Spirit AeroSystems (SPR) 1 Aug 192019 Q2 Earnings call transcript

Good morning ladies and gentlemen and welcome to the Spirit AeroSystems Holdings, Inc. second quarter 2019 earnings conference call. My name is Cole and I will be your coordinator today. All participants will be in listen-only mode. [Operator Instructions]. will to there questions. presentation, today's an ask opportunity After [Operator Instructions]. event Please is this recorded. being note,

now would Ryan Relations. of to turn Avey, Investor ahead. go I Please to Director like the conference over

Vice I Officer, Welcome and you second earnings and Director me and good Gentile Investor everyone. today Jose President Senior am Thank Executive to are Officer, Avey, Ryan Tom President Spirit's morning quarter Financial Spirit's XXXX Relations Garcia. and with Chief of call. and Spirit's Chief

our regarding allow Jose and and in Tom one by comments questions. that to opening will question, we order the ask your to everyone performance take limit we After outlook, participate yourself you please. question-and-answer In segment, to

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

refer reminder, earnings we use we to broadcast at measures our And results. investor.spiritaero.com. our addition, our discussing on can non-GAAP presentation a follow presentation as release for and and today's of when you website In you disclosures reconciliation slide and

our turn would Chief I over With that, Executive Gentile. the call Tom like to Officer, to

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

XXX free the performance up X% and month delivered per was of postponing increased EPS through cash grounding. rose MAX manage XX, to shipsets flow XX%. period strong at in time Despite XX Spirit planned QX adjusted as to we adjusted and the continue XX%, revenue our remaining ramp

aircraft grounded respond the our been in operationally March. expect, has since would on you MAX and As focus how we was the strong

return to around work the Boeing world regulators continues the with MAX to service. to

and Boeing, communicate the said, per We rates service. MAX regularly we Spirit timing of with returning rate partner confident and XX will term outlook program. produce proud them of continued production That in we coordinate aircraft the the a for on MAX on long remain to month. the to a very our the has agreed to be at with As Boeing with

As tooling, in I to the capital, material rate mentioned at produce month. staffing was the last quarter, had in factory XX resources XX. and place aircraft to All produce staged the all our per at XXX we

In final fact, down of system production the Taking started like caused the the disruption aircraft XXX, our back a fuselage. month. effect and cycling line of assembly produce created the beginning to already a in complex had rate per a to XX lot time especially a frame factory whipsaw in short XX

quarter disruption was for So the absorbing associated Spirit second really quarter a transition costs. those

to Additionally, month. down and the storing quarter, aircraft fuselages reduced at we now XX since aircraft and industrialized right is Boeing transporting for has second process Spirit producing in month excess the per per the XX

transport the flatbed inclement First, from for fuselages area we our to protection from trucks weather. factory on wrapping a designated

Our wrapping which engineers four complete. designed approximately a three-layered hours to process takes unique

The a before fixture to special to by fuselages and tethered is layer to unwrapped they styrofoam cushioned concrete protection. layer for finally are between being XX followed stored protect cradle, and days first tarpaulin a to are thick by a skin, an Boeing The material XX shipped where layer typically holding additional the acetate rail. then down

We in XX XXX have have over storage. stored and roughly shipped currently and units now

XX agreed with to continue We build rate Boeing. at the

determine work rate customer service closely to with appropriate to we return to the the given our schedule. will monitor However, and continue production MAX

is build the of expected XX% plans aircraft rate reduction XX% laid which to the to XX% rate previously our Last XXX of schedule. down quarter, cost out the we structure, mitigate our production lower XX. approximately of We The from XXX XX impact also about is of the revenue.

Spirit to new at around targeting a production are level. So we offset reduction fixed this costs X% total in

leadership reduced furlough hiring unpaid including overtime days entire actions for certain These senior and freeze, a include employees, deferred XX the and contractors, plan, retirement a capital team, of voluntary working spend improvements. levels capital

and and the these financial in they second While the capital cost to working in be plan, quarter half this tracking second year. reduction are improvements benefits beginning realized of we implemented the will

These the financial of benefits into better aligned become as will lower carry our the production. future level resources with

toward longer production will we stability. We improved efficiency will margin and period as improvement, And of also benefit well to XX.X%. quality from back see a rate our begin target as of

supply We to full to rate on of advantage health. factory pause take continue increases chain and this in will quality, efficiency focus improving

line with fewer fuselage the have our last We shortages supply from we seen than XXX in are the already part cycling in-station better years seeing three chain.

At a take second $X results. over X% $X.XX. Adjusted revenue at billion, earnings the a share look was let's XX% up closer of up quarter quarter per second at XXXX. was Now

level the impacted Our was the aircraft XXX and we which segment production adjusted margin in aircraft program, XX%, operating cost of throughout If year our early per margins actions. actions. reduction reduction of second the of to realize improve stay we half the the maturity benefits by current was the cost as XXX of per the program the XX we transition to month month in expect at the back XX full

at MAX, XXX to Given the unable uncertainty time. are guidance regarding this we the provide

schedule than we year. updated clarity to provide that and of rate the MAX producing on a financial service anticipate higher any rest we do the per return will in month We guidance production XXX be the further of at not will the for XX have when XXXX. We timing the

off after excess we continue XX. transitions eventually rate produce XX rate to Additionally, will inventory to at to Boeing order in stored burn

produce storage few a a will and XX achieve is XXXX. our XXXX. at that higher rate levels, than overview margin during detailed to provide not financial expectation in in our But more is goal will a we rate minutes. XX.X% a production current Jose Given

