SPR - Earnings call transcript Q3 2017 | Spirit AeroSystems Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Spirit AeroSystems Holdings Inc's Third Quarter 2017 Earnings Conference Call. My name is Brandon and I'll be your conductor today. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the presentation over to Kailash, Vice President of Investor Relations, M&A and Strategy. proceed. Please

Kailash Krishnaswamy

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

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

In presentation refer we and our for non-GAAP earnings when disclosures discussing addition, release measures you of results. our use reconciliation we to and

our slide you reminder, the can a on Executive to to like I call As investor.SpiritAero.com. Officer, broadcast over turn our follow and With Gentile. would Chief that, presentation website Tom today's at

Thomas C. Gentile III

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

with forward the Success role documentation productivity XXX its is and as The companies, on completion would pricing our you, Partnering to Spirit Boeing reset Before and third standard largest from who aerostructures. solid quarter a and proposals helps highlighting the results, increase weeks including on Boeing into a this resolve many our document relationship on documentation Boeing's develop for discounts agreements to pages, agreements these ideas This the Spirit between provisions capture also proud to definitive next-generation drafting with office providing agreements, to new customer. to for discussing two begin big agreement Separately, MAX issues significant remains bringing several technologies the in technologies industry customers coming program by I milestone the look established our with of our and totaling the Boeing. and Spirit terms. Achieving Boeing, was the collaboration definitive months. includes almost payment remind XXX XXX to we our MOU. while has of effort. for like spent To commercial the Teams and open And XXXX, rates XXX in program. moving to aircraft. play

can our growing With executing the agreements now related to Boeing in uncertainty we our commitments complete business. on and attention removed, turn the

highest have Day executing traffic production XX will XXX next planned by late underpins per rate AXXX As XX is approximately key And of growth program. programs. rely backlog drivers: for The support driver rate over projected just This most growth years, announced recent popular growth, our to to and key executing already in levels. X% for growth main strong rates the continues and which products with three is on at year-to-date in be we September, Investor and growth the our The our demand on of first, discussed X% on of XXXX our the increase month this more Boeing. the AXXX, airplanes in the to for rate the began historic wide-body. XXX, line XXX with we a ever increases increasing

popular content that programs We most are all the significant growing fortunate to have of rate. are on in

our absorption other benefits the natural as plans these in maximize opportunities. diligent rates cost increasing cost very being as to of are We well both reduction

sheet are process. example, leveraging productivity, our pursue For clean continuing chain we to supply

is driver fabrication expansion business. second The of our key

which which cost we annually, approximately already world. We all the produce of are manufacturers internally. the million of of largest we consume Currently, machine one parts in $XXX parts

other Tier supplying expect of a in-sourcing commercial supply and from while OEMs parts customers. our providers, combination parts chain through billion annually X our and expanding to military fabrication grow We customers directly to current $X to to

McAlester, of machining chemical and centers Wichita developed in processing, and X- X-axis excellence have and for for X-axis Oklahoma, We in machining.

To In Matthies addition, expand Vice drive of growth, as we this also facility assembly. our Global Senior for Kevin we've broke ground named recently President to Fabrication. Malaysia

in The business $X we third and is annual final a key growing which billion becoming driver anticipate our defense, business.

for we a cost defense packages, lot position capabilities. healthy on KC-XX, commercial key We competitive practices recent in a the win work have attracted a Spirit aerostructures platforms primes. that backlog of CH-XXK includes major This strong of best a the structural key including with several a defense as and strong defense military proposition with new bid manufacturing, and prime the including application has P-X, to begun customers, in build And a work value such component. interest has design B-XX.

