Spirit AeroSystems (SPR) 28 Feb 202019 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to Spirit AeroSystems Holdings, Inc.'s Fourth Quarter and Full Year 2019 Earnings Conference Call. My name is Andrea, and I'll be your coordinator today. [Operator Instructions].

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

good and Andrea, you, morning, everyone. Thank Spirit's Call. to Fourth Quarter Earnings XXXX Year Full and Welcome Avey, of Ryan I'm Director Investor Relations. and Spirit's And President with Vice and and Spirit's Officer, President Senior Chief Executive Suchinski. me Officer, Tom today Chief Financial are Mark Gentile; and by outlook, questions. regarding our After we Tom performance take will opening Mark comments your and Instructions]. [Operator

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

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

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

understanding VP from that, Officer of roles and Quality, the our our was external both stakeholders. XXXX, Program. everyone. held Year to Fourth and XXXX. a and of as XXXX Most internal Mark finance business relationships Welcome before where long-tenured Mark Thank Spirit's good is Principal with by today of and serving Officer, start XXX from brings Controller Call. you, Earnings Chief key Mark welcoming our Suchinski. to XXXX he leader within including Spirit, Accounting recently, to has morning, the Ryan, of variety comprehensive particularly and Financial to team at new a Full a XXXX Vice and strong I'd respected and He Quarter President like

expectations MAX Boeing that in I growth for The MAX. by Air backlog strong in Let's the current regarding significant but remains move at remain outlook remain confident re-emphasize the we situation healthy. challenging, be the MAX was long-term to XXXX will impacted have aircraft traffic and on while aircraft. been is X.X%. X,XXX cancellations. for coronavirus to the approximately at solid the long-term want there no XXX growth the XXXX

to traffic, the MAX short, and including and is air for the of important critical Spirit XX% fuselage. the aircraft aviation of the the the an given global is high The of entire Spirit meet MAX, the of MAX the demand narrow-bodies MAX's manufactures range structure mission. suppliers key system and utilization this And program. one to especially is for the In

and support be a program, return to it as We to the partner other global will we they and to are the safely service. with proud Boeing MAX regulators FAA on work

in cost delay Spirit levels to Given of actions. January our service, On to the on to December the immediate do December deliveries and a in suspend the structure began taking directed decision MAX of production re-entry December XX, XX actions Boeing to XXXX. same beginning suspension back XX. in the took made with on We align expected production lower announced we a number and

Oklahoma. implemented of own our workforce employees in in and XXX approximately halt suppliers deliveries Wichita X,XXX directed a We we Spirit. to First, reduction employees incoming to

we tightly a expenditures. also executives program discretionary led teams internal CapEx hourly all our created both most initiated Further, retirement senior voluntary the reducing manage salaried We've all and also expenditures. workers. We but for to by necessary deferring indirect of and are and spend, control

was extension X,XXX the so we agreed for to with contract expire workers We situation. previous union years. to this year. extended on on June IAM Additionally, the approximately the set work we could MAX early XX solely contract that X our The focus jointly IAM of on contract for

deliveries XXXX. with regarding agreement and for Boeing On January XX, we reached an production

compared XXX XXXX. deliver produce shipsets will in XXX in and to XXXX We shipsets

half to do until of deliver the production to year return the back XXXX. deliveries through in late restart XX% the XXXX. coming ramping per not to shipsets slowly XX We month up will months, expect in We about

timing MAX including agreement on assumptions, several the of rate. Of XXX based return course, Boeing's to is this the expected service production and

addition, of pay million will X agreement, to $XXX In Spirit, consisting part Boeing parts. this as of

The support which of repay stabilization, is our XXXX. in million of part million inventory first production $XX $XX will and in we

agreement the contract is part received in of XXXX. prepayment XXXX. second the years. $XXX advance It an through we $XXX and previously terms The is for over of repayment last X until million, Other XXXX the the XXX which deliveries incremental MAX million next extending extending expires the year include

to agreement XXX also the health Spirit's monitor chain. creation supply Importantly, the of includes Boeing-Spirit force MAX the task joint a of

airplanes this compound its years double-digit annual for advances resumes and future, growth. easier the in production be As per to reasons. we Boeing number will to growth of execute This of a strong XX year month several target for of us expect

First, we already XXX% production. to have MAX transitioned

MAX. as increasing the rate, we Over NG the are are same the last in produce which were about per Today, we still NGs we only P-Xs X the the month. years, few that to at average shifting from for Navy, the time, aircraft

per the the and we tooling produced rates. we at in each experience have We early production grounding. XX achieve XXXX achieved the of MAX to place up capital to that level. in already month, higher going We have levels see just these And aircraft previously to have to production up which all we're prior to

advantage improve slow back levels come higher our taking streamline train efficient more to flows of we period process workers, are manufacturing we can of quality. our maintenance with Finally, do so factories, the and