and will of rate to future The pushed the XX continue years production growth. few previously been growth out to has the further over planned. well. strong delayed that to XXX be the of program has organic into Turning topic increase The last growth a than Spirit for as driver

priorities, this our not defense During other fabrication. have our including and growth on we time, slowed focus

a strong balance through cash share. growth, dividends Additionally, the and we to free to share flow inorganic targets, through financial earnings acquisition do criteria. repurchases, our after our meet and acquisitions is capital that remain suitable XXX% Whether which strategic resume will of and the we to MAX. committed absence of we to inorganic our of shareholders will In flow deploy have returning cash benefit repurchases free per it or certification share we sheet

the acquisition. Asco status the now, to And of turning

attack, the The European Commission Prior worked experienced finalize approval, with reported, As to we had they seen methodology you in this have may the conditions Asco June. delayed data process. the provided to segregation March. cyber-attack a their for in which of cyber-attack to meet

we a As the long-stop result, October date the of contract extended to XX.

cyber-attack that is have Asco once they data the will we that the of completed they expect in after restart segregation activity. the systems and recovering their process process

The content, broadens indemnity Asco fit seller will put adds bear expands strategic capped expect cyber-attack content new which we in all remains acquisition we be costs for as million. is by the associated the which a at business. Airbus place and will covered believe We our the our fabrication compelling Spirit defense $XXX with a

Wing We aviation collaboration the supporting few on program, And commercial announced now, role recent projects highlights. Airbus other our applications. Tomorrow four contributing of a technology across

important an Wings Tomorrow Our milestone marks of of our in on support participation Airbus.

to distinctive suite by development performance full shortening our leveraging costs of cycles. are product and We capabilities improve lowering

support Innovation foot company's Using is industrialization are focus to composite Aerospace approaches, system. the the on reality digital for year. directly in efforts. development Prestwick, we facility materials, and production automation, square addition broke product manufacturing with and in rapid resonant design XX,XXX all This our where Scotland site's and ground and Center is augmented developing prototyping fusion the handling, parallel we last collaboration Wing assembly part The processes virtual will the at

fiber Paris development and Technology step-change lower We methods or components. new terms higher disruptive for and also We improvements Structures at using Show and fuselage we panel production the Advanced on costs in what carbon announced material call will in demonstration proprietary composite June. production the of this fuselage Revolutionary enable aircraft architecture new of new ASTRA offers technology costs future that panels. volumes unveiled Architectures, This the weight Air for

ask will Jose? financial the detailed results. Jose you lead I that, With through to

you morning and Thank everyone. Tom good

summarize financials. quarter me second our Let

for Let's as NG $X slide quarter by Revenue was This on XXXX. revenue production billion, of four, higher to the and XXX. period model MAX same move XXX the from favorable please. the was driven XXX volumes the recognized on the programs, up to we transition the and XX% higher on from XXX mix

five. year-over-year. represents retirement excludes, of adjusted turn reported $X.XX share a from second EPS quarter acquisition. now per that announced We It EPS increase the Asco retirement the to the pension. prior compared non-cash on is $X.XX program voluntary in as impact expense a Let's funded Adjusted our to The over quarters, of XXXX. program. excludes the This of funded slide be of in X% impact EPS voluntary also previously the will

quarter program $XX The estimates mix count, adjusted a million. includes partially of in current changes to lower litigation settlement favorable also was recognized XXX of favorable improvement EPS and non-repeat due quarter the by year-over-year the approximately favorable on share The primarily offset model XXXX. of the cash second in

continuing second of into reduction second in cost And the these half partially. mitigate earnings benefit we actions the will the In next year. the on beginning quarter, year impact of implemented to the and MAX we realize actions

growth step-downs. free MAX payments XXX The Now quarter excludes free $XXX the a $XXX CapEx, free increases working on tax partially deliveries cash of as six. inventories This solid by turning chain, Adjusted lower rate to XXX at second the acquisition. increase fewer in impact the to XX% a adjustments, our Asco of lower million by of from the quarter capital, cash slide offset free driven was cash adjusted was as in as result reflects flow flow prices XXX supply the well year-over-year. compared for flow flow Adjusted million XXXX. and cash cash

related in Additionally, the which our is offset MAX received factoring the we a advance the relieved headwinds to inventory measure This of is increased temporary help Boeing some in quarter. quarter. once cash be third second the in from receivable will anticipation

Let's We fund in and to the $X.X our now second ability confident operations. we ended very to turn a balance seven. of on remain billion current slide deployment capital our with healthy cash quarter

through capacity strong undrawn borrowing credit with capital a sheet facility us $XXX markets maintaining of strategy substantial million. of our Our and access provides balance

$XX in paid also quarter. dividends million second in the We

and approval quarter, years, we growth. share clarity until repurchases per cash than flow term our regulatory balanced share maintain greater return surrounding been XXX% the to further long strategy three we capital over has to to shareholders we As have paused have discussed returned our last our of We the which earnings MAX have the contributor an deployment of last free important service.