Krisstie Vice Programs as appointed Defense Business to and defense. drive Senior Development growth have President We our Kondrotis of in

We metrics. overall will measure with our few performance basic a

to return Boeing. that X% X% and been cash repurchases. deployment with We've and target growth, and to total lot agreement the work revenue balanced shareholder of will doing dividends includes on We X% structure flow conversion, a X% following expanding capital share margins, free

certain company. objectives, of an which out one remaining have We goals laid is and investment grade

authorization. this our intend forward, levels have deploying we $XXX growth. repurchases, looking past remaining inorganic of quarter, continue toward we in maintain share capital as undervalued. also Spirit purchasing at million that to robust We're our $XXX Going in million we After is repurchase believe to shares currently

evaluating potential actively deals We in this very are marketplace. multiple dynamic

these content, content, potential mentioned the country M&A areas Any thresholds. low-cost Airbus well military return footprint. past, meet I've as and must our in internal As objectives as our opportunity are strategic target

we are have XX has done on the executing rate Wichita next cost breaks learning and down Our Carolina, North operating team the rate our job the year stabilizing good the after actively XXX XXX curve. In continuing Hurricane teams Kinston, over have and XXX. very In and also been achieved the production a Matthew last for Tulsa, working hard. and

mentioned we hurricane. recovered from are that the of quarter, last As we fully now impact

insurance submitted costs for million the carriers. we with associated booked During $XX our the of period which of disruption, to claim we storm, a

the our our and recover a that suit that in extraordinary quarter, remain seen, disruption over expenses filed from we related may with to in last You hurricane. the the insurance position flooding to those dispute confident carriers claim. We have in

Now, results at reflect let's execution the quarter solid of These look continued the take a business. results. day-to-day third

flow of Operating X% billion, up earnings we the year-over-year. income up were up $XXX reported X% XX% strong was $X.XX, Reported flow For was year-over-year, share year-over-year. $X.X free revenue year-over-year. year-over-year. per Net quarter, million, million, $XXX $XXX up million, X% X% with cash of up cash

you third about quarter these commercial Boeing will the financials a platforms the moment. more strong the Our all backlog the quarter packages and at with in on details was third billion, in backlog. end Sanjay provide work of with $XX Airbus

XXXX turning remains Now, to XXXX guidance guidance; unchanged. our

earnings to expect flow $XXX million. per sales between We $X.XX. XXXX Free billion cash and share $X.X $X.X and expected billion adjusted $X million is to be and be between and between $XXX

we release. guidance quarter fourth earnings during to plan XXXX, full our provide For

For that, now, we And, With X%. expect a to target we increased flow from will at X% to be over our percent XXXX. to cash turn cash recent free flow that Investor X% better to free Sanjay? Day, sales than I'll highlighted have Sanjay. it X% as our we of as

Sanjay Kapoor

Game from very good morning, right. everybody All the a X also and everybody. night, [World recovered Tom, and you, Halloween has Series]. hope candy last Thank I

And will questions. up will for summarize quarter first, then, open we third your and year financial So, I outlook. our it full results our

offset activity. start on quarter well the period $X.X as lower let's slide XXXX, defense-related for activity, on the and from production the production up by billion, increased was XXX slightly higher the on revenue aftermarket XXX So, programs, program The driven decreased of but by the deliveries same X. and deliveries XXX as

quarter, XXXs shipsets XX For and we as as including XXX the delivered AXXX XXXs, XX XXX XXXs, XXX well AXXXs shipsets. XX

rate the across chain. as our needs factories and as We of continue our changes to challenges meet customers' well meet supply

to slide third X% compared $X.XX to share quarter as team another earnings reported year-over-year. in executed These we Moving want And per repurchase to Spirit from and yet thank per once ourselves. share reflect shareholders up was quarter third I aggressively quarter benefited a of quarter results again performance. lower our the our our customers, of entire to commitments X, the our in count, solid share Earnings for to to share $X.XX the program. XXXX, meeting

already including lower Operationally, reductions XXX the non-recurring as chain. our And, impact in as always, the continue deliveries margins program, recall, we our and the supply program to our in focus on some due lower cost our will had aftermarket the on program activity activity. quarter. increased factories and offset of AXXX increases as all was you aspects well As authorization own XXX last to on on board by

flow increase reflecting $XX timing some quarter and same cash same by $XX for free The in million free were slide quarter to year-over-year. strong period capital. compared million $XXX on the performance $XXX compared year, to was cash for was Capital driven cash XX% working flow a last X, million in period to the million last expenditures year. the operational the Turning of

continue as our investments in ramp fabrication in-sourcing and new into some prepare facility. as to our Malaysia for of to increases, initiatives transfer rate well We capital up of our for work

quarter, work our also will associated some rate the fourth see package in increases We to inventory transfers timing build due supply as optimization with strategy. on chain well as timing on

we metric converting rate an performance. X% strategy of As a component a cash to key X% we our previously revenue free important at stated, to have our is flow of and how measure of

quarter, third And repurchased Turning now shares on million $XXX deployment under million. we and $XXX million we shares X, $XXX the for X.X repurchased current million in remaining year-to-date, the next to authorization. have for X.X million capital slide have