And X wing things These full operating forward box transition a rate XXX identified this transition global projects logistics leverage during for the pulling and forward number the projects initiatives product center, in include optimizing can period fuselage flow we harder be the of for have fuselage. separate sections, our We accelerating would our full digitization that digital achieve the new like of system. production. to

to focus want and for liquidity, which us a I near-term cash now. is Next, right address major

of cash share create helped pause XXXX. healthy decision with our to to end Our cash repurchases, a XXXX strong the by performance, combined balance

on the XXXX our ended Boeing in shortly order after with revolver protect $XXX balance in $X.X December sheet. late billion we us We million our Additionally, cash suspend uncertainty. on in to directed liquidity production to proactively drew given

Given terms half be program the our represents XXXX. of halt cash slow ramp production will of in of first and cash challenging contributor revenue, the largest our and flow is production XXX half subsequent the it for

We just proactive have in cost measures liquidity mitigation of to number described. actions improve taken a the our near-term to I addition

Let me go over those.

Spirit, quarterly until $X.XX production the we levels. XXX of program significance at preserve are to from to liquidity our to higher dividend Given $X.XX reduced the rates

of XXXX until cash agreement agreed April from XXXX. above, million our repayment XXXX stated we that advance we deferred also the $XXX As from in Boeing

matures earlier. into MAX, ensures We the of are to delayed a entered access $XXX short-term additional this revolver. we cushion, to them. of in loan or a funds term we liquidity have million with pay off year this draw XX This market quarter our the also after The facility to facility need to days bond plan the XXX is provide the ourselves shorter-term recertifies additional longer-term third is in which FAA if further raise whichever planning financing, capital the funding some use To this year. including

Asco X In this expected cash and business. announced close previously Bombardier's have terms aerostructures uses, acquisitions selected year: of assets of we to

$X with excited All X defense, which are in defense-related aftermarket our smaller detail and these we'll of will paid. deals one these X acquisition Airbus $XXX very remain to already closed content. we cash closing of committed contribute of the profit fabrication at acquisitions increasing positively has all been addition, billion am our I strategy aligned to acquisitions, years. about shortly. require in our which coming January, revenue, XXXX, We and flow about, go cash which In of in of Collectively, these and million more into

since MAX our our cash liquidity through grounding, we mitigation proactive under management likely to the actions near-term As MAX result position the in are sheet a of scenarios. situation manage and balance confident

to Boeing for only while units of and the Once XXX quarter shutdown the levels. in recovering to reduced strong in out resulted holiday a production loss caused MAX, see of QX our and Let's XXXX, month they had mixed. production was production XX to delivery XXX, our from that on goal overtime our system by aircraft resume then to quality return million move meet of us plan. we QX. to historically and On several a take as $XX spent on which performance target the we margins a The production to disruption stabilize our in our we requirements quality forward period and per suspension early to on and to we announcement money Performance extend significant is delivery focus rate XX contractors XXX QX in saw now.

as equally will on inorganic quality time priority. important, improving XXXX, slowing of diversification and not rates At the are be and while managing production higher our ramping strategy. #X and same For to XXX we long-term growth down our costs

Airbus Our strategic growth inorganic for defense, priorities and are fabrication aftermarket.

decades and we in materials, combined industry-leading XD company national source advancement as applications sole base Force throttles has over Department strategic to of capability requiring a its as the creates defense, critical defense FMI performance FMI on completed small legacy objectives our weapons, cones is attractive defense the earlier, strategic Their acquisition advanced vehicles defense applications. very the aerostructures, primes diversify composite capabilities woven hypersonic positions with $XXX for to priority. Spirit's a I specializing couple As a which on above degrees. well several industrializing an Navy strategic essential growth mentioned in the hypersonic defense but are Department business. as missiles, earned programs aligns makes identified and X,XXX expertise industrialize has they FMI of expand a high-temperature primarily next-generation called for Acquiring several FMI in of current and company technology last in million. of Defense for composites, FMI's materials of on January, missiles. Air strategic and on programs on is high-temperature state-of-the-art with Spirit's FMI FMI Defense. partnered several temperatures and with the technologies customer the defense with carbon-carbon like nose

our and fabrication footprint. Asco acquisition will The Airbus defense increase

the positions exclusive for Asco's slats Airbus mechanisms. revenue XX% Airbus and is with on sole programs and wing other source all

defense and the fabrication Asco also capacity. program content our our and F-XX capability grows on expands

resumed its close to operations to has all transaction experienced XXXX. Asco on it we track cyberattack conditions remain last meet the year, this following in the and

AXXXneo state-of-the-art the reverser. AXXX our adds and relationship the fiber AXXX Spirit and doubles and composite and Bombardier with of carbon positions the used product is next-generation portfolio. The our well for aftermarket also acquisition long-term aerostructures the property wing jet acquisition transfer infusion in narrow-body our which high-margin the fuselage, acquisition intellectual on The aircraft. wing to revenue business form This resin fabrication adds thrust significant through Airbus propulsion wing business solidifies

later to this We this on expect close transaction year.