share current our authorization. on We have remaining $XXX repurchase million

performance. Now segment let's look at our

the quarter in For the the our XXX non-repeat was higher fuselage XXX to revenue the of slide year XXX was production segment results, largely costs the to year. MAX volumes of on XX.X% XX.X% was favorable of to the same revenue period the X% as billion, program, from the same program. to Fuselage for changes in the in period and last the XXX margin in and impacts same segment quarter period last from the to $X.X Operating year. compared higher recognized related on due resulting eight. estimates This higher grounding please turn well as up programs AXXX last due

compared XX% years, quarter. in On to normalized improved from XX.X% estimates the in in to prior margins the changes basis, first reversing fuselage a slightly quarter after second segment

the cost a We realized mitigation as and in expect stabilized actions efficiency improvement of second year margin are from XXX half the improves further rate. our

after the and XX.X% propulsion transition nine favorable revenue model reversing segment our was million, program. the on the slide mix propulsion higher on the higher quarter change recognized period we margin to from performance segment the continuing the compared XX% revenue second the up year, to solid was for in NG same from primarily quarter, program normalized XXX due volume a results. mix driven propulsion production on In estimate XXX XX.X% by turning last program, at MAX. XX% Now, quarter. was $XXX primarily margin impacts, compared XXX the favorable model On the the Operating second XXXX, to in for basis, the to first strong as to quarter of XXX

margin volume X% XX.X% and XXX was margin to in by On Wing same results, of XX.X%. Operating on was quarter period segment programs. segment million, turn a basis, change in estimate in to after the XX.X% compared second production for last XXXX. wing XX, our up quarter the year XXX slide $XXX For revenue wing normalized the was compared reversing to driven the the higher impacts, quarter let's

previous impact reflect by rate production did guidance the our not me increase. of the reminding Let MAX of delay conclude that XXXX everyone

we date. FAA the return and due on guidance production laid and at to impact date rate MAX As making In service better remaining with work and future a financial of out uncertainty announced to a to more do, expect aircraft summary, to first schedule while we XX of Boeing's we there to the Spirit, cash XQ align the lower is cost in timing progress month. the the still on to we reduction quarter XXX actions by and the issue last per are

the and and supply changes. that want Spirit to embraced entire I team really mitigate impact challenges for help of the the broader organization these to their thank efforts, up stepped the schedule chain have the

the these actions and throughout the of begin We half of improve the XXXX. into to benefits second will year financial see

over With turn some closing that, will Tom I it comments. to for back

now we Jose. make some before take comments will And closing I Thanks questions.

of transition inventory a per that all from at suppliers all rate work had was Once we to the transition change The rate We we loaded rapid created in direction factory XX XX, made all the already month. the the to remained and place learned for costs was was the The disruption. significant production grounded, never quarter. MAX aircraft rate the in but QX with for XXX stopped XX. increase staged. a

XX Spirit production. capital taking The production revenue and of as quickly new Boeing margins well the of to and at agreed would began the We with level our working remain necessary a was to negative and impact profit rate align actions on that as costs predictable.

we us We the also the helped the the as Spirit results financial actions made of into impact impact mitigate Those and strong new coming begin immediate QX operational changes to taken better positions achieve the of actions in future production level. have effect. in

to future deal of uncertainty global regulators will work continues MAX what is there to the with Boeing While around recertified, get schedules be. a great still production

For at improve to now, will to on and our continue per rate quality, initiatives. efficiency supply the increase we as a we pursue chain month continue and our remain XX growth of operations MAX of stabilize aircraft

long MAX partner the program to proud confident outlook. term a is Spirit remains be on its and in

the leader is the traffic grow rates to With global packages the market be well-positioned and the aerospace around on programs. with work strong and future world, air Airbus continuing to the at strong a Spirit remains in significant Boeing all

be to happy your take that, will With we questions.

our Citi. Instructions]. Raviv question comes [Operator And today first Jon from with Please go ahead.

morning everyone. Hi. Thanks. Good

Jon, good Morning.

point? to a that is know, having that kind presumably, margin? when you eventually at be you to therefore, able being run in in to of XXXX, putting to able to Thank even On just you. curious of at place on XX. get pieces there you potential XX is that in what do Or are achieve to upside rate that And the going XX.X% to do dynamic rate of margin in fast place terms to stay

bit both. little a Well, Right. of

realign new whole outlined, have to cost this we production schedule. started to year base the actions our we take to As

build our MAX and as represents XX% mentioned, It we to basically revenue. from rate going that the the I very we XX%. production XX% are proud of So XX And of XX that. takes down of

our So it X% of total really represents activity. about

look So to our that's of reductions, our target was at take X% out fixed we costs. cost as

on I that implemented We the outlined costs program. of up. were almost contractors. We overtime, in all part different a things that so, indirect XXX remarks of that. take voluntary And We people focused had retirement my and

staff, furlough team. days entire have leadership these the our also unpaid salaried including for We senior XX

get cost base So things to those fixed down. all the of start

natural its on the direct letting are And we course. base, cost attrition then take

hiring. down slowed have We

haven't down stopped But XX the We attrition to we taking is per aircraft what month. headcount for it. require completely

contractors We and have also more than reduced half. cut we to by overtime have been able

on benefits So we have seen significant some that.

So have the of end and really next to XX.X% to our continue year margins goal is that at year. all

month all when what we at to is have go back in Boeing after expect going we give MAX of production to As cost to target all I current XX.X%. long XXXX. the aircraft a And the of schedules, be stored likely that to per are mentioned, will for we is actions XX take That's XX to given service, reduction And stability. will with that, what will we we chance period It give these all at achieve. stay of of us hold. a back will

Now as goal will we to maintain go to the to XX, be XX.X%. try that

the when and discounts end tied of year, we recall, you As pricing Boeing the at deal did our with rates. to the we last

So as as the rates go go discount up up, well. would

reduction to working been plans place. have those We in our that are offset and cost on

good at confident and we next us feel year is in the to back that XX a we XX.X% when term for also long at for rate it. XX So rate get target future

Thanks. I in will queue. hop the back

Thanks.

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

morning guys. Good Hi.

morning Good Rajeev.

