Spirit AeroSystems (SPR) 3 Nov 222022 Q3 Earnings call transcript

Good morning, ladies and gentlemen. And welcome to Spirit AeroSystems Holdings Incorporated Third Quarter 2022 Earnings Conference Call. My name is Harry, and I will be your coordinator today. [Operator Instructions] I would now like to turn the presentation over to Aaron Hunt, Director of Investor Relations. Please proceed.

good and Harry, you, morning, everyone. Thank Spirit’s to third quarter call. earnings XXXX Welcome Tom Vice am Investor Mark Operating President and are Officer, of Hunt, Suchinski; and Sam Marnick. President Spirit’s and Executive I Vice Director Officer today and Relations; Spirit’s Aaron President, Financial and President Chief with Executive me Chief of Gentile; Officer; Division, Senior Chief Spirit’s Commercial and comments Tom and outlook, performance we by our questions. will opening After regarding your take Mark

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

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

remains environment. make levels, supply Global the morning, you, quarter momentum call. Thank to a The the continues complicating the state. air in are recovery good pandemic fragile a but pre-pandemic to economic Spirit’s side traffic creating good Welcome toward the challenging earnings lingering demand of third Aaron, everyone. and impacts aerospace and recovery of

production chain of factors, and including inflation. this of challenges multiple to our in continue segments labor While near-term day-to-day face positive we for the all saw year, skilled rate first challenges, time from Spirit’s persistent earnings supply three for availability schedules, volatility operations

for including delivery Frequent XXXX free production units change, chain. supply XXX, challenges rates of the pushing us out for changes while schedule the and programs, do some schedule example, seen on cash putting not For and flow. since and AXXX, AXXX last our changes the quarter have create the we headline pressure

the also Earlier our addressed the While meet inflation. levels to which chain of we workers. performing causing Several part shortages labor suppliers year, has workers been in part by curve labor disruption, to same experienced chain, Labor supply supply many disruption had driving the in factories. retired skilled learning the were see a during productivity challenge. we a and including our of workers that is attrition, Many expectations, needs less shortages, the are our as and shortages have these of are issues continue longer the to in pandemic. recalling

to past. our gone As the we mitigate contractors, open been attrition needed, we we than of seen have higher To and in market lengthened we fairs, training job holding to have have on attractive and increased the program skilled have labor attrition fill wages. a have have brought this starting new additional openings, level hourly

lower negative we been have offering system in than bonus even which our shortages had and labor expected issues, addition, schedule These cash part workers attrition impact disrupted and shortages, In of for QX, in $X,XXX turn have Wichita. hourly inflation, in on production flow. in our changes, deliveries, a a resulting signing

we position. per effort full We XXX achieving this and of stronger month. target at to the but in tremendous to risk have start with this challenges to so XXX place Right obviously these a year plans There’s producing deliveries during continue address team. put our we XXX aircraft achieve team in for is our that the a target, XX XXXX we to the are now, delivery schedule rate making a XXXX

of for if rate most, XXXX. much, We expect to be at this not

when aircraft reducing overhead. time. be on and Spirit labor some and will the cost This profitable where optimization month, XXX enable optimization in have have focus at effort cost is now flow per at effort for that encountering, chain operations, a are structural cost infrastructure launched schedule, supply that supply remain we to may three and should which major positive areas, been ongoing we chain is the Spirit Given challenges and XX we cash

time While Defense our Commercial recover Space the to to are efforts pandemic, Aftermarket traction. and and operations more the from grounding diversify are taking more our into MAX & gaining

its Our grew Space & with segment XX.X% margins. XX% Defense quarter this revenue by

repurposing are some We to have more win Defense Strategy that been National excess application. Defense projects capacity new to wide-body important Defense of able classified to our the by

have to development, square programs their are So transitioned and tanker. in classified rate were a new will awarded Defense These when for approximately get contract X.X into to million far, we profit horizontal production. provide we KC-XXX full contribute the revenue but business. in In early the feet stabilizers Wichita they to September,

continue Berhad recently Airlines We revenue with signed The in repair MOU growth services control QX. billion also an We XX% $X for Space flight & XX% Defense Aftermarket Malaysia target XXXX. QX to over The nacelles to with XXXX and in solid saw margins. by business establish grew surfaces. segment

business We call excess our results. revenue turn of with third our Mark? to Mark through over continue to a Aftermarket target of will $XXX XX% the in to now by few on quarter margins for details take million more you XXXX. I

everyone. Thank morning, Tom, you, and good

actions of optimization certain it earnings these will a believe calls from taking and last volatility have over chain, this the we the challenged implementing production not supply are couple quarter significant pandemic, labor continue challenges some other Spirit continue inflation. pressures am through ongoing lingering XXXX due the of to including program. and impacts you a heard These weeks. to and schedule unique cost shortages, challenges very We additional to We experience I like are

XX% since to an in most were XXX Gross positive metrics. we Commercial higher have the improvement improve operational our financial segment time Revenues we while to this due have cash flow continued has are We year-over-year. to reported were significantly, since starting highest up rates. the margins And the began. slowly see margins production pandemic first is reported XXXX,

third through our of you Now quarter details let results. financial me take the

to This on the with First, was improvement on start production for from billion, XXX lower the let’s revenue last program. Aftermarket program the XXX same quarter two. primarily $X.X by Revenue was increased revenue, and production revenue on higher year. offset quarter partially up due XX% the slide

up the to third year. XX% period XXX the program in year. in more units deliveries third the quarter The to XXXX compared XX% XXXX, of quarter of to narrowbody of to and XXXX. in deliveries units compared Turning higher quarter to the programs XXX XX third last were deliveries. XXXX. compared same increased more compared XX We to delivered last Overall, XXX were with of third the quarter Wide-body units, AXXX XXX

third per last of to of EPS three. Now negative earnings slide compared $X.XX year. share earnings $X.XX, let’s to reported turn on negative was We compared in Adjusted same share negative the per per $X.XX, to period $X.XX the XXXX. quarter share in negative

excludes excludes This to XXXX curtailment well asset third Pension tax allowance, valuation deferred the A, valuation costs quarter’s as while termination the EPS allowance the adjusted the the of adjusted as gain. deferred and pension quarter tax EPS related Value Plan a