With that, to through the Mark you lead XXXX financial ask results. detailed I'll Mark?

everyone. morning, good Thank and you, Tom,

want Board I begin, to in asking on take me thank I the new Tom their Before to and this confidence role. for

aerospace new finance I'm I to have navigate While us position, are forward XXX that my the resulted experience strong to I'm uncertainties future challenging not to and look across not and optimistic operations situation to only am the about prudently I help times are ahead. the right that the MAX the the but also the new Spirit, for and managing situation. company's through way, am from we challenges CFO company. I leveraging These confident entire in industry. the

accounting As we previously review. January an conducted XX, company on announced the

our of of As a did to end those company review incremental appropriate that we results the concluded it with have liabilities financial and contingent accounting contingent the certain quarter amount less third respect After that an have the the potential is in third potential its amount liability review, material quarter and comply contingent of statements. should company to to restatement appropriate established does after require than of respect processes a in third it our received liabilities, recorded with results with This quarter QX. determined $X conducting the not recorded the million, accounting the result not the financial XXXX. of not

in material financial However, reporting. internal control we noncompliance the have over that resulted weakness our in a determined

of fully expect remediated in action We be the corrective reporting end weakness in the place by year. material financial and have the to

today. a have I deep to ago, Since Please Financial as into move the being Officer a results financial about and you dive confidently X. company's can month for Slide summarize appointed Chief done those

aftermarket year. by volumes for mix. XXX XXX, was and was XXX Revenue growth favorable production year recognized XXX increased the prior activity of X% higher billion, revenue on the programs; the AXXX from driven up higher and on the program; $X.X This model

the the earnings the to EPS aircraft adjusted by higher the year-over-year reflects to per related announcements acquisitions Boeing's on program, excludes program programs. will $X.XX EPS XXX to in profitability XX which XXX from reduced extending turn now from losses offset accounting through losses absorption We The recognized voluntary second production due impact from impact per quarter Slide grounding, XXX program on reported adjusted current XXX decrease to XXXX month; now largely the The to the program XXXX, production fixed forward line and XXX on block, cost partially share Let's and compared share close XXXX. the The the to retirement announced of forward in and runs due decreased resulting expenses the of X. impact to in the XXXX. per in first of quarter the resulting on of of $X.XX of unit MAX volumes the the XXXX. primarily XX adjusted EPS

As quarter performance Tom mentioned, mixed. was fourth

cost rate in have fixed efforts suspension call, led the costs Also, XX we impacted on quarter. to continue XXX the earnings contractual per the on a costs quality. as step-down last to was number to elevated increased in AXXX fourth absorption on there to improve aircraft our XX fourth the due which production disruption to program the decreased contract, recognized In the of price mentioned of impact being XXX to The in program XXX production quarter. and also from month, on accounting the the addition production units the

asset was loss a a of type write-offs also These BRXXX a quarter extension, few nonrecurring items. one-off due items fourth the and by the Lastly, other to impacted an number additional block program smaller include forward on items.

Looking recovery from that normal costs XXXX production will financial recognizing note GAAP, to contract the XXX important ahead schedule per the production excess it's be MAX production to from reports, and we costs. resulting separate subsequent suspension

will they spread idle occur abnormally segment which recognize will to over or unallocated We and as costs be recognized low the subsequent rate opposed period Further, normal to periods. related in sales. to costs allocated contract and as which are these of excess which reported multiple be abnormal plant accounting expenses cost production the abnormal an could in

associated the and low As the well period as the in results a continue resources quarter rate reflected are utilized the capacity. until production will result, suspension as at XXXX excess production production subsequent costs be these beginning will as with normal first of

reductions, statement. will such reported Additionally, as those costs to relating the include which separately related to on expenses restructuring, be income workforce

Adjusted by acquisitions, cash in compared free free to turning Boeing Now lower X. XXXX. driven on million This quarter, our XX% for the the flow exclude impacts focus flow continued year-over-year increase year capital capital advance planned a from of taxes. spend including well on factors, $XXX a cash and the received cash cash Page third to was million million working to reflects $XXX as as the $XXX several in

were year $XXX to the million XXXX. in for expenditures Capital $XXX compared million

deferred took to could actions delayed million be range or of During in $XXX XXXX XXXX, the which plan grounded, the all projects $XXX order our million. we process to spend expenditure reduce to to capital expect amount was range expenditures. of order on $XXX capital half of the first to of million soon to determine during We million after $XXX MAX review million as around $XXX to to spend previously and compared capital continue to a forecasted in this

we that of the with of our structure for cash. assure levels cost difficult lower burn year, to year. XXXX first a negative free be align in of adjusting you our the will projecting of I overall we're flow can the cash And and liquidity production. managing diligently during majority the especially terms cash XXXX half Currently, will be to

of end rate MAX cash a mitigation expect the our we we cost as to realize on the increase flow and by begin the free run actions, basis positive production benefits rates However, year. of