Good morning.

for would a that? And potential the as halt to that production some trying you. be? question Boeing serious as around they navigate something not that? if making like that on the move are you happen, thoughts strategy process you something at what mean far like may idea urgency how forward? maybe Tom, to just be were the I XXX. think create Or about they are Boeing looking would How If on talked maybe progress has of getting do just a

to of recertify and first a as long around to it continues go the uncertainty dynamic until regulators away other FAA situation. There that Boeing all, flight. grounded and is going world be Yes. it for Rajeev, well, the the as remains very uncertainty isn't the

range different really and could scenarios. Boeing in closely look of like production whole that a what future So schedules working are in on we the with

planning to do. prepared So and whatever be are respond to to that they going we scenario have we been doing

at slowing down have We production. looked

pauses temporary doing production. We in have looked at some

to have to return being. able the MAX it's the coordinating on of that about depending aligning to implement all up closely service gets be service. prepared whatever So And again, to Boeing back production schedule into with ends when and the scenario really we

just Tom, a as to follow-up that.

more of look of You at bit something and around is there's et doing a some already like mentioned element imagine specifically that? at? a I complicated How a holidays, vacation what did looking you times you long Can pausing provide production. scenario color of cetera.? How it period?

we goes Right. that our will aircraft have stored month until current once plan to Boeing Well, per XX the and burn to is XX, we clear, we just be then produce stay then at down to and at to back aircraft XX XX. go will we

scenarios we So just the looking are that various scenarios how we have would that, been at and respond.

thing One factory one-week of end the say maintenance. we do at I shutdown year, a would where is, have we the

we a to so similar year-end. And know at that. do very just like how we shutdown the what It's do temporary to

So agreed scenarios. But a rate of reiterate, stored the is XX to to that have aircraft plan have the to with as after has and Boeing and at evaluated we again, we all we XX, down range Boeing burned we to have returned to return have. then stay current XX

you. Thank

Rajeev. Thanks Okay.

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

for Good time. and thank the morning Hi. you

morning. Good

with capital? Free look do on track you cash flow expectations. how any about to mitigating Jose? talk about flow we and free trending could cash second you guess, bit, as regards that half, to of risks little a working I If the at think ahead

Yes.

continues because to be working So progress I on good. you capital am the glad asked

days-to-pay, good managing thoughtful plan to capital, accelerated attacking because XX also of elements our are make it progress in supply in to suppliers. down has working our from way we is team think on the ramp a and we fact, the chain that's XX with the continue a remarkable and all I especially

to half we second and stable a we addition increases, tailwind on in in place CapEx which maintenance forecast the are point year. with a XXXX. Again, do CapEx kind deferrals second associated of a spend our is maintenance this which see lot deferring of future and into saw CapEx because going you are going of the We of that. CapEx the was at quite at tailwinds into least rate half the about quarter in per The bit have

third inventory. big in inventory the quarter we earlier the challenge vertical XX as second we from with kind to in We we XX had liquidate of took a schedule production in of, throughout expect itself lot quarter the that and fourth a and the to And did, quarter. was the drop

my with inventory So usage in as additional we some mentioned factoring. the I remarks, replace did of

with the Boeing year, advances We quarter expect before chain. to guidance our manage of year. framework line cash the supply suspended third we million $XXX And for the the unwind earlier for $XXX that to the million in in to it as summary, stays in

cash about to thinking on And I XXX flow. relates production how the capital just as follow-up are working legacy MAX? guess, from a as free the it you to

half, and will think we obviously the the volume irreplaceable. lose So we inventory we that The is absorb. impact, second in

That's Yes. the for XXX.

In we For increase the ramp managing very we the starts as level. transition XXXX levels the on that. way And to to as similar to reduce triple we up, words, managed we inventory the production NG XXX, the the from other min/max min/max are down, MAX. it the the goes XXX-XXXER the

down the able manage to up manage one XXX. the and and and therefore transition we of bridge on that are kind So other

Yes. That's correct.

you. Thank Okay.

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

Hi. Good morning.

morning Carter. Good

morning. Good

proceeding as there work originally this quickly change and flight? Just XXXX. has development for scope ahead to all? in last in the plan Are of Or on planned expand been on slippage you any at spend clarification your first

No change Spirit. for

plan We are are on the we and on proceeding right original track.

we have this calibrated right. voluntary Okay. just And to then retirement one sure make just the on

will shown Or You a pension. said somewhere there? P&L Is that funded else? that over-funded by impact be there is

$XX it under if that XX. the of to pension the But accept plan. Medicare was also and there as And incentive for motivation Well, voluntary also provide they XXX portion it offered. to will to P&L. was people funded advantage of And basically over-funded that hits to people an said, incentive from the about our of bridge to funded that over-funded it was we Right. impact pension. that program of I be all million. of component out took about But them And were that

that made an EPS. to that adjustment was So we

you Thank Okay. right. guys. much, Great. All very

Okay.

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

morning. very Thanks and much good

Good morning.

