase and this a the process. probably then resubmit effort, a when timeline. we significant back and they I

year, the tight. end So of obviously, the to very through the going of it way to better situations. And as we a get all it's we think to was it different be manage do to

So process dialog the all having over as but through spill very that it, commission next in get year we're does we'll possible and we're just it's going of but closed. still deal and constructive with parties said, this terms it's we're into I the timing, the confident

up, been included were And just Thank magnitude these that in this update in outlook, when same guess have in at mid-September follow adjusted I that time? can point and with order earnings legal you the of adjustments if settlement I the you. cumulative

when into we that all the we made Yes, took account adjustments.

this Yeah, decision frankly legal legal Sam. I is mean a settlement, was quite that know, dated. you the as

was quite into were so and guidance. that baked recovery certain we about the our So

Thank you.

Research. next comes Copeland Melius ahead. from question our of Please Carter go And

Good morning, gentlemen.

Good morning, Carter.

Hi, Carter.

Thank could suppliers. color in maybe sub-tier some around And that ones. we helpful. quick if normalized granularity on, terms One, give if at XXXX what gave had that XX Boeing of the us aircraft a does wonder secondly, for performance should teams to have you in say, of of for go if revealing, or timeframe, about couple past a you I terms I be just talked it's that tiers progression you. the month around that's of aware Just thinking margin a next a progress? unchanged elects going some Tom. think you implications down year, of hiring color commentary you real-time about Any early looking know to I be in, in just the SWAT would your couple then there

Okay.

XX obviously regarding any So, aircraft, Boeing yet. decision not made that has on

to toward XXXX it prepared, for XX if what We we that production. regard people to And wait they their so be would so, would the continue would decide. and at With make we're because additional decision it have we decision end hiring, we'll and require it's going and study yes, was XXXX be hire – the to to of just date. more aircraft look to but see

hire increase in months Boeing they nine to six probably we So have want to on to whenever decides that rate. advance would

don't you you talked the weighing envision progression But margin earlier? don't you about that envision that – on

no. No, no,

Okay.

No.

we're suppliers; in the a did team, and SWAT suppliers done their and lot understanding resolved. XX teams about terms using with the chronic of hiring onsite and been and patterns of are with there's So, we But that the drive help of then of capacity we've XX are deploy we've readiness, suppliers with people taken to rate a into how XX their digging is for or so regard probably to readiness, what people, really aircraft. rate they ready lot to some them now those have really

deploy issues readiness them always XX to SWAT shifted assessments to there's So can as team aircraft. is terms in as we've get we them to really the for deal and current that now rate production but having with available, of we that, really what ready

Thanks, Tom. Great.

Thanks.

from today Sanjay, cash supply about process importance of question with with that's ask couple hiring Tom, for this which next people, hiring wanted go next the believe of significance aircraft each that still and sounds MAX Credit but that you. And have - of not Did such do to you, own rate Robert for capital Please one just on Credit would your through and Boeing struggling to inefficiencies for any they how XXX in there you've to it? you question. and of factors are Rob and did as those a ago, of year? reverse ahead of I'll the a right think already switch inefficiencies the quarters each comes why relative I wanted in It flow or then, fixed the know your working just if, fixed own free our chain? guess one's aircraft, invest the these tweak I supply unwind guidance hiring XX ahead. like And you And I I'm delays you we go Spingarn M. chain, start first Suisse was of challenge with I (USA) Suisse. relative but Hey, first. the you. getting Spingarn XX morning. Securities LLC good understanding the

Okay.

first. go me Let

NG the XXX but the more XXX, are the up not the rate, of a in and shifting is XXX Boeing They're MAX I you chain Boeing around we've the worked if a number down. a coming Boeing say board over supply and in answer two-year talked On going would the dual suppliers is been just of and capital, generic a with, on new on recall across working on as result obviously Tom it's we period, the working work. sourcing. specifically, about on XXX that, conjunction of other Boeing shifting and,

inventory that, some buffer all did as up, we et as So, are up result rates a going of of build cetera.

and the get to efficient future, cetera. flow try efficient and inventories more et expect more our our in as So reduce days, become much with we we

capital be on. in that regard initiative work that obviously working we will something So

about to addition generically, again, In this talked bit as well. that, a little we

and we you year. one expect last because the cash time supply continue our well. XXXX good That's this We in same able on Boeing down to industry as did and maintain apply we why of we've the terms, If to that principle progress with move chain. agree reasons very with recall, flows our we've capital, to going standard been to made do that been we working to some payment working

on. think more from ensure stability will we to call buffers I So become have factory obviously the in working working capital as reduce to what that and the we stable the there and we continue we'll min-max get work improvements our capital initiatives