$X.XX Board our of In be per paid addition, declared to another January. of cash quarterly share dividend Directors in

segment look let's now, So, performance. at our

the increased primarily same let's higher For activity, due segment Fuselage last year, from deliveries Fuselage was as million XQ lower in in on the production XXX defense-related X. by XXX slide a Fuselage partially during the and was $XXX offset $XXX normalized segment for deliveries to in same was activity. X% lower activity. in lower results, to aftermarket quarter million, and program XX.X% impacts margin On quarter recognized primarily XXX the basis, as to as the well margin our up programs, compared year, turn period segment Operating period revenue aftermarket XXXX, after estimate XX.X% to XX.X%. last in change the due reversing production

by well manage This remain seamlessly is on as these increases, working the hard plan. shipsets the quarter. million us program, the XX compared delivered the decreased The XXXX. focus $XX The to tracking AXXX balance in in to production third plans between NG. are the XQ Fuselage teams transition MAX Deferred changes. executing is smoothly the diligently the numerous Multi-disciplinary on overall our AXXX XX in on in is and we the shift quarter segment to on shipsets but in this mix rate as plan. we On program XXX work, and for to the

slide to XXXth recognized reached during segment results, XQ compared milestone decreased lower turning delivery on after segment same XX.X% a for million basis, driven the by the that in In $XXX activity. [XX.X%] BRXXX million, same quarter quarter program XXX normalized deliveries last primarily XX.X%. margin in XX.X% to and higher reversing period program production the program. Now, for the on production XXXX, X increased aftermarket (XX:XX) deliveries a Propulsion XXXX, our the our the team was from of impacts period segment to (sic) change driven was the Propulsion quarter, margin down the partially year, congratulations. revenue by XXX On sales, offset with higher Operating $XXX the on during Propulsion major non-recurring by to Rolls-Royce; in primarily estimate

X. production For the XXX, offset by segment a the margin million, results, On AXXX primarily lower segment period last change XXX XX.X% margin deliveries line in period after impacts normalized our the up was for during from revenue the partially quarter production in XX.X%, the XQ Wing was reversing last deliveries basis, slide the $XXX XXXX, program. and was the programs, in higher with turn same estimate AXXX in same Operating year, quarter million Wing segment on $XXX during on recognized due year. XX.X%. to to let's Wing slightly

we be guidance, billion; $X.X XXXX: to are adjusted million $X be turning billion to to our $XXX and and revenue $X.XX; to be guidance between million. XX for flow per between $X.X to slide share reaffirming So our $XXX between now earnings free for to cash

close I hand before out Our to to guidance key for it points XX%. on prepare approximately we an is few rate tax comments, back of closing summarize some for I based And like a and Tom XXXX. would effective XXXX as

thanks First, the to our to my once all team again Spirit entire sincere stakeholders. our commitments for meeting

stability our Second, now for our we will win-win and growth And significant future. allow this agreements have concluded with customers.

our while And with many something in methodically enabler be X% to have strategy. discussed it we cash have have metric. XXXX, long to for focus year-over-year a next year, reiterate target. goal will cash major have becoming this in for times, and be higher are opportunistically Third, for our a of revenue planning X% will free of our we conversion cash that we lastly, execute is as components deployed chain key that a been giving share improvement XXXX, shareholders. in dividend flow this and in we and not we want in our best-in-class started time, year consistent flow to next aerostructures This aggressively continued and than we future. free payments to to show guidance cash And repurchases Spirit to free to flow Fourth, the provider supply on

let that, me over turn it to Tom. with So

Thomas C. Gentile III

Thanks, Sanjay.