will to our also and of amended production from covenant stable cash and flow from year to of demonstrates The performance support MAX addition, provide end full relief in the expect a achieve first of increasing which XXXX. acquisitions. credit relief and our Spirit. In agreements from the point, and covenant rate we the lenders the throughout the earnings confidence quarter we year benefit contributions through the At to sustained

our Now billion, by increased production year. Slide to aftermarket year XXX in as basis, program. due prior Boeing's primarily $X.X higher the offset in to result production Fuselage normalized changes programs compared program. the activities, fuselage XXX prior segment to improve volumes year segment XX.X% and let's costs to performance On to for recognized volumes of program. the the XXX partially year, the up XXX from lower periods, decreases margin to the segment quality due and the last higher was slowdown the on losses on to was after on X. a primarily X% the from forward incur due turn in Boeing and announced we XXXX, revenue on continued In XX.X% Operating production was efforts costs the margin XX.X% XX.X% the rate related and a compared estimates fourth to quarter, reversing XXX XXX

We rate production operational to lead ramp slow forward. the and throughout year this in system, lower optimize are full taking suspension metrics of the costs and will going to our improved production production which further advantage

the step-down AXXX impacted profit. program fourth quarter on Additionally, price the the

XXXX. for due model program. normalized $X.X basis, as well up volumes In mix margin compared prior change compared primarily to reversing performance XX.X%, propulsion was on estimates, the year XX% our and XXX to production a XXXX, in XXXX, on driven compared was in segment revenue was after AXXX XXX year, primarily as the favorable and to to XX.X% On model margin XX.X% in XX.X% program. up the billion, XXX the on the by propulsion XXX, mix higher favorable programs Operating

XXXX, on Boeing's impacts, result program. decrease, wing driven $X.X segment program XX% as forward wing losses well a Airbus after a rate the production estimate pricing XXX on billion, In in revenue in margin compared to as in reversing the XXXX. AXXX primarily Boeing to XXX basis, compared due normalized programs. of the higher for as was compared production AXXX by volumes XXXX, On Operating XXX margin up XX.X% was the and was XX.X% recognized performance year on X% to XX.X% XXXX, to change

not a his As And guidance of opening a return there in surrounding XXXX uncertainty time. we result, Tom will is this timing the as full of to providing lot mentioned year MAX's at still service. remarks, be

slowly expect in the then and throughout gradually restart March ramp production We to year.

year, For produce XXX a of MAX produced be during which half the we to the second will total plan XX% units, year. of the of

We production rate of end expect the by a month XXXX. to return XX of to per

the that opening to the we activities. in the I of as in in during exit to you Cost time reset Spirit, low work our about been a right to with with I a have our future. Recovery our our current But captains am and feel stage will costs to do. a prudently volumes. optimistic cost executed remarks, and reduction are very sufficient my structure the and plans lot for better I are and begins situation quarter from managing and detailed said through cash improve second can way, appointed increasing to production lead confident I that meticulous aggressively MAX cash cost have to the production the very assure is of our year flow of generation rates year being operations. align overhead plan stable challenging mitigation We manage very production. realization This process fund to we

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

before closing Thanks, take I'll some questions. make Mark, now and comments we

rate quality, diversified the we production And to reductions and on years. year: assembly Our years. inorganic time, integrate us help of lower and we Bombardier's work goals, the higher production focus announced next costs line. along our Executing company that the and become XXX same is improving to the especially in of over make At cost transformative assembly improvements aerostructure ramping close on managing more leaner, to several and leverage will will sustained current and acquisitions business, operational FMI. over XXXX a a rates X will the priorities, growth, Asco lines, coming to with we the these last the X quality the the

and remain on future The MAX commercial As I a structure, has we aviation for earlier, economy. U.S. viability Boeing Spirit including the of MAX, the ensure the Spirit XXX of is the outlook Boeing fuselage. the most entire to the supplying and look of is partner the MAX program the impact on overall. proud tremendous MAX global the confident to the began success critical supplier for aerostructure and U.S. aviation critical in long-term working program, forward long-term the remains we a and the XX% with of program. the to

we'll With to questions. happy that, be your take

Carter And question Copeland Instructions]. Melius [Operator of Research. our first from comes

wondered a a microcosms but a I this liquidity on understanding very is I mentioned the you challenging sort bit chain if us -- health. is the you I'd collection obviously, supply you of imagine little a you that more standpoint of might look for supply similar. give wonder, chain beneath guys, situation from

how do Tom, anticipate color you would revealed Just what force support us to that to so And mentioned pay to be of you helpful. you out can when your anything on you kind is up? looks And ramp suppliers? give that any today, back risks try about task having

across efficiently to to start Great. back the we ensure suppliers and supply with critical and imagine, want to because going health we the levels everybody the Thanks, And and the eventually, particularly sure those that all parts but with Boeing, are chain to of and up. quality. can rates strategic do the start can program. is get meet rate it high going long-term are goal, producing, make after our increases our of as into And service to business, XXX Carter. along us viability Well, you partners important of most