Seth. morning Good

in ask the I maybe think have coming set results in EBITDA We we when for terms you of wanted there year and the way XXXX about still it this margin things thinking sales how Asco us million contributing? Is to of $XXX Asco about what if to start on are can going level next just year? and into high-teens and been might growing about having they fair thinking into then think XXXX. a to about be about that

Yes.

place So as I working changed it's we have Commission a the is, fit. Asco a structure commercially that have with for sensitive happened called in hasn't segregating process XX over European conditions being said, years in this the still company and technically What and the Belairbus that were outlook of the strategic on and involves had encountered data good very Sonaca. put in the may of that approval

it. that the it hit so delayed was And going and basically cyber-attack on. Then

good of date push out in we So put arrangements and unfortunately, we set got an indemnity a to place long-stop the contractual and have had we place. in

We estimate. have good pretty a

Asco started of it flow get still they took profit, what of the the of revenue, cyber-attack very outlook similar They cost are the place. to bear are but manageable. costs. cyber-attack, in an looks was terms very before the estimate to cash those And to going

XXXX assumptions. for you yes, is set of good just outlined a So what

Okay. I Thanks one. will very much. to Great. stick

Thank you.

ahead. our Walton And UBS. from go next comes Please question Myles with

for on Raffetto, Lou a is This Myles. morning. Good

morning. Good

Good morning.

performance guys the systems to the wing you attribute AXXX. on in in that release, lower and just you margins pointed the press out So

little So I hoping was could a just bit there? you elaborate

Yes. suspected. Revenues were AXXX on as

on related repeat program future. Now impacted the prior years, to will the by in the mostly pricing not true-ups that XXXX margins were and

been it's not on catch practically equivalent. as cume really but are them that have a We is because reflecting blocks closed,

We complex were some we and there a that pricing agreement in call incorporates IRIS. the trailing methodology adjustments effects, have that disputes

Great. Okay.

So at nothing least? operational,

No.

Very you. Thank good.

comes And with go Please of from question Ronald our America Merrill Lynch. Epstein Bank ahead. next

Mariana This for Mora Perez Ron morning. is today. Good

Good morning.

Good morning.

two Good morning. I a follow-up Asco. One have is on today. questions

Could in issues, you future? cyber-attack, of XXX on severe given details for new four the facilities could narrow-body How shut the all provide second mitigate please the And in on this damages? the like risk and us the that? On replacement status MAX you one, program? you countries? How update down it can NMA the were like how

hit Right. cyber-attack the that terms Asco, was in the has number world. a companies Well, one of around of

is, caused initial down or different didn't is, have are and a their either they the connected some basically them of were to infected to did What versions the systems it's it access to systems shut understanding and Our that cyber-attack. it BlueKeep which Ryuk, of Internet.

their reconstructing their leveraging So what had from essentially cyber-attack programs, before also data backup and did was going backups to back their their the occurred again, they files recreate before.

took that So some time.

customers. relatively What they with been they up with Spirit their to could so other to able well they And they did get production, went manual several keep is, production production back. have along from help from and

complete, working segregation process to And go So we they to they the with do on the can all get data that back Commission. that that all as well. of agreed worked European

able got has was advisors they expect can. able strong manual process. good process resume supporting a for of lot as this much fully for been use methods some team. recover had few a the be to weeks including disruption full a to and And where to Commission. for They very European able a have to be as a we them from will the systems. leverage normal them it as segregation we recovery their again, expect activities, Spirit to we being But So that they to opposed

and to very of a They have to lot that's with I Asco period. want stand So worked hard team. that compliments get we time where through this

Boeing a of have the very partner. on NMA. interested programs, single-aisle the to and and be NMA we continues Spirit, discussions Airbus, We both regard think compelling a With value would to proposition. at Boeing have be new course, to

are media on XXX. of in is leader that reports like do We aircraft. And both a the world's metallic composite. The composite the composite the again, be a on fuselage, what are we lot have really which structures that aerostructures, we and forward especially in will experience, complex

we case are and would take. we program, business a look be to to a eager would present could not that for shape something ideas to really It's value our to it we win-at-all-cost have would we proposition So forward provide but close on Obviously, what it exactly that with to make on. feel working Boeing be would able sense. a Boeing to compelling

out, a single-aisle Airbus and of phases, those. also on Boeing they my think new on has three something mentioned that in Fuselage are And Airbus Those areas programs, Airbus Tomorrow, ways but we I a a all with to next-generation propulsion. Wing in are about regard program course, are program Tomorrow remarks that's of to through phases development they their involved corresponding called as think and have development structures. in next-generation With one long structures. are They in of

Thank very you much.

question from go Robert our Suisse. Spingarn And next Please with Credit ahead. comes

[Indiscernible].

a of try you Robert, having There's difficulty we some hearing again, are Can please? in you. voice. lot tinging the

Is better? Is it it better? any

Yes, it's better. Yes, absolutely.

Okay.

about that. Sorry

in of XX on whether Just I Wichita return it's a excess aircraft the I while you their in being fuselages are think and year at building that talked or past think next for plan. expected based Seattle, up, XX, on end excess at their are the the about Boeing. they When about to

I it longer. see think to little us of XX will months Some fuselages. XX of a excess about take

that you possible XX of So it after is years to until couple do? get they don't a

time to return that when take is they divided be, to many five of the going however we amount will go by it have to math XX, Well, XX. us stored, to

depends many So XX to stored at it when and have we they go how just that time. really

be no stored the expect I on entire more are going production how XXXX based would stored, would said, the for and many to to we I how current we many for year. and as levels than XX at have think So have we

the it starts on increase this are and into and when its Beyond rate when those at gets really service that, gets MAX time. back eventually uncertain XX. Boeing depends to And still to

XXXs. well just clarify wanted XXX and the math on One that XX five. yes to it would just I me the will seems dividing That's higher of quarter other Well, per it fuselages. to XX XXX to ask the the by be versus was we previously, be over you rate thing

Well, I we mean [indiscernible]. obviously quarter. Per

Yes, instead five per three-and-a-half. of driving month What's that?