areas. XXX chain were cost to labor, The cumulative to margin unfavorable to program, challenges, while additional positive shortages million RBXXXX third disruptions were The in result the in energy and million increased capacity excess and XXX labor adjustments forward of pressures million forward We the engineering forward period. increased lower AXXX AXXX, The quarter ramp rework as of losses continue forward costs is compared associated driven XX% result and estimates. well negative specifically part adjustments and and $XX primarily experience the in as related losses reflects the million. losses unfavorable to RBXXXX forward by the by were cumulative slightly and production losses XXXX. with increase the current were higher XXX during programs. charges factories of other driven catch-up part up $X of other a as XXXX. current were compared further catch-up logistics, of Operating the costs losses of and shortages, see the the inflationary The third rates, $X of programs by losses indirect were quarter’s continuing of costs and driven our quarter on while a freight, supply and were production quarter margins $XX impact in This to

plan which drove income last of of compared the XXXX. the period undertaken special of quarter same due third included costs, capacity quarter earnings the $XX was each Other activities The period. each million same million to pension XXXX also million a termination million, accounting to were of that separately variance $XX impacts of quarters, excess $XX expense in third was third decrease The the for of period over in primarily year. $XX XXXX other in

million, the resulting U.S. $XX also company curtailment to the risk of third our Bombardier part of recognized benefit noncash the acquisition. to planned providing of participants, fiduciary XXXX a an the year, quarter the third termination. reducing the U.S. termination termination, in the to is the included future this obligations frozen relation acquired in certain market Plan gain plans eliminating of This this million future of by period, compliance as of In primarily with volatility obligations. we current The while closure we satisfies A. terminated pension Value of from In Pension defined benefit and charges and enhanced $XX conjunction employees driven quarter

Once next the this as $XXX the completed, additional to we cash anticipate in million. expect $XXX is noncash also few million reversion is the We XXXX plan finalized. over after-tax quarters range of in charges

annually. this anticipate we to about forward, plan million $XX Going pension the absence noncash reduce income of by

Jobs in XXXX. Boeing be Now repayment flow and customer to the million the was large which which cash million, into turning towards in $XX which AXXX used in million quarter by $XX to particularly (sic) was for XXXX, mainly $XX received Free compared Protection cash items Advanced negatively and by [XXX] XX higher programs. pushed operations million included the impacted AXXX from quarterly tax was the period the free Manufacturing four. that of been the cash million, deliveries $XXX the XXXX slide free cash Cash driven and same a on flow refund received of quarter, will have usage XXXX, for Aviation has on flow Program. third $XX quarter been cash the includes

disruptions, labor losses the as and from the ongoing AXXX, shortages in pressures. and supply as RBXXXX forward chain headwinds third on the inflationary quarter, Additional well XXX recognized

five. third result, negative million. the previous to along increase from This a majority on slide We we into As due to $XXX the current usage increase turn of previous we an through with the the to to this XXXX. $XXX quarter billion of million our debt. target $X.X quarter cash free $XX are the now seeing out cash our with usage negative ended and push on at the to of $XXX flow cash and let’s rate full of fourth is $XXX longer be million cash expect rates in the a that, free and XX than flow debt for and between of cash our breakeven stay Obviously, resulted million. year program the production XXX quarter plan. deliveries estimate the with With million plan Considering lower balances

We us options to it expect We will reduce economic refinancing environment. given to longer explore plan now additional the debt that uncertain our anticipated. take cushion provide than to originally

we termination amount expect million. million and $XXX in As anticipate surplus pension the approximately also earlier, $XXX from to this be we I mentioned receive the to cash to XXXX

performance slides eight. discuss let’s on our Next, six segment through

as across improvements quarter sequential all the This three segments, year-over-year quarter, improvements well across XXXX. over as second each we of significant segment saw

to on more let’s margin to third positive to due XXX slide quarter compared partially and XXX, on improvement XXXX, get quarter XXX the of $X $XX the detail of in during in million quarter in the XXX. in losses XX% $X compared higher and the The costs. higher on increased primarily last losses on Commercial offset million, unfavorable million XXXX, forward million to X%, adjustments. included of capacity by revenues In to $XX catch-up period the $XX segment of during the estimates Changes estimates current The segment compared six. production of due lower In into AXXX forward year. volumes and segment of changes capacity unfavorable lower Commercial programs, XXXX, same on had recorded million. production same cumulative increased excess of the of comparison, negative cumulative same volumes to and the period Operating and lower period X% the for excess adjustments catch-up XXXX. cost $XX million the was Now

partially program XXXX. million, capacity and higher development P-X quarter cumulative the in quarter catch-up & and CH-XXK to the Now same costs third seven. to turn $X on of lower the on forward of margin program. of Defense higher million in increased losses higher recorded of let’s segment compared production cost current classified of The by offset The forward increased compared to revenue losses, X% cumulative to XX% favorable million, Defense the period to in due XX%, quarter Operating excess XXXX, & catch-up the in Space to adjustments by CH-XXK forward each excess and improvement compared costs period slide favorable due third losses adjustments and the was to XXXX, under program $X of million activity. Space improved just compared $X profit $X XXXX. of to Sikorsky and

of overall primarily sales, well in period to XXXX, the revenues repair MRO turn For to to slide our activity eight. prior higher results, XX%, segment part to in margins spare same Operating up were sales and for compared period spare XX% increased as margin same to higher quarter higher maintenance, due part as Aftermarket the XX% the Aftermarket compared XXXX, compared the due on activity. to and to year. let’s

customers continued new to delivering see Aftermarket from and are the labor to a we closing, market, chain, our pressures remain this the segment. win focused schedules. on pressures we our the In we in business and production supply as through commitments customer strained growth Our tight increased continues the and associated execution team our those on pleased costs of impacts to to manage

recovery operational going would we forward. on see, are like isn’t improve pace to and flow recovery. to trajectory over two fast expect to we and years as financial the that margins right as have to what last cash the the continued Revenues, continue Although we