ensure chain. in healthy have to all our of supply So we a interest it's that

suppliers joint Boeing a So also lot who we've to directly. that end, supply is because supply we've what task a formed the us force of Boeing done with

crossover. so And of a lot there's

their and to reviewing are through flow, position, particular and going there's what which their understand what that the good performance develop debt different And each is operating all terms, terms suppliers their understanding their situation, solution their we We they're cash jointly doing and a for situation, then So customized solution trying their payment supplier. levels, liquidity we of for rate the that can producing. a their a at lot suppliers. of go the it we look of levers in inventory at is through

discussions goal system get know Now supplier all we works up and our increases the as very meet solution They're you is to imagine, come the for fluid production whole and stronger that And is through can a for come we with we and situation the goal to ongoing. these the that that are changing. are dynamic, because rate the very works each that to them work future. this to with in together going able with emerge

And you how suppliers reviewed many point? the have of at this

formal day. I'm We've to have them. with suppliers open every all And talk reviewed suppliers. these a lot. we to the to And talking reviews we're

this we're make So going and we've order got all help suppliers challenging in mechanism this that situation. set through we get to it sure to the very up use

from Our next of comes question Jon Citi. Raviv

Would just you tail, on even point? that the at we debt friendly facility the debt you've you going for And the mean? X 'XX, term, Are dividend 'XX? What saying going context at this the I reassess What frankly back you on new do the even the you're look in point? in some Can of at all place. not, sort to the midterm, does into put mean still raise can sort to all deals? also of going -- just forward? in repo short-term does shareholder think, you're not near Are stuff. recent downgrade, allocation moves, flexibility capital the able Tom, more you some tilted put

that Right. couple of liquidity situation. Well, the a impacted things whole happened

was an The and production first what's on impact turned out had into quarter. the flow and the in our for the system our earnings cash of also February in first thing suspension January

debt. have We bank

danger $XXX first through loan. in covenants bank operations facility which been million quarter. term normal revolving that course would $XXX the debt we And a million breaching were have the of in So we there and have on of

the we thing negotiate on the So to those first waivers did had covenants to bank we loans. was

& you we did addition, get In both X as notches. by downgraded and Poor's Standard by Moody's mentioned, also

And so high yield out some put us that took the investment which additional situation. of on into grade pressure

and did put we allocation. waivers. renegotiate those So That in our some of terms capital did covenants negotiated restrictions we

investment restrictions of to until is return dividends back of system, MAX We So to is, we is share. to share to on increase previous we do the couple getting the the over But $X.XX not focus production executing flexibility of Difficulty]. one a make next the grade, that goal the our have about levels [Technical repurchases. up back years, really on

the conference get We the me, Thank This seem them conference you. operator. operator. have connection we Pardon is Please lost is this to the while with speaker location. continue reconnected. hold to

reconnected they they left proceed speaker and may off. location successfully the have We where

me that for very me just much through, technical everybody, much. apologies, how asked allocation. issues. you Thank about But got the capital And Jon of Not let had repeat. sure so

the quarter obviously of flow our particularly When suspension first the production end that financials, at is our profitability because of our cash we and MAX production. our learned the of impacted XXXX, half

our put a that loan. at so term and us of covenants risk breaching of And million which bank our $XXX on our loans, consisted revolver

In Moody's and downgraded us X addition, Standard Poor's notches. &

restrictions our we for our doing early and since no went renegotiated grade, to investment some on to related that. were and in we're result kind at capital of part year, them But period have as of covenants, our least particularly banks longer that, time this new we the a of doing covenants, loan until next So successful of allocation.

we down second on half regain do go focus permitted execution of repurchases again the increase really, as a as our future to the really share mentioned, And Mark once until years over repurchases in debt dividend. to our we will time, production rate, grade, to starting focus are can cash. then resume to X.X the get will stronger we But flow we Specifically, goal position. pay can year, to in not continue cash grade. MAX QX more on cash basis. is the increases investment over we're positive investment the share immediate by much reset to back for and up a And We be the dividend so, run or next generate is the rate and in

Our of Barclays. from question Strauss next comes David

question then a follow-up. clarifying and One

flow Do that talked get there. lower advance? given is cash of Boeing on you had much include terms or down would question clarifying then So excluding that what XXX does Boeing in XXX, said pricing relief I that guess pricing Tom, be step the headed negative. the know any free the I XXXX on is, you rates? in about advance we're you've to And

flow over Okay. Well, Mark question. me on it XXX question, the and then free the cash I'll to on turn touch let

David. Yes,

Our for for represent that Boeing, negative price does the the prepayment and $XXX advances got year $XXX which of inventory cash million projection and million in flow million roughly stabilization. include for we $XX from rate

Okay.

with That is now rate. to different prices than on essentially XXX the is fixed of the agreed that to XXX not it and The to the Regarding pricing rate. we are do as program have question the where in not. index we is rate Boeing indexed changes, XXXX. answer pricing But changes XXX, out terms they That's no.