the representative Spirit, results planned years. great momentum relationships we've is reliable and rate is over been to Airbus. increases the growth, working the projected Boeing few hard here at and quarter of last stable consistently There This industry deliver with with

Now, driving happy growth top-line to we executing deployment. and devote take capital optimizing our production to With attention to we'll of are cost your that, rate achieving questions. all be increases, reductions, our able

Operator

We question-and-answer now will session. begin the

from comes ahead. question Please with first Our Peter Baird. Arment go

Peter J. Arment

Good Sanjay. Yes. Thanks. morning, Tom,

Sanjay Kapoor

Peter. morning, Good

Peter J. Arment

on maybe I little the focus a bit could Sanjay, Hey, for just CapEx.

to You're of is if I in $XXX be million, number and Thanks. QX. thinking running of about what assume number? been about step-up is some should a But, probably a And we'll see still XX% reasonable guidance is, XXXX pushed good kind and higher into a not, that, million in the at we your $XXX XXXX?

Sanjay Kapoor

appropriate Sure. Sure, Peter. It's an question.

well. was I as know, You looking it night at last

every $XXX nature, in. again, mean, over very obviously, quarter of the and, just showing close a lumpy very related projects, that some million remember, fourth as It's this and quarter its we years, our in starts a out high got increases, last projects couple CapEx plans you if I We've I similar go If XXXX. back industry much had in these across pretty on. equipment related number, script, like of the I By said is are has my and of to in the in fourth expansion this year. XXXX coming to the number rate in

it One We'll be million to thing And assure in is so we It's do going said up. of to end expect that lumpy. Having a I we range high that, where $XXX not you, somewhere can million. choking see QX. capital. $XXX we're back on

making productivity, of are all so with investments the increases, we rate make We to some with the associated associated and need on.

So, this and doing just it things, are is just of efficiency how timing. of is we in some some

that in. So expect still see we in We'll it come range. I where

Thomas C. Gentile III

as capital is out the our business point investing have also I'd fab some our initiatives. well We've as of growth our other that capital some use been in new Yeah, we growth. support for defense our to

Peter J. Arment

Thank you.

Operator

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

George D. Shapiro

provide so on then can margins you fourth little the cash why between all if sequentially pretty sectors? the to and degradation going why One, weak QX could a the in saw based on quarter in you to and flow is be the your good as if questions. compare normalized we guide; two QX Sanjay, more Thanks. second, detail

Sanjay Kapoor

year, the full left to Sure. $XX I got of last, XX to to on And chain yes, million, million the of And from chain. optimizing rate I we also are things to of George, one got then increase fourth some year. manage AXXX. some we activity just announced for of this. the to XXX, a we've are aggressive you Sure. question $XXX lot want which – building transfer some million that A be we unchanged, cognizant things in for increase guidance, of as timeline. increases rate that but a tell in work ahead We've $XX the that XXX for suggest George. would of, that our not terms and is growth the which as of next some have about our It's we supply on in the the on also also terms in inventory we these the And reminded want rate happening, we inventory also will associated quarter. are the do we Boeing guys $XXX of, also activity that see increases. some we few Thanks, the investment, see range We're the million XX will about are make Peter's of sure with doing. you XX. of an least, for but supply and would the talked example, know you of rate naturally

there's good that to make it's actually good things And pressure. are sure to there no are likely be these to pressure, So because slip-ups. do

to levels, you we time. Spirit sure is that One always on of have that. deliver do that inventory by we manage we'll things the ourselves in pride that if higher having make And to

Now, Investor having of said delivery do remind always back this than and our what not to we Tom of Day, guide delivery. I you think Internally, said ensuring me sacrifice at guys, will and go we the and but I better day. what we I'll that, all will our sanctity try to every

If will do generate inventory, to and more you some have that. we go

your cash question flow. on that's So,

bit to XX% what down, terms of to to know is: question but, the the XX% to in Fuselage year, segment; XX% Wing. and go QX full back XX% XX% all margin the margins I'm a XX% saying the been margins, in Your I again, listen, are I've to little Propulsion; going in in year, for which

We