I that's question, to Tom. So answer first think, the the

the some various what's that Spingarn (USA) the Robert challenges factors? take of question this we second year? the LLC M. you Yeah, significance I'll - Suisse asked the And relative had Credit Securities of is

factors. mix Credit Yes. (USA) Securities supply LLC Yeah, - then Between, risk Suisse Spingarn model from... say, chain M. the hiring shift Robert the and

say MAX chain, ...to in efficiently it's factory the and parts. really and And I'd MAX. we hiring our supply terms then then chain have order, probably when the it NG. of rank in goes the very And operates supply --

the those do a that when longer it have we significant finally work because parts and was have when to disruptions and the travel them. arrive, when parts, the travels, install takes work challenge, so didn't And created it

that You delays. might have create some can quality issues

capacity surge end of need the You line. at the

So that was a big driver.

to order a little trying and material And soon mills installed. have up that labor them was enough the were cases, so getting have could then, didn't was of their talented longer some to that. In moving some own they across some factor. the things. that. in absorb In did a been of and bit hiring properly have then that. the between we and going to may equipment just the issues with cases, really also skilled find have suppliers, on that The number a get stretched they work took the their They around why because IT, they requirements cases, could there they case working factories issues as and it it trained, things it so, And is operational industry been related been like

different with We've and needs. us. And been change to aligned labor, And skilled like we Wichita called been a and XX additional was mechanical beginning XX the of dual acumen, college it, about XX of to rate technical there was fairly mix managed at others, for it worked on our curve coming were, working factors, but for go still a number between and requires and to Tech exactly And coming WSU closely a that area, some the more and the chronic then challenge. it significant, of parts. of that to we do host MAX aircrafts, our was out So to great. clearly. that source are then Tech, on have it's than nevertheless, the everybody we hiring, training. lots said, around as better multi-source out but State half to hiring about much for We're then, with figure were that We've local really it especially that a anything, it's challenge offset work the suppliers to readiness have we a model we've of I so and year, in ready getting supply to down, learning But was live and lot trained graduates where the what XX% And working an they've big And I University Wichita, and for did them challenge. very people the mentioned their us; we're up fortunate curriculum story. do.

last only the Now, we XX was year, about be about this next to year MAXs, going about half produced it's XX%. production, year

LLC supply forward going won't hiring Robert factors we the Securities from the model clarifying curve that's we're I'd how mix Okay. Suisse that. as MAX ranked: three that Thank Credit go way learning shift. be then But the Spingarn down So chain, be here. for really you to and - factor then (USA) the a the say M. and

ahead. next our from comes question Canaccord. And Ken go of today Herbert Please

morning. Good Hi.

Ken. morning, Good

Hey, just manufacturing sort just on wanted Tom to the when look from one guess identified one the issues, ask off the one and one side, different you extent those you Sanjay, of off. beyond which just we I call to other can angle, I

been efforts a for sourcing the years. in-sourcing multi-sourcing, or few with that's a dual steady supply had lot You've process last the around of chain ongoing

through. the other you we step are look a year, next downs obviously customer are to went pricing pushing from the fiscal running to of at other to standstill been pressure? with your As really you've or How tailwind aspects and just ongoing look you the tailwind one-off supply as look just get issues, you chain, these or the much

It's I uplift going improvements. to we're making year. more of get point as end we that. to next be said I year But of mean, XXX this basis probably we're going lots to where

to to expect and Chinese efficiently. higher on be going price don't escalation, example going operating the of will some some in result continue that's that to customer as the discounts goods, I as downs well labor then we're the still other material in. for the step built offset productivity have that in But some those because and to we've margins, aluminum Tariffs of more pressures, escalation in So to things. of whole see system necessarily we addition

that is to deliver really they on need chain so to and we levels. maintain were historic what execute more to be operating next said year, margins we So, what we efficiently at the which the can supply

Okay.

the really sounds it inefficiencies is next face the obviously basis margins? of just the lot point you XXX So, like a depressed which improvement year year this

but Right. the new that It's adjusted back for ASC revenue XXXX, we getting the margins to XXX. had recognition run rate normal in

it. Got

Thank Okay. very much. you

Thanks.

Research. next our George from Shapiro comes And question go Please ahead. Shapiro,

Good Yes. morning.

Good morning, George.