from comes question JPMorgan. next Our of Seth Seifman

Just of follow I two guess, to kind question. on last David's quick clarifications, up

goes guess rate unit XXXX. So you think a out in said early XXXX XX a month, presumably, at I of I

an a rate month? hypothetically there profitable to is the cash opportunity be XX Beyond is that, if

is XX XX yes. after XX represented answer a million the rate $XXX,XXX, $XXX,XXX. about from then new to to and from The is cut about so headwind of Each XXXX. The price $X.XX XX

now have got we it. more time to the do extra so to but And $XXX,XXX, up we make

The cash flow aspect program. XXXX decline loss fewer is period forward position early the up once in cash XXX time the now And But of to the a consume still we're we units, it's which is this fully the in other until XXXX, going line XXXX. delivering and we be on be cash to unit is positive rate negative. expect XXX in because get flow less positive we

still that's million undrawn? be clear, $XXX And Great. Great. follow-up. just really quick loan, the To then short-term

is. help covenant by after we to Yes. third And we MAX that, by first. whichever the And the XX comes really either of us it days get the don't It it vehicle this on draw recertification or later Yes, renegotiations. said, a was to expires quarter through as expect the year, it.

next Cai question from Rumohr Company. of Our von and Cowen comes

Yes.

the comment about negative for flow your cash First, year.

You mentioned great. cost Is you, XX% through in of of a going of big that be those be cash you I us pretty second. the you like in which the guess, because expect implies going quarters, laid sold? positive Is to you unallocated to third Wichita? off that be first goods would already and and to answer could be yes, that kind basically of severance the Can A, drivers? in the deficit some mainly questions, if And less walk fourth

Sure, Cai. It's Mark.

to -- relates Let door. to of accounts our $X me end to per you any generate drag limited payable walk rate related remember, the negative you we books. have low at and We cash balance first cash in 'XX, Obviously, airplanes to big through have to impact of cash negative not in a at on month. the coming a going have But impact therefore, capital. that. production is had quarter to billion very going ability on working we're our A were revenue, production it rate that's of essentially the as a going the to producing is XX or

and suppliers. have with our to most going XX to liquidate payment XX we're between our the of therefore, payables, of So days terms

therefore, in quarter. and obviously, some be will revenue biggest negative from to book back But on to some big down drag of cash. and up us to allow is around the XXX lower Obviously, have a XX, year. the first down slowly accounts volumes going in to the also to going half be specifically here on start the working second start units production So will payable in capital to generate the of We'll impact revenue cash. ramp drawing quarter XXX, which consumer a will start cash first

payables move it's back again, have And which, rate slow costs at fixed will the a half costs the costs, the year, as also abnormal day, not revenue type excess the of first burn end drive down of and of of have back some combination the into ramp half, we items, of we in cash. and those the that of So two the up. the we will the consumption really,

Yes.

the are actions the position. taking, helps the of that all they actions cost. our start or year, mitigation our cash and mitigation we're cost which the layoffs So in to half benefits reductions the now, The including back taking accrue place cash of some in the indirect

mentioned announced So you you but layoffs, layoffs. already

of the this to the as the impact the hitting is really first in cash in is opposed layoffs fourth? quarter So

WARN And Cai, days our had XX provide employees regulatory the Act. WARN, impacted pay. to were of we of the were required that that's to upon we pay And worth by reduction that part right. process,

their essentially, those reduction, that the workforce we're April. paying so by of employees were and the wages impacted first quarter the essentially into end And through

as going cause to drag flow And so first negative in therefore, some on well. cash quarter that's the

from Kahyaoglu comes Our next Sheila question of Jefferies.

you MAX Welcome, expectations the once were segment whether And that about a alluded some producing rate fuselage in said you of XXXX? maybe production Mark, month think about to you given run we fuselage rate X.X% QX? still do corporate normalized margins it's charges be rate for reach Mark. would we at line. you profitability a How MAX of margins the for talk in in Can a that XX on QX

Well, there were impacts. several

notified production to we contracts we periods. January. by had were go had us. of of down the slowdown, impact pretty We the some actually contractors a hard deliveries. the the after catch in and in from over quarter. some impact on ceasing which up accounting to running a of they on shut extra the Boeing some were due also slowdown, That But result profitability to early that that in couple then we we time that negative and quarter, had production a headcount weeks big a indicated, December Tom standpoint fourth factory overtime were had also as last As And

split had And so to we our accounting contracts.