And we supply As to profitability for areas a program structural chain are effort per program mentioned, team This operations, XXXX. XXX result, we XX will initiating as a flow overhead. have focused most rate now enhance of the reducing of focusing on a Tom expect month XXXX. and to and the cash in a remain dedicated in our costs of at

continue positive we As in to our be call next we plan details expect on sharing look cash at XXXX, free and we more to earnings flow to February.

to let Tom comments. me over Now, turn it closing for some back

Thanks, was foundation outlook. Mark. It see will for a quarter, some strong pleased future provide a but we positive to challenging were a results, which

versus which was First, was up on XX% overall was XX% XX year-over-year ago. XX Defense mostly revenue were with year up a operating revenue with XX% revenue year-over-year, operating deliveries, XXX Aftermarket XX% this quarter margins. up XX% margins.

operating seen chain not expected. high million had from These This than some X similar at all in the XXXX. customers challenges the dynamic quarter, in Unstable attrition change. three lingering production first into positive what at results operating margin levels especially schedules our is inflation, segment do positive of was we are experiencing. years headline impact levels longer years encouraging, we Supply part it we we rates the and since highest shortages adverse for elevated The and far income main $X are these have companies pandemic X.X%. factories, of in the shortages when resulting even to disruption and labor of expect continue of environment very challenges to other a in are

remain month. XXX therefore, the at and actions our on are, are reinforce be These following. positive profitable aircraft if to Spirit flow XX even taking longer the performance production rates position major expect We in we cash several to actions to XXXX per than three

up where chain will period profitable extended that cost XX is positive remove cash in being First, that for rate say launching ensure ends and at per infrastructure, cost optimization that flow an we month, and of a operations if aircraft time. structural supply effort to Spirit

process to be in additional your options that, XXXX. equity. to third, and refinancing $XXX questions. take cushion pension economic exploring planning of uncertain we Second, given to provide With revert the which our will termination, of cash And plan million the environment, will million U.S. issue we not between $XXX happy are completing

from [Operator will line the go from of Our first question Greg Jefferies. Instructions] ahead. be Please Konrad

morning. Maybe just… Good

Good morning, Greg.

free takes of you how pretty thinking based you think step-up flow. do about in the QX with and on At are How big the it MAX the XXX deliveries. and puts QX lower cash the end into on starting -- for a of takes kind about just matches the usage, … these items puts XXX, and XXXX?

Right. for programs, all Well, cash XXXX particularly QX the to MAX. deliveries be the is of course, flow, XXX in going of key, both and in but

in we mentioned to per QX obviously cash flow. getting remarks, next month working at that. next our and and target will key on capital focused year, drive to that, about stay looking And are stabilizing as our is control chain, and means executing flow. the will I still cash as said, at year have so, more under so That in a And planning I factories, supply the XXX, that team for my which on go XXX free better on XX is stabilizing aircraft be driver we

Thank you.

line Seth go Our next from ahead. question of is JPMorgan. of the Please Seifman

year’s $XXX is about Hi. Thanks let’s would talk maturity very good now is also exploring when options, cash I pension positive something about And or morning. million before year, and we that year you being back? the that free it refinancing about next flow call guess flow it, talk more coming then and right the positive from cash next next when the, comprehensive? be much free

question, we reversion first the expect termination. to what? Seth, again, pension flow answer the of And secondly, free million yes, million Well, to cash second that then $XXX in on question the without be -- Right. from $XXX the is, even your positive was terms

.... On the

Yeah. Oh!

about refinancing... Just the

Yeah.

Yeah.

options. time, are point at we narrowing one at any to holistically, kind really looking specific we we of exploring that, all are this are say I in Seth, not it just and maturity. So, so in would

We the are current of environment. at looking just our macroeconomic the -- backdrop

XXX are lower be making We are situation, evaluating longer evaluating for market -- production are looking to longer going some environment the capital that be the at the fact so we -- will our we decisions we are rates and and shortly. entire

Okay. good. Very Thanks much. very

next from Please And Spingarn line question of go Melius the of our ahead. Robert is Research.

can… morning. Hey. Tom, if Good I

morning. Good

since It all about I in and you one and so rate, own you, … sounds sudden, the of a but it What chain? for those like we their significant much the short-term haven’t about rate longer plan and for that come you is said, because and to and have two already question, for imagine on XX XXXX seeing Spirit movement are long-term. years? back is, them. in for you one QX XX in us all assumptions? time an this on July plan that change why the between then in Airbus the MAX, Boeing all so got changed this, to a a were have not with us the now on XXXX -- that’s the financials of the QX supply XXX, plan, and have has the think for and second there, XXX Boeing now And question What term had happened what for the I numbers on but XX you of sudden just XXX? you given Can

Okay. Robert, first me do well, question let the first.

just with terms start assumptions, the short-term, rate the let’s On MAX. of in

customer, a we gave greater now their getting solidifying bit clarity plans. of from Day terms in little their some They detail Investor Boeing, We yesterday so our more in and outlook is. right are our are just what

trail hasn’t we a grounding that burn we we it, of pandemic really MAX that up always look we so inventory the them some we during at built bit can said, yet. little off in started As the and to want have this

are buffer. we next an their look we they have going for we they and XX still a to and will we accordingly. year, be We as so period as of well extended watch So trail will said at at just along will increases time,

it XX last it about quarter units. quarter units, XX was XX was or This units actually whereas

So bit it actually this a quarter. little grew

the and was with more XXX necessarily the the of that’s to supply it some So XXX It units move to do out decisions With making regard really situation chain. just the XXX, wasn’t the on to MAX. anything year. Airbus

of in that that moved the change, didn’t they rate we really programs. the update just So year of terms out but won’t was units the those deliver and production

mentioned moved units didn’t we production my rates that number the change, them I was because but of So headline in they it delivered the did remarks, air. that out the of

that the... So is

all and over like It just different all when of Seattle the past I in a chain and out everything mean, supply two visibility volatile seems lot rates just they still I production is they place. rates it was the on quite production heard days like in prevents for tied to the that a are in going seems and you? I are bit there’s of

a up. dynamic they I fair thing production everything stabilize you Airbus very they moving next are really Boeing make over It’s increases ensure as And well rates very, going things few think to around. as have and want to one they is, a wants years. and rate comment. mentioned the is current that environment aggressive decisions And that’s before know, yesterday the at about stable everything

meeting want So are to we sure we requirements, yeah? the make that

all now. three months all to more I you do were this like it than comfortable felt seems was with just ago just going -- say, you you

I’d to quarter a It the for of a dynamic reasons mentioned, say the play uncertainty environment part continues and was part. I the shortages… dynamic some

Okay.

and inflation. attrition …

rates for years well. So outlook XXX it, MAX XXX XX And since time yes, planning about the to longer and for XXXX take we of that up yeah, we do you had with that to for forward those as our and it on XXXX then targets we to can now in term, some gives outlined some clarity on haven’t and start the and information Obviously, learned Boeing their it that incorporate into but… current come looking and hours has some us in more said XX XX.