George. morning, Good

for that you're to much well in going recovery Sanjay, claims other and your could hurricane quarter you provide of you guidance you the supplier cost fourth how recover? included think in as have as

on, suppliers. negotiations multitude are Tom be it'd you George, customers our like with going it's are different reduction I that -- these in can't in with the forms future sometimes give I even it's cost of things the specifics a cetera. reasons our there and two three that. These or take mean, are sometimes of of for whether dollars, in settlement said, things there settlement, a et form or claim

prepared is a So, associated At opportunities our wide EAC, described improvement there in The with give we cost my et bit mentioned is than I more you end risks there. so I margin with operationally, and it do day, range it with like exactly get head Tom's program any yes, the improvement got a in of reason there two-thirds remarks of time, would some improvement, little the but that. and is, over we've is count we can't there cetera. how dollars come QX in lower that then the into associated XXXX terms specifics QX.

Okay on is And expectation assume the year? I that probably margin? and then that the excludes the at margin lower also average is XX.X% which the you'll it for Asco

the to Asco performing And your about This and apple-to-apple XXX closed business and of earlier we are impact cetera. be M terms expect own on sort this effect are QX a differences so here, that There's the like remember in move only a when manufacturing bps, around we Asco and deliveries always of but bit, of fewer blocks they same past; timing mean lay question than firstly have include a out of days which normal or reason. more three quarters. the QX it and about of terms we should guys. and I Asco unfortunately, are there we timing, (XX:XX:XX), in not and you two how et we of could now, relevant, or call, trying things time, XX.X% Yeah, the have little the didn't at should operate the see described run December see we we in XXXX. shorter that, today compressed you we We've in a the lingering to compare kind is in higher days. little when talked to as how bit or that's

this, a remember, There's no this. year stable. to shorter half We've the and back track to I for always guys, are we question. same feel margins usually quite a we But obviously year. than prior the where we've what us. more should QX, very to little we better prior our goals has on improvements confident laid some plans see this Every that mean, in very got solid sometimes our So blocks internal are communicated once This every you about expect once we year do get they tough QX, thing our in bit year plans, we've middle and you, of to are laid if we've the next been year. volatile. to you similar

last one I if one And can.

XXXX, you with fair of since On price as or lower around delivered not that XXXX was completion assume simple that the the X% percentage it it's the mentioned that? reduction like to AXXX, doing as versus is revenue you accounting,

that and the the so the again, the as between would was fuselage simple that as Wing revenue price I and not step doing you the differ it's FLE. on to the No, again that was downs explain delta FLE,

Which is the Fixed Leading Edge.

sorry, hopefully -- I'm it so Edge, Fixed is, necessarily but what remember George, It's Leading yes. that, not the you volume. Yes. the George. yes, that's

very much. Thanks Okay.

you. Thank

George. you, Thank

Strauss Please And final more Barclays. from And comes we for time and one ahead. from go gentlemen, question. ladies David have today's question

squeezing me for Thanks. in. Thanks

morning, Good David.

morning. Good

end? assertions of So supplier, $X.XX answered recoveries Is the supplier heading this hurricane that the have for around you wide high this assumptions you might end puts range but guidance versus in low on or already kind into various -it's quarter. and pretty questions, other at is the different year, that the the last the what

is overtime as this obviously contractors a we're the expedited will much What any along had. we're expect but is fully the working activities. time, mitigation going impact we we deliveries how kept on fast need, lot we because At similar of Well, we come how originally don't on freight quarter as down. a the we're range then point,

punch teams it, look, as lot where to working it. our on things how range. keep As you terms been we and address up end can there's we've on to of that a a we in But, always imagine, been our we're those list in can up lot high in we'll We a as see come of in that working make of still issues offsetting all got execute going still of sure the pressure range. of we pushing customers. but that it We're year. We've confident and feel there's for

in And Airbus, Okay. Was a as the AXXX deliveries. impact XXXX the plan? I on asked follow hurricane from was deliveries George any and third quarter about quick know Kinston? with the slow shutdown but there seasonally the up, it's in

were No. quarter No impact from schedule, buffer Yeah, it was maintain the light delivery on overall. we're the hurricane into we eat because able the what a just that was planned. to so Airbus to and that we had was buffer behind schedule; a any not

think board is. are David, make the on we we their key obviously want exactly with every schedule there that sure that everybody much on pretty is gets. one Is message platform to customers, with the across what I

if that a of we are movement, So see you little schedule. just remember their bit on

schedule And day. that getting was every for a time back was Boeing quarter this big on accomplishment us on particularly to XXX master

teams And of them. I really lot hard easy. have not thank to we the know been we've that worked spent money. a have It's

that into question and There able quarter to that efficient definitely no hopefully and to expect recover. fourth more the We see see we'll in become we will is and XXXX.

All right. Good luck. Thanks.

David. you, Thank

Thank you.

session And today's thank and attending all question-and-answer presentation. Ladies We today's you for today's conference. and concludes gentlemen, this

and disconnect a yourself You lines wonderful now have may your day