this through to the now going right XXXX. bridge with the from we XXX-XXXER transition, the units. planned, the especially just Well, this are always development was And

up effective of last were we an really rate back five, rate an whereas are of We three-and-a-half. year effective to at

it's with Boeing some right the line and has think that been had communicating I time. for has So plans in

risk Do back to you drop that see Okay. any to three-and-a-half? you have down

Right their flight production first delayed. plans. now changed of is haven't we But this development to date, really did be our schedule that know I as we don't. announce or they going

Thanks Okay. Tom.

with question comes next our go ahead. Doug And Please from Harned Bernstein.

you. Thank morning. Good Hello.

morning. Good

back and in to go you the In systems. talked and to you And margins from earlier in this wanted that coming wing QX, appear performance was improved there AXXX. on about then AXXX, be about and call quarter, the to the headwinds, talked was I the the the AXXX, that which but to it one-time you some also said that reference the on in one-time expenses release was a the in non-recurring there to presentation. on

do systems QX where as of at in is, QX margins look trying continuing and did somewhat being an aberration? am we we see we you like see to as here? to understand the wing trajectory I expect How of upside what should Should So this?

had, that expand rate expect And second up. up in XQ to impacts the AXXX AXXX the our as goes are consistently margins positive We and segment we both on in in quarter. despite revenues. first half wing said, you revenues with the Really like going is

for unusuals, look margin guide expansion. revenue So just I would XQ the and at trajectory non-repeats at look and the as XQ as

in were the AXXX. very Doug, Yes. wing confident, the particularly We programs,

do on get to levels our we So to wing up expect historic back margins.

have when what look like? trajectory this you sense and a would Do

Well, historic of year, up be back should year. all levels to and end by next difficulties this the I again, the we our obviously into this experienced, think we year,

right. All Okay. Great.

by the And they that And proportionately trend will way, were margins higher be have seen you been propulsion continue. we have to They improve. communicating historically. will continued than have as

the main themselves. And that's driver due performance? to the assume of XXXX MAX I and that still it's the better

Yes. Exactly.

Thanks. Great. right. All Okay.

question David Please Strauss with comes next go from Barclays. our And ahead.

Good Thanks. morning.

Good morning David.

the to and you Boeing idea have could accept on contractual want right this I you? pause to that Tom, Does halt. have not shipsets follow-up Boeing from

they give work And them. situation, we with contractually very I can the obviously, notice. is they are to change us this things rates Yes. have the the But We lead dynamic. them. closely times. in way appropriate with coordinate But works mean, contract with

have enough going tooling that and to up make to obviously, sure and in we place. get have we time rate, lead in Now capital staffing

a they what's have out There right Going flexibility. them is more down, just answer. again, types the to these with of lead time. in But situations, work figure we

lead is? that Okay. quantify what Can you time roughly

with them are. even We attention just it. on their don't to depending needs pay work what We

with And so, I working said, have been as closely again we them.

and return XX. that delayed, us plan right our be to will what going MAX out work that's appropriate with what obviously level production forward. We If And Boeing do. have to is service re-evaluate will to now the figure is rate we we appropriate will them production reiterated the going for to gets

that when I you terms where in AXXX And maybe block. wrap negotiations tell think those up? stand might don't on Okay. you with us this yet, of touched and Could Airbus extending those

Right. Well, we have initiated those.

now right XXX. are about at We unit

to long fixed have would get dialogue forward what beyond XXX time we start a But and going good like Section it the leading edge of XXX. a us So on both XX the before the to we for have look both quite that contract wing. recognize will the be to about got

We like complete to don't possible. So have frame soon the would dialogue has a it we but do necessarily as started. as it, time to

XXXX. don't XXXX or We a got have We time. XXX until reach long

us initiated motivated need. of But a get have stabilized, no are highly pressing interest them everything there's the of getting timely discussions and in So the completed just both we manner. to in

Thanks.

Welcome.

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

Hi. Good morning.

Ken. morning Good

wanted temporary comment mean, potential should we what the the to of that on a sort ability you you know risk considering XX scenarios? to Two support your change levels second, question program to of suppliers, supply of the to a about either risk wanted and follow-up ability I production, chain, or the I have maybe think XXX. with or how some if the on chain the month. a I think supply And you about your or as pause with specifically the in then can in behavior of Tom. parts. with seen any just different your invest on around your execute maintaining supply and chain

throughout Right. this supply whole Well, our process. say first has outstanding I to would that like chain been

have closely. with rate has their the stabilized in We have XX. go XX. They fact, us worked them very already, investments of to have at worked had to as them the production and maintained They of with schedules. schedules made had changed them, all Most the have

what like ready is settling in we So And just doing to they are they were were. go XX. at

in that place So is will continue. and

So we closely like are are again, just Boeing. communicating with them, we with

health. in of terms the In of of terms at risk, financial suppliers we look risk

others. So financial we in suppliers. than essentially are all of And our some a precarious that there situation are more grade

So we of Spirit-owned of watch switch them inventory. a them lot with some inventory, programs we have cases, that In We programs. we terms work very have them to provide inventory, On for vendor-owned in that carefully. can example, certain relief.

really partly as will that in that. tapered Jose that offset to what staggered And that the ensure will of inventory healthy. we describing next Boeing have we is help We and have the quarter, from was remain advance that the consumption receive changes some suppliers

the watching very chain are we carefully. supply So

all of necessary we the watching individual are where are taking that. financial We help actions the suppliers to and health

to have, them we Citi Bank period. flow that similar during suppliers, have thing we another with and help we and able to of a with for liquidity been is can for cash But program we We to way extend work the with example, this Boeing. have America Another that's receivables. factoring our program that program

you. Thank Okay.

Thanks Ken.