No…

yeah. … using we be will ahead. Go information, that

would market much. Mark, that. Thanks so I the think, appreciate

you. Thank it. Got Okay.

von now. is from question Cai Cowen. go next Please the ahead from of Our Rumohr line

you Thank much. so Yes.

way anything your challenge your what unit, get on in to the means That’s fourth is that per miss, we based and done. of of have XXX flow guide there What target if So, terms you flow how you think quarter. there, in XXXs kind cash is that shortfall? getting above that? cash should about Is

higher in have past, have improvements delivered additions over been but up we changes it we that and course of we the than have is of the recent last making working with the to and all year. It Right. been the

to for example, new been we So have hire continuing staff.

We have brought on new contractors.

We continue to those incorporate in the we made are the come benefits have lean and digitization, fore. all starting process of automation some plants of and so the things changes that flow of into to

still We a can part have of have in see control it. to it’s sort we stabilizing of like started good part There’s stabilization we some and but also shortages. of the feel shortages some some

and So that’s we right tracking are that why we to target set now. it

if we if anything is for to would some, he to a that XX, the would said the miss end we of else And the of there account execute higher them, on end was that Now risk be into range negative guidance at we the when zero the range, lower we that some and miss QX, why range. that be might Mark, all add? take toward gave those of we Mark deliveries. of to of

No.

there to continues I mean, said part right. prefer But shortages. wide be in Tom you think said, give I quarter. not to it range the you a such as I fourth would

on can’t and the we deliveries deliver, fourth a in depending make got And suppliers critical we turn means parts in the don’t quarter. and cash. collect the around we can’t are few I that these have and We build to very get a customer if that

and over That range through means to as have, the being up. this ends so We they able And not year. so fall fight couple going cash up we where we next XXXX to next it’s the if the just opposed end are year, timing in cash a into deliveries of situation. this we those that’s collect make year. months The it to

that of the last working over couple stabilizing to the per been have say of I’d getting quarters, But month at XX course and toward aircraft we level.

operating currently aircraft at on So challenges, the now highest performing we the are team that and we are for for outlined we lots level XX plan month. that but of quarters. remain executing the the There per confident We is last are several at QX. its plant

I month are understand, you are XX you XXX. XX, so don’t But talking per equals basically

more. You are talking

because that I I some been begin, complete, So been? pretty to would you aggressive as essentially you are is have number mean, XXX, built that where said there a given have

Yeah. rate than a little bit is cycle we higher where terms The of actual that… so in XX

Okay.

… some of for explains it.

some early about were eight They finished XX and built that yes, there that’s up very eight into so, And have We over or that. to in overtime not we the carried or QX part units of QX in those were finish delivered so QX. didn’t in QX.

us hit the can confidence target. So it’s that give those factors that we all

it, that’s is to. but and the plan what the that’s to team Now some is executing risk what there’s

Thanks helpful. much. Very so

Bernstein. question, next Doug go of Harned our Please For ahead.

had when so with go that, how do from that kind if don’t were here, you exactly we a Yes. we you envision picked reduction you. up, will, much, same really cost talked do of out pushing the reduce situation suppliers demand we to make back through a everyone up? -- clear the sure before up On given too effort. clearly, and Good Thank there. cost you How about then you lot cost year on through pandemic, morning. others, and next gone have you of cut taking when, end rate in see we in haven’t a lot of a it’s that which we not But expect

things, Right. Doug. Well, a few

levels are getting costs make competitive that anticipated. to higher we want indirect optimize got costs We -- not necessarily SG&A, make and them the levels have align all, to to those have of all to the we the sure most we we may at we of First continue that that on have, sure the production cost production rates.

a are that So costs of services, make hard types and look are example, purchased for lot of those taking indirect we controlling to at our sure we them. a sourcing

and of can to we pricing. where that benefits. the the And with chain, at have of and the there really more system we of and is overall out how leverage of chain, looking investments and create chain around that options lean in that cost capacity to supply flow is that The out during optimal can whole on looking different And competitive supply what other to we loading a couple supply the in to more move improvements and how way, level those the get figuring continuing how pockets that brought like cost. in the push capturing can including optimal more is benefits at pandemic, and exist made factory and are supply then level thing we productivity the at the drive the digitization, more is realization third thing are automation things get the in back over we chain load cost take the things is factory years in we range in some floor system to and operations the the have labor last

shifting that of in our not We it the from much to from we R&D, term. things more are is productivity out necessarily can look some so will R&D, example, efforts also in how R&D, terms deliver that at, near benefits but reducing perhaps, R&D the for further get benefits the of will better

Horizon what X. have Horizon call we X, Horizon So we X,

XXXX. the area And in the absolutely we well, things those is, what’s is some potentially shifting Horizon Horizon at saying, order and last into then again, capital expenditures will critical, like of X or to can outlook stop be push out capital for looking We out what improve expenditures X.

chain operations. drive Mark, supply So and in to add? it’s of else overhead, will that benefits in combination in that activities anything the

Yeah. No.

covered factory specific not going many be to aggressive I Doug, around et really the There things think outsourcing it. we are on we you are work. that assemblers, working type cetera. are transactional on

that at administrative could that, time, We at we These being for of some looking in the combining But are past. we lower volumes some this functions with production are of point sites. afford things some longer, can’t. in across our some

we that very, some there do. go be negative our some don’t There’s things And utilized. these we mindful are deliver. over our factories real so impact to some a sites, are of are have on ability going structural -- are that But that to very

to We have consolidation. do some

this types overall we things So and will it. will us at we time, have. point are help of It in aggressively the our go improve cash flow improve at projections have it those -- and to we margins it’s that

we So are it taking serious.