We had a in negative on consider have less be the units in quarter. the accounting would impact what to contracts, normalized also I fourth margin a which

this and XX, our line I and of fourth tell really part have and on segment. initial types quality seen guys to QX into of XXXX would of in efforts we have the margins get really, it we a margins the you 'XX the the as quarter much will had really back the XXXX reach overtime more a effectively go that there's back We're for some target go XX, in to us you, XXXX a early the rate get as bottom and that have the up in on unfortunate lining And much fuselage little margin more a and getting lot of cost to silver situation to is, as frame. good past we time in factory has doing from standpoint allow operating a here. to things indicated have. Tom And really XX.X%. back and negative as up slowdown and impact a quarter So of allow those us of chance efficiently, relates profitability that the the is, will

to that. just me add let Sheila, And

get absorbing impacted chain historic it propulsion that well. we terms you to a in things pretty now not about to is margin. one XX% absorbing. But and quarters XX%. rate the think the think few fuselage quarter how were all that really it process But now really I and of the expect fuselage Once I improvements reduction see lot actions margins we and back will the the summarized margins we that, growing we've is, this of start we're Mark we get is the fixed right in levels supply cost the with terms been last which of back talking to of fuselage by in took overhead really

last XX% So versus margin the this was quarter year. XX% for propulsion

is starting up. to bounce margins the range in XX.X%. see to going to going fuselage as get relatively We're their continue. margins to XX, goal overall of margin, go to we range. XX% And back really about our be see the is, stronger the to XX% the again, up we're propulsion That's at will Mark levels into that historic but XX said, propulsion, So once for

next of Walton Our question Myles from comes UBS.

take would What's next you externally milestones to XX% of the Is contingent there start to Boeing month, clarifications. the that those mentioned accepting first One, to deliveries that's guess. couple implies of to the certification actually delivering A think, in I and related for anything required obviously Tom, place I production starting deliveries production? half you and the restart start for fuselages? would

no. is The answer

production expect decoupled the the that. said maintain recertification. they production they from could supply so the has of that it midyear, viability to system the than Boeing essentially the the were could earlier they think but start going in They that I that recertification chain

So decoupled. it's

the already of the to sorts this. all built there's into plans now, assumptions be recertification Boeing that restart But for Now the advance production right will plans has even are announced. that in of

the half the Okay. I in Previously, Bombardier, And clarification about one then the XXXX. other closing of you mentioned talked on of first think you XXXX.

like moving track now looking the second is half? first half still it it's the to or So for on

No.

the XXXX, half I think detailed the all track. through achievable. for we're first said half. still closing. on track think regulatory first And but We've It's we is I made working still and all filings the on

Crédit Our of comes next question from Robert Suisse. Spingarn

this if disruption And and of wanted past, the said sales. I margins. think level go year to high around normalized to conversion year, back free bounce on a here go X% we next move to you're your cash could, Tom, you I X% going back little and to

flow can XX taking stays to rate So you gets is, the and cash you've new if only account XX XX? to on the mature does on question change businesses into back And at MAX bounce answer long that how that term bought? if

level of committed to answer The to Right. back that getting We're cash generation. absolutely. flow is

cash MAX and of be taken accretively flow. cost terms the positively good. that's of a flow contribute more should cash production range, generation for all process, that actions we've once normalized into to back in level think acquisitions with the manufacturing gets us. XX I the and pretty all And The

X% our X% So to goal. certainly is

is range recover headwind with going goal even But we're X% Now that once the particular. back at XX. little go XXX up be they to Asia, to a our to bit of the to at into XX, Boeing have once that gets expect going XX has orders indicated XX to rate. in X% in back of But production MAX up

Doug comes question from Bernstein. of next Harned Our

This is in standing Doug. Caius Slater for

margins. to just Propulsion want to I the So go Systems back

in said parts that the margins margin got And you strong why been the towards of seeing you're thought there the going outlook production, you MAX. years are lower MAX now the and were a to of you shift what shift's part confident stay you other taken the A that Tom, place has are of that couple So there. and there?

we're is, most in we parts. the those the in the there had Well, reason configuration change confident of margin outlook the

the it's pylon and thrust reverser. So the

look you NG, thrust about was in at the say than different the the the it's XX% but the most of always change and if we MAX, So reverser. pylon

rates. So that new able meant all and essentially good we negotiate and products sourced market out the to with suppliers we're went to

So a That for the sourcing from certainly reverser. the products for new of lot pylon those came thrust the benefit and continues.

the have AXXX we on fairly at AXXX. pylon other the Bombardier. thing is low is, The a it that under And rate a program when another CSeries the was was

and increase that to do the That program is good time, will now Now margins rates the seen for the up that to to so. start to is a particularly propulsion rates program, that the continue also ramp And program AXXX. really our over very it's us. has contribute as going Airbus we've significantly over taken

Wolfe comes of Research. next question Keay from Our Hunter

Hunter. seeing you're regard supply actually chain? Are Any be about little Airbus the a in seeing in shipset you Mike bit Can Maugeri is the This from ACF what you on to lower Airbus would helpful. pulls AXXX, color in talk for the delays?

bit little a a seen we've say, mix would I of shift.

And future. little shift. shifted would same. the rates We've in in seen of looking the say, has studies of at bit the continue to had for of higher skyline AXXXs largely rate a in our the AXXXs, mix a are, Airbus just do some I we we terms So rates but to

see with they AXXX we Toulouse, have as line between shifting will some and the we've at normalize new all as AXXX in is it, point, up production the time. But so in seen Hamburg resolve this some that And open issues the production the the they over of and mix AXXX.