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

than deliveries XXX timing? The just is rate, a the Yes. XX lot at less XXX, that

really the we little had. timing. pause that would But of from A I bit say, disruption George, mostly

a a it loaded factory just because around. disruption So movement of lot of once we scaled back the there was and from already lot was created XX to XX,

other is, up XX XX, the started The we and relatively thing got quickly. to immediately process storage

we opportunity we improved, the of as to essentially quality So down ahead and Boeing. contractors rebalance were line, took And we efficiency way improve had an overtime. get

producing rate. ended up to a probably the we where slightly That's XXX. So we at got lower

of up quarter, Normally, obviously, get would we storage The there's But quarter, we other we thing the little are to bit, costs the for do a five kick as didn't the units straggling. four the overtime with to that. is, reason, out whatever and always end trying and or that manage those got all units this door.

normally that in will of They so, units That's didn't. And ship would shipped, QX. a some have those issue. timing

we XX half But rate. that's assuming the little the a why than the that stay have XX, back But in will lower really delivery for was place. rate we at bit pure a of year, just

half half pretty that will year the much the will of for we expect second would look of because I XXXX year. be this back XX for XXXX So we like XX back the and deliveries for last at the at half of were

some then was production follow-up long Jose. how big if volume how was It I a it And so, that for to continues? revenue reads Okay. unrelated that's the like and was recognized there And XXX differences. wondering

was This first in we quarter. explained Yes. situation same the the

at XXX the finalized on was As in that the price. going removed that the we the Boeing the and was pricing parallel of mechanism unit MOU a the of result with end simplified risk-sharing last year, to

elements. So new have in unit we is increase merged over not the what all That see ledger. the unit. changed per And in economics both these both. The you price revenue incorporates

Yes. it complicated risk-sharing us meant And year. Previously amount was based Boeing would following inefficient pay the operationally. that on an and very the losses,

So in purely we so XXX. resulted structure. when forward them, pricing year It's the That issue we pricing last it. X.X mechanical just based we in it revenue coming on Simpler, the the redid Resolution did the Collective cleaner, ship was units. the a with the change receive on when but we just that it

much. very Thanks Okay.

you. Thank

Arment with And our comes go Please Peter next ahead. Baird. question from

Jose. Good morning, Tom,

Good morning.

morning. Good

that regarding near of works? absorbing able those just costs, how Thanks. Obviously, continue, disruption here also to recoup? term. is kind comments back us give more little or a lot units, are circling Have store bit you, you a your then ability going in know, like, going of to capacity it and of be your Just there kind And an of you storage. these something to the around terms costs sounds are can understanding to you your in to the that

Air them the Base the large programs. landlord different fuselages store generously we bring fuselages buildings owned cradles I Well, mentioned. it's basis. adjacent Force and in for the us that to allowed them now, of with to we which And capacity exists the four very The have it first-in, use that wrapped they several right as And to first-out in place about a takes on we regard there. a Right. hours. I we units, ramp. when of the to lease a wrap ramp of McConnell by out put process and us It's said, our given That

Boeing. ship bring XX and hangar, then there back they then them them rail we So about unwrap to and by to for to them days the XX are

constraints. don't out XX the ramp out We It's store that big now with very will have about we just we be But that right work a that are there. have physical any what's don't The space. stored appropriate a But we limitation. should and Boeing. really, number have we real physical limitation will

and very very particular always I to of is in room. Base space As Force said, big, this Kansas flat McConnell Air plenty has adjacent

with it very support whatever Boeing. and we will for agree fortunate scenario that are So we

of of In costs the system. are lot cost, those working the a through disruption terms

it. we million new to The while the only of absorb forward, total this for they million are force be align or labor $X It really the $X other rate will costs, go taking of the it's workforce, production the lot direct work, a and will actions we to are minimal. year. As all storage all cost

system. not costs eventually the as the other are we we costs And will really material production dissipate these go as So get stable forward. into disruption

middle for one XX went year, are are this at We really be of extended though we to The middle in last highlight, of will year. we period time. of thing going I is, an

year. there a So been we have

to going there better of us in be quality. terms be and year-and-a-half. will is to another at us enable We least more much productive also become enable That to

are period, how very our of So chain. only but through system, our Boeing take of efficiency the with working right time and this quality we production advantage improve on not closely the also supply we to

while await So leverage where we in to sure making opportunity are rate pause production service. there's the this fully we we return a to MAX

Appreciate the Thank you. color.

Thanks.

ahead. next question And Wolfe comes Please Research. our Keay Hunter go from with

Thanks.

then of changed, quick a about you engineers a perspective, a a from MAX has I am follow-up. of that, the Tom, year team on you NMA. the scope if staffing earlier has, grounding? and curious XX one up last Just it set how said since

let changed. proposals We deliver really situation. very have really we we it MAX grounding dynamic on team is impact can can't very nothing It's But a a strategy. that growth No, still Boeing. It's large to our The that's working operational. long immediate. term