as We there go are protect we the fact, to in way fact due that as make quickly need costs get, doing in there it production that factory. a to is that aren’t But rates some we possible. the out sure recovering to

you month -- point, with can When XX. that -- Boeing supply could to at rate if looked to have something going go say when up up through I chain, some if the if been while, like depending be. but said a engines, year. need this XX XX or yesterday particularly that Boeing rate in would they going it, at things to the are QX that? tomorrow, wanted in to and do -- to to we that But look this were a But at take go how lead they not if next next it uncertainty rate through break you of going I for say do you are time much this How

we do of that expectations we with if time generally so a we are of that our We it. very to notice are with on have Doug, our are like customers months we speaking, partners. we a watching are Right. confident rate and in we the closely to and sure going mindful we increase, before, anything rate our like will are have rate rate XXXX. from optimization X a get us hinder -- need and said there them, us six-month meet of working we we project increase meeting to least or cost have in But make is of deliver would at that prevent and the we not Boeing working terms expectations that as And usually to lead

Yeah. would add, macroeconomic just true attrition. environment, the I historically with that labor was shortages, Doug,

We put we ourselves have factory. thoughtfully. don’t do to to in position have impact want We a a this to the where negative

to we current eight that six on so commitments production very light could with help So our make do trying but Let’s definitely Boeing time, months sure six months protect in of we thoughtful environment, work to are contractual lead to hire but months, a the we a way right? protects system, the the in place people, orders also really it airlines we that in the this that and manner execute we support the profitability.

you. Thank Great.

from Research. Please George next Our from go question Shapiro is Shapiro ahead.

to to effectively wanted happen this obviously, so occurred only flow why was like the worse QX year, go back just gave payment $XXX the that some back much color as you Good morning. February, the numbers morning. call for and and cash and because including next I got the cash million, could Boeing, it Yes. guide in get in to minus Mark,

So look for what eight at that deterioration the when were biggest it? clear months, in you drivers like

AXXX this, significant. about the the close George, production content They it’s are, window XXX on that’s to engine and year of I is We just deliveries, out program, seeing air program and cash being delivery we right? think, XX amount OEMs us, supply that are we generated XX schedules, seeing days, shortages. assumptions, convey where They and to units are AXXX of talked the the expecting When we the either chain XXX the challenged. started on supply sliding units, deliveries Airbus the within are their have from look challenges. tried at XXX, XX revenue they

in when certain go cycle, George, can so bring lead be. process, as short is But manufacturing complicated rates gear a and X, the to quickly up long and to inventory trying system and down react you to times time. long very and hire been It’s we Tier long quickly rolls to stuff difficult change order. we produce this rates those very have it the And production we to us this as that of in as business All support This in production as pivot right? are a can. people to for

the this, people you I what cautious XXXX, And for about and one as learned right, we do comments to be at and is are trying to not any about that we right? would going planning tell the financially are Tom is And the is lesson what those XX, that. so -- learned better saying our me expecting therefore, than to talked lessons very and We think production take is those increase. rates about about be expectation are to

we anticipate We assume And and the factories got of it. there’s production things to we to where right? going a to are be to sight financial we healthy so from up clear until that standpoint, now, going have get are have these can’t rates close these to planning line

And more labor when pressure XX went challenging and lot chain, so to and up our pressure on we to been XX. pressure It’s it’s there the of are supply over cash. lot environment I to It’s we a putting putting ability here the tell ability XX can have XX been on seeing our rate on in production years, And production from system a even -- is out through of a we years, with putting produce. the the generate inflation challenges you away And and several have last cycles climbs. right? I

now, not the say and we extra inventory have just stable it’s environment, collectively, get supply of factory buffers stable. We because to chain. have Spirit, right to got the I a OEMs, carry would

have see when come happens, delivering cash the you that and through. the start and to will to start earnings consistently a We at XX generation month flow

more recovery us would what been the I than say has uncertain any expected. Yeah. of George, is, just

seen had in we have really things further changes all out multiple schedule anticipated. than programs, the We pushing

So far. biggest by that’s the driver

kind And push this just let a me minute. XXXX for towards Okay. of

I So year. deliver was negative XX cash saying at going more positive the what this $XXX than versus what you year? to be year. the to deliveries to you your when going million XXX positive be and next are XX next just deliver you this get more going [XXX] next are from mean, you expectation obviously expected only was XXXs It’s XX early year rate, from year (sic) now XX early it’s like to

included Advances the negative the remember, $XXX the Boeing George, of $XXX million. million of repayment

Yeah. had -- Right. said you breakeven… It

be wouldn’t that, have positive. exclude expected to So would If would have at those and it XXX have not include would you if included XXXs, we -- you right? you said that

Breakeven said. what But Yeah. have you okay, -- but the is AXXX.

…breakeven slightly positive.

XX gets to deliveries to, for going you you And million get? are benefit positive XXXX, are quite the Okay. ex you pension to $XXX $XXX the million extra say,

We…

mean, figure trying I would out what... we say, to I are

more we in what to of sight flow that February to how in when production said cash reversion We XXXX, haven’t specifics a cash pension We said excluding cash line better positive. are we positive the provide schedules be. be would have and would our going we

color. the for Thanks Okay.

you. Thank

Morgan next Stanley. our ahead. of of And Please Liwag from line go is the question Kristine

guys. morning, Good Hey.