Arment Our next Peter of from Baird. question comes

treating you're how into system? get Tom, maybe in production are the production better a be you're just fuselages going understanding on storage, can those we the side to feathering the that how

Right.

had the XXX adjacent and to storage on McConnell that ramp in about right we've is they're And all Base. wrapped stored Force Air So now.

time good of And And is years, level inventory to off one as the things next that so back XX, sustainable by no the want. the over that get the that couple of we've goal learned we whole that the having we that. is burned that a Wichita a be up and It ramp thing. is there to like anything XX, Renton things, to to through should very ensure between or we enables with are this is process train us buffer delays issues to catch essentially

goal buffer keep we the cushion in is to future level. is, that And So at XX be sometime in we the the by get XX so XX we is the or will that system. production a we'll can out time that always probably

but burn goes couple XX. essentially XXX, will off. burn and until Boeing's the rate. year, us we next from will years we up in then go buffer lag we grow the it both still down goes They'll higher expect the Boeing will above up to us So over this But that we'll that production production and of than as get

comes from of next Our SunTrust. question Michael Ciarmoli

guess, should year we certification maybe at to cash to And To guess. rate XXX I see see? produce flow, the we cash positive, sort I flow free contract free to ironclad the to back slide? how just is if Tom, continue exit expect of with what at Boeing the

we the Well, that. the depends could obviously lot have that It change, with if of a they assumptions. things on change is Boeing. XXX Right. agreement And

we is So of in certification midyear that expect stone, that. but assumptions given a the made for they not MAX, I locked do think the to

we be going as said, it's a fluid. little Now to bit

will production that of the back year. in half of the XX% about said, Mark be As

catch the So have and the to slowly catch well. of work-in-process a then through we're couple as let off system we next in breath. flush production over start relatively to March, to And months of up its kind and May, of April going lot

March, because the low XX months, XX it's start over and gradually month, of at year. look course you -- if we very about in start increase again, So the average XX then over months, a the

So in XX, not quite a but sure to XX year, probably estimate. range, end up good is where the that we'll

the to about Got to then exit how that a cash year thinking XXXX. And you it. through or Is that or just additive be guys are program? you get going follow-up, as flow the

schedule XXXX know, the you as pushing is out. Well,

in those to freighter headwind X. that number more units this we away are the towards so are And shift little and units skyline. terms of going in year a and And to the of see from bit of the XXXER the expect

it wings, little orders potentially bit to year got month I because headwind out, and even above building But to So And had that, a for little that it's get is will great it. outlook program and bit the its that's again, took program terrific. year. flight. back spectacular for once very was the first probably flight, start this folding the this it's the saw it of its and just five year, last mean, compared it before a aircraft per up a a rate, of headwind those I a of And But once us. delay. strong they aircraft be that with It's aircraft.

Strauss Our David a Barclays. last question from of is follow-up

the the was it MAX. your helpful accounting of work Mark, how So will on description

these of costs period through have to At block terms going expect would a when rate normal flow as you in to period we're be the what costs costs you're way? normal they saying not in would You're taking and production. below

a get what we be idle once production you or to production say, factory required costs. XX, would to in would as we these and to therefore normal be rate type I get wouldn't recording back abnormal of the to be about consider

abnormal part, but being end be contained here you're the period XXXX, There primarily into to up the of in going might bleed XXXX. it'll for costs a bit XXXX. mainly little costs So see most in be

Okay. one follow-up, And other Tom.

experienced labor As green to labor? rather back to or labor bring back back back can ability about up rate, hire than you the think call potentially about talk in going potentially need and you your

bring Oklahoma. laid were to off. preference that people decision there make. be are was difficult about Well, the in a Wichita our This Right. back And in These we we would have our people people colleagues day. every X,XXX to with and to that XXX work

to goal back. get would So individuals first the be those

live. given could those goal last Wichita Oklahoma years look been new both people, going And jobs X.X need they in course, actually that job local to of organizing before X with a would period because Now to of up get to year, for prefer going and many work. all in that's people to in production fairs as possible as this where they're the to we're slowdown area we've

been in also are we've Oklahoma. well. companies, been out-of-state, coming or Now to not customers other who Kansas suppliers, They've talking as in

And Wichita But some like people who here state. leave really in may people in so living the the live Wichita.

mechanics for ground back. so experienced fertile confident this get has aircraft we And area have and of can't, But if even we we're we been can when very engineers. jobs, always lot a a them

that all confident be we first in the so desire Wichita we're people is And that the our of people this and need we'll and to part area Oklahoma year. XXX the go we tap to back people the bring earlier and But as and able up in commitment layoffs back X,XXX get the in rate. obligation were of

attending Thank session. question-and-answer The today's presentation. has our conference for concludes concluded. now you This also

disconnect. may now You