So defense for of ideas Fuselage we Also continue and R&D. Tomorrow, our on on the our initiatives NMA, Wing the Airbus. long for the work of term to working also developing Tomorrow for

let the MAX work So the Airbus. for no, Boeing answer next is situation generation haven't we impact or on the we the programs doing that are

propulsion. the In of you mentioned Tomorrow, you early what some requirement, of Can elaborate also Propulsion you the if in And hearing the, tomorrow, in you of? context terms design Wing on of of Okay. follow-up. the you that will, my are terms Got actually context of of up sort maybe, in brought it. the

case in have in things. would this which I I nacelle the propulsion, say, mean and thrust Well, type I structures when to for propulsion, reverser be say

cowls, with nothing engines. So fan to do

propulsion Thanks. of perspective, you at broadly Right. just you No, perspective, I curious, just broadly speak what for hearing know. participate to how I that and Spirit? am from are was you in in cowling speaking, terms wondering your even just guys nacelle expect of, I to from

our Well, propulsion expertise things pylons, is thrust like reversers. nacelles in in again, and

our to new things Airbus areas. has new resin in ideas fabrication XD to printing, our composite in air digitization ideas so to the work, also try techniques. with do thrust fabrication, infusion, those for channeling we we it and Boeing like technologies, reversers And leveraging we And to like and are bring new and methodologies again, composite materials

a We forward propulsion in we value proposition compelling the are the areas. field. think Again, And So look in we we all to ideas we Airbus providing leader those our a in discussions have to very are think good. are applying the of we those and area. Boeing and

Tom. Thanks

Thanks.

and question our with Company. comes ahead. Please Cai Rumohr Cowen next von from And go

much. Thanks Yes. so

XX produced must XX the than the in Boeing and have year with clearly, more delivered XXX than probably even in delivered done you to fuselages And second, you So here to XX. they the XXX, they last quarter customers. more first

my really mean, Because it as of like should aware, their that XX plant? I Boeing up would like that delivery that sit they some be. And and as you XX. looks or basically of in to I then I So XX be would fuselages smaller take mentioned math, number stored. a think Are do stored than adds it you XX those around does

en in schedule is of rail time they a route, traveling very there days. at is their you some don't get store Well, if have because of held an kind way. Cai, Right. you tight are will, on different or they that But that extra period there flow plant right, could amount stations cars, any for be and the production a along

some system. now few So And may that right there's more. the be always are a in there

So that the couple waiting stage yes, of factory, there's they in their outside to loaded. some perhaps a system be

the the way how stations And way, stored and on-site of held differences. rail what on What on then the so cars the in could buffer along what get what's different outside to we stays be that's you at right here, Renton. have

if to once to late thoughts in disrupting doing about they the ever XX, that be the increasing production and know, in to do anything lifted from going quarter, then kind your is basic of can Any fourth grounding of number process? they I would you And without from vacations suggest suggest have the stored until at there inventory you back it. about year, talked wouldn't in things, amount which Got have production they continue build. XX is cut increments get the

them we XX. Right. into MAX back are very going service all to closely work to based gets way the on production Well and their when the when with increase again, they

in dynamic. didn't for Boeing. we the it's the still schedule one we to will best that's still uncertainty some reasons to adjust of want So the There's works is, give system with whole guidance conjunction production and what

very much. you Thank Terrific.

Cai. Okay. you Thank

Poponak go Please Sachs. ahead. Goldman from comes Noah question Our next with

Hello everyone.

Hi Noah.

morning. Good

realistic am process guess is in supply but a could experience sort different I XX? similar a of plan just what's thought the and provide to your quickly if curious get and has of view ask chain expertise through I way, to go on will how for question, which to current assuming back you a based the I Boeing your what holds,

on any depend just back I the production up Obviously, production And system, like MAX when don't methodical take normally service. the and on to schedule speculate that. a you complex in want will gets to way. Boeing's very into down it need

XX XX. to that's I what are There from they can't exactly that am in and be you some So thinking. sure increments to just go has

they are So into that taking account.

and we to that burn goes we now there stay very is, XX staying XX then again, buffers. the the beyond what we are focused Really, the on and easy. is at are And down point additional right Boeing be will to going equation

per and for are that already it XX, I go we and any by are month stored, just than as number not likely the more all five are where expecting that XX and will to be number number on case this going produce many will that be we rest based stored the the have have that will to what stored take to divided once We well. we we have they of year will are the of months. of why XXXX now we say, we and That's right be how

Got it.

you year? of could acting you free margin year. next for got capital be tailwinds working doing to the CapEx to tax, as now. XX.X% cash guess spoken next you am have associated or because have are Maybe You think speak margin would sort those the you flow right with what curious I I cash that

is the free the rates. percent to that at production flow X% in sales again, goal next Well, Right. X% stay cash to a year, as of conversion even lower

of is will at to that's margins that I to and It and achievable. provide would invaluable. improve also efficiency. will And but but it's plan us to help ultimately the staying improve performance. that a us say And enable really of lot with XX will stability. that a quality, this, period work overall achieve And So again do

efficiency. XXXX, we had at for and you really over go back achieved XX I great to we of mean been if levels three-and-a-half rate years

are XX.X% XX why Now able it repeat and confident of achieving achieve us are can similar it. even of levels pausing at that rate that year, to say That's that we XX, margins to we we be at to to aspire enables next efficiency. and

also but thing help multi-year will payables, at The also rate but margin flow, CapEx improvement I when only going initiatives and inventory deferrals obviously will not we the XXXX are will you management that harvesting forecast, we the in add the into working only continue look cash are lower is, capital expenditures. and to and be

in summary, into higher range think, I X% to XXXX at X% So rates. the going good momentum there within is margin

CapEx in should working XXXX I capital tailwind assuming Jose, tailwind be So XXXX. and versus

Yes.

minimum, the not So headwind. at a

turns quite it We a really to our inventory low. sustained are work will example, you looking know, improvement which, make for

per So you turn year there's half for a years. an opportunity to modestly several know, improve,

on kind we of the something stages achieving. of are that's early So that

so Thanks it. Got much.

our will to you question-and-answer conclude conference. gentlemen, And We ladies attending session concluding and thank would like this presentation. for today's thus the

and have your a lines time You may this day. now great at disconnect