Good morning.

morning. Good

So their would be seems part past they alluded XX new heard the like production rate XXX at In of that you would production rate when to surprise. it Tom, Boeing, looking have you I close assumed released in mean, production process. discussion guide planning quarters, to continued are rates, hours it to the I guess, it down I be about few with the ago a investors. you that

surprise line planning normal in process? more are on this with is So you is their or there something not going that

plans I saying every scenarios. in single are and just production place. What No. day announcement. Boeing about obviously, mean, schedules take to that schedules the is that have interactions and place their dynamic. we the But talk public We and was place obviously in have that it’s we are I been

said, but the XXX a It’s a changed basis. different changes XX I last in the the the weekly very had schedule model. schedules or so, in have production terms months As level, also several have production environment. on minor we on of dynamic highest changing at It’s

discussion scenarios not is. the have working what and in that’s to and constant that be looking are have what adapt why to meet lot we them of we We we Boeing scenarios. to different detail. we that meant obviously been say it, at we that’s learning able production confident a that outlook whatever so are rate we constantly with just and are does, in with by are have because outlooks will we I that, good And now And

cash free That’s positive higher it see. was so where outlook XXXX, helpful clarify flow predicated And I previous thing production for guys rate. be you would I one if could seems mentioned, your like color. really on you

quarter. So that does expect now on free a that can maintaining like, to I you But cost how that and -- will imply is pieces moving would details get from us you you be production or XXXX guys these on initiatives thought there? -- positive flow you more in rate, that that provide few give lower next cash get know that you

longer, positive we at the more and to longer. terms we going cash we of XX enhance Well, be since that now to we said the to our in things we aspire do I in made the that investments is, have at some are profitability, the profitable expect And and be at position essentially want what breakeven of digitization, Right. to put and incorporate will stay in we look automation get our earlier we cash to more flow things be are XX if XX ourselves of benefit and we mentioned actions we are flow. operations take would saying to always flow a to is,

can costs way, level profitable making of of those cost XX go in we efficient pockets better and there the that to we the flow aircraft be aligned people are can sure those month. share positive more purchase to in have production. and optimize we and terms services got and different capacity to infrastructure, so at we would harder more the a capacity that between overhead, -- at and in it’s shortages look per will exists to terms are because that to how in cash things load where do and best position In supply system it’s get and then we really looking chain, the at are figure consolidating more level indirect And at sites looking underutilized, costs out aligning where loading the

the obviously, contribute as per our to we But that program always proxy. XX proxy MAX Now use of MAX we It’s it. just aircraft as programs use still system. we biggest a month, so the for whole is a that all say just and the the

you hit at we it just the I from quarter. that would didn’t And Boeing we off really $XX the that $XX repayment. factors Yeah. Advance -- consumption million, look talked challenging Kristine, add we a coming pretty of other Deliveries all expected just was are third of only million cash where ops, item aren’t was is, about. a a to when due

standpoint, capital working ops cash challenging from were wise and from a operationally in almost breakeven we very quarter. a So

those are the cash excess So are that in cost we structure, the you demonstrate our seeing I we seeing think trends and lower seeing, position our improvements costs. that are significantly

cash that, look good that’s knows what rate drive program are you who of then a can we of challenging XX we stable close into higher a seeing little will about last and next a you late thinking you get cost it. even see times right, how gives at to be -- And kind but cash feeling and getting us at we the this a And from providing, positiveness drive are month ops, that to quarter, a we at look pretty so ops into additive breakeven take maybe this you if year, very cash guide stable as from advantage year, our quarter then are production very, the and and that very that’s optimization flow we the operations, during next the favorable trend, month. flow at XX

thanks, time. Tom. Mark, appreciate Really That’s really and helpful, the

Thank you.

Thank you.

ahead. The next Strauss question David go Barclays. is of of from the line Please

Thanks.

really income think terms about million month, stabilizing is refinanced the raise on of refinancing, side? that really MAX follow-up then questioning, flow, else year of them line rates almost a $XXX should we Is a you question, of Mark, as solely in advance positive bridging on is million an table a on guess, there bridge? this next on $XXX focused cash a anything all this XX on in And the change, equity free follow-up at year repayments? the are to or I to terms fixed know a is Just helping us less Thanks.

Yeah.

first. second -- second So the item

investors. have refinancing to with our At this that price where are The a Spirit. equity fair to would like raise. other There’s a not available We an stock from exploring capital stage company our the is standpoint. are game markets be of not opportunities we

is time, what looking the aircraft minus cash okay? right? math we are XXXX million, year, than broke that you at We per doing, additional this about million equity you to improvement million an inventory. and $XXX in we I $XXX XX $XXX are right? complicated bring at we And not had the So think were David, this start all in between XXX? point hey, flow, you XXXX, At rate, and are million, month, at so $XXX saying, know the of the It’s at more that, are When raise. you

would of first a consumed impact disruption. the break flow from year costs and in XX that won’t of just We a quarter that repeat. cash lot have in costs seen lot that were rate earlier that the Higher negative whole say, to significant XX I to had to was, a

on. So I going think you have of a things couple

into occur get et what curve, of cetera. period Those you for XX stable -- As when move in -- longer cost costs inefficiency we ahead of at people I learning a you and costs stay XXXX, rate, hiring the would won’t time. up call the repeat that go time, the if

higher revenue, AXXX the is, and are go earnings cash will from The program. XXX, theoretically, a expecting just I on helpful units up XX, we you standpoint. very tell flow component on also we deliveries XX second that

in in an And contributors flow. is we inventory, and of Defense, all program down revenue needed several during to inventory Another burn some that uptick us, have a programs, can our for to opportunity not factory to higher time. an things so start those stable on standpoint, the if solid the things are we good higher on challenging from cash program get are very we other then revenue Aftermarket, seeing this a bring

believe positive the how rates occurred production those -- that in work take factories better few and us of let can year, was specifically come being stable repayments, more I we our turned us little a months. that a through that all will that back lead the of dial factors, positive. that to negative for we line right, XXXX our in that to of again, ex So the -- Boeing can we next combination And have million couple Give much to more and take here get more to how a to think it on disruption to and of try talk a $XXX will around sight in things bit us months time a little be. that more about

forward loss XXX loss balance. year, how given burned off a of burn XXX, that there And on a the Okay. the that year I or XX, factor to this? Has at you all into negative the next been rates higher does a mean, those the burn neutral? cash just down of of [ph] forward lot on this is looking

We I have XXXX, what cash the specifically of forecasting, loss. you that take. projections, in consume we XXXX, fact how tell that our forward will or forward programs is are XXXX are Well, on would cash we they cost well our multiple give and aware much know based exactly

get bit of put a but little to that, into going situation that that current price in losses we is forward cost taken have our losses on flow factored to forward our third we the and versus recent is that the can based of positive. pressure our Some with XXXX assumptions through quarter cash on the projected

Thank you.

from is Our Wolfe ahead next go Walton question of the now. Please Research. Myles line of

Thanks. Good morning.

Good morning.

fuselage in slips comment There that deliveries at and at was requiring be third and rework. observed Boeing if there quarter? quarter fourth supplier Spirit, October in yesterday in recovered that it the the made their was pace that observed and impact am preventing is a curious quality just was on at happens something is financial that a two is that is or will I

Yeah. It’s yeah. --

or of from different either programs, to are our that that our escapes we fuselage things all occasionally some Boeing the With in there across do parts those from go suppliers.

getting escapes us up I to those Stan with fixed. think think it to work Boeing was happen. XXX,XXX parts it, we you referring And supplier XX,XXX fuselage a was that see a not do if and and but ended It’s can we the on about to get routine, to fasteners, one escape Boeing. there’s that

So it’s systemic. nothing

and it their working I one them an to which who our had isolated are to factory, of was it. we suppliers flowed to resolve Boeing unfortunately escape with in through think

impact it the quarter the be will observed deliveries? quarter point, the observed in And third Cai’s fourth was so And deliveries or all to in comments…

don’t I to line, there are fourth don’t way going their Yeah. specifically quarter. expect that -- I but the in it’s think we mean I all persist something the know is through

get would do not as in period weeks, and normally days these things it So resolved a in months. measured

Okay.

Okay. I will…

that escape routine a will we with this call would I Boeing. resolve

Got again. it. Thanks

from Ciarmoli Our Truist of ahead. Michael next Securities. Please question comes go

the questions. Hey. Good taking morning, guys. Thanks for

made again, curious think next XX on cash the just, And think excess a where the plan? we especially Just to, costs track as month about do the then cost flow, year, capacity I reduction guess, Aftermarket free staying and into XXX? you XX you Day. good contemplating some Commercial anything does targets Should and being to comments at the the XX for be change still thinking for with we Defense Investor still XXXX or Thanks. relative Boeing on are the

excess leave that Mark. of for in the Well, one terms Right. I will cost.

would work rates rates the anticipating anticipating would about the XXXX up. XXX talk We just Again, outlook. me were Let go XXX go we that the up.

now Boeing think has about those. more I been publicly clear

scenarios into XXXX those with. to that our it’s But incorporate been impacts start the we about think will thinking we what so were with that consistent and working And XXXX. have and

So, that. surprises on no

Okay.

I accounting the costs, excess that’s will answer, Mark, on issue. let XX you

in In that rate, are expect couple we excess you incurred of before, -- -- we to cost we talked around $XX as million XXXX, In about year-over-year significantly just slightly again Based quarter. three are little programs costs. it we Yeah. have being inside have and well costs, third give as through the of a history. $XXX million the million million to a $XXX should $XXX we on expect this month incurred excess end million. first to at $XXX production And it’s costs the other excess up XXXX, of we and quarters, a of XX improve that the

benefit standpoint. So another cash flow from earnings an a from nice and

get the MAX of overall we for positive Spirit. cost, to XX XXXX rates, MAX, go XX going about towards that and -- will very Yeah. absorbing positive in narrowbody we And XX be we as will the XX for better get a to would excess to be already That costs backlog will back want and benefits on in our is say And And back be said I the fixed range. timeframe aircraft. Spirit. drive will the terms AXXX example, the as our family those the up has up of for the XX% to that Airbus in away. they lot

narrowbodies domestic So XX% is that’s, that, narrowbodies I think, increase is as those favors recovery production. of cash our that of and backlog for first. we absorb will very flow. That can one productivity, and aspect efficiency of positive is our fixed our our be in production on factories our recovering travel positive and drive productivity the cost our more profitability narrowbody and rates and

guys. Thanks, it. Got

Michael. Thanks,

Our ahead. next question comes Please from the line go of Ron Epstein of Bank of America.

you Ron, there? are

Yes.

Yeah.

cash flow flow when about to Defense we a do supportive X% the mute. X% How gave of questions, up. about I Sorry. be quick that was try your just accretive feel couple that it today mess is business to can how you Anyway, outlook ones. guys that on I before? -- to guide cash it -- cash and how you was you target your think

to terms overhead Right. normal still XX%. Defense, of a on $X it call yield Well, that at, XXXX it be in good And cash margins some profile. expect of some -- obviously, there’s by but that, XX% we very should we as at we it, Defense would said, have billion

good for solid is nicely. a business growing the Defense So us. business It’s

the rate good be obviously, With programs us growing drive those environment to very regard those and a looks to full will into as been Defense global have like with a and economics, target. X% lot production, and to for diversifying. a place geopolitical new now, historic won of right that X%, get We the that’s

lot chain. environment mean, in talked obviously, a rates have and the I up the of other going a lot interest changed it. in in about months, supply inflation, terms XX the has challenges We last of

much account that incorporate our XX targets. that changed, else to profitability and to I thinking things increase that as we and improve aspiration have into before will obviously mean, have take macroeconomic some conversion, it it take at set But absorb to we flow So production but it’s our we a ago. anything margins of look and our is was and our even months add? different cash a also Mark, environment than rates

No.

fundamentally we what going we I same production so this will think that’s able let stable Aftermarket where stronger get point you be a first, company, discuss flow. is, have at macroeconomic to are cash Defense be me we better to able a like during I got are where And Once to sight the were rates of first in macroeconomic into But in know look time, the don’t better positive generating got to think, production We right. that business, Ron, stronger that’s start will past, month, stable. time. to we and XXXX, are XX business. get XXXX up and to environment a environment and good ball right? those enough I what are we line rates the where demonstrate have get crystal At the that.

to XXXX stable getting are on that in and and saw getting cash and guys And so, type XXXX. of back flow very you then we margins back the execution, focused

of complicate sheet. is yesterday. their more in they are Got an the life, balance And may, be told just are what protective many it. and your question more they all? kind does supply chain. I the implies case, Boeing maybe if other It less maybe be of to sheets like observation, mean, broad that if world balance at And be of how that’s that going their wrong, protective going Got and it. seems this might one to I from then if

I to staying, that’s be what would for say, my I lower, prepared that back response I get to a -- to is, just for we to interpreting. higher need for longer us rates, the taking am timeframe production

or control what of that launching control. this exactly are cost Right. can is can’t we and to optimization And not program we beyond why about take control control things the we are that’s worry what we

be at we if to are XX… So going

Right.

our sure XX. and longer we profitable flow at ability make we to be then will enhance positive … can cash

it. it. That you very All Got right. sense. Thank Got makes much.

Thank you.

Thanks, Ron.

next Our Sachs. of of ahead. line Noah Please the Poponak question from Goldman is go

everyone. Hello,

Hey, Noah.

How that about how do from you can your that you to at now units next talk do and you is progress said to year? -- expect it -- where How here XX. you do believe and expect MAX expect you I you

Boeing in we point, some continues, off month trail have burn the units. said, we time, Right. the Well, five over at excess or a as will order recovery so as units to

holding are some in, say, units Now the I would pattern. of still

for there’s example. So units, China some

that off. And so, will we that, burn expect

us we and little time will goes a rate, bit up in more our lag Boeing gives factory. As them stabilize that

that’s positive. So a all

thing the any last sort is because very it we and Spirit, the buffer to said that, out Boeing issues other The actually have Renton before a both good is, a of to in this the impacting and turned allows production helpful minute thing at have has prevent cushion us for system loads be to factory.

Boeing and And permanent And be we is help cushion will buffer system. units period that disruption. keep we create sometimes it that, in so. be that that place have And jointly the XXXX production the so with and that could buffer a expect in to in place or XXXX, we will will agreed we time have back a didn’t about XX

So that on before we production know and system buffer in cushion so there that delivery the challenges permanent some right help ongoing, are happen system. some things the occasion will production

at are we So XX now.

would the are the so will a XX. XX, burn want which about kind and of now. then keep that said I We buffer there that a that’s to that right situation on off of holding permanent And in some means pattern are buffer we

purposes, would you I Noah, XXXX. about are say Hey. it’s kind your because for just this, modeling Yeah. probably talking of specifically

a month. of wouldn’t don’t in believe they at year, to a two reduction to mean that there probably at in stable their We continue lot and you off going for not a most us -- production be want based our of beyond going would that are on the at in That’s XX year, significant anticipate would next burn a buffer cards. we mean probably Those means month. XX are time. our XXXX yesterday month. is the which off the would conversation to XX which buffer year, Boeing’s the which get would burn And just mean not lead the below units at XX XX production I point conversations into a that about some next

So I next told two standpoint, just are of think modeling from about year, a most that’s consideration. into we at said on you I what yesterday, what points take Boeing XX staying those for data and think based -- to

will you four staying then call they to at to six the basically, of get months have, months XX to to break it, whenever So, XX? XX XX, the

Well…

all We once. at do not burn off necessarily it

go of we them then a they months of may months off go of gradually. burning to XX buffer a So the when lag to when with couple couple and maybe the plan they XX

Okay.

are -- system. the providing cushion it time it’s good to production burn actually there’s We no pressure off to and a

right a serving purpose So good now. it’s

optimization next cost quantify year? for the Can you Okay.

Not yet.

on We are that. working

have will earnings to at the We more call. say February

any of be or Okay. that last comes margins variable longer vast that And should it back? we and of eventually consider to will majority your term the into

will is which the to help the improve structural idea -- ultimately cost, margins. reduce the Well,

stand probably always headwinds I of don’t mean there’s target go Now would XX.X% have your that does you lots fast still. are up. to forget run also, to know thinking Well, you and

it We still pressures us the will there, But macroeconomic all way And help don’t long have of so obviously, in to a the given help. go certainly seeing environment. right won’t I we are it long-term, beyond necessarily get XX.X%. go will now other inflation like to the it -- would help the that

you. Thank

Thanks.

Thanks, Noah.

Baird. question the comes now. And ahead Arment Peter Please of from last today line our go for of

while. both the and times Thanks. several and morning, Yeah. for Tom Mark. you have Hey, you mentioned labor ongoing just Tom and talked about Mark, about Good shortages a this

targets you be all Thanks. Just get laid the occurs update Wichita rate able beyond where whenever what kind have of to -- longer you of on could it guess, I headcount to you XX term? of maybe that kind have just you for stands us of kind and hit kind in to for out to,

Right.

mean, on. is go to yeah, So, the people as it’s had have to rate, in up we started -- more we I have that, issue bring

have people in over people. have people. in Wichita we about XX,XXX But, recalled this right have hired X,XXX for year we example, about now Wichita Wichita new in So, we XXX and yeah,

were order has based gives I just but gone the hires, those just from are of new past. of XX% roughly of we higher the are X,XXX we little that. overall. new is history what rate higher particularly to actually seeing the mean, entry-level attrition been you people, And X% so in mechanic level what on even an And the it’s than is that a is seeing magnitude than of bit X,XXX hires. new about attrition some But positions of the

QX. of QX -- of that’s little took to to bit kind so a that level us of and that And adjust higher attrition during

We ended having up have to more. hire

of meaning have that those dynamic over I those the go better. think of a with are we have is, We X,XXX more. had we it even and now the are new to in and Wichita. those X,XXX starting to And it’s dynamics there. But dynamics. out hire But hired people globally the higher attrition, globally, back understand It’s levels now. we are environment stabilize

point are we are But getting are that that’s in a stabilizing starting said, fairs job where are the we rates to as higher signing I we As work we helping XX had helping, Wichita, actually offering future. and the and even we bonus. to the and increase to will on our hourly we at continue anticipate wage in

you back just at were terms in in you staffing what And maybe XXXX and in a back total of if Thanks. clarification, -- remember you just it do have employment? Mark, at Okay. Wichita levels

I don’t have Peter. that,

that number and… get will We

Okay.

don’t … you get I than but a accurate. Rather just a yes, have to out. number I I approximation, give mean, it rough completely not -- want that’s

Yeah.

was just higher than that It I quoted. XX,XXX the

Yeah. It’s right? our XX-K, in

will get out. that We

the Thanks. at Okay. that. can appreciate I details Yeah. all guys. We look

Okay.

you. Thank Okay.

Holdings conference earnings quarter AeroSystems joining your the Spirit now you this may for Ladies and disconnect Thank XXXX concludes gentlemen, lines. call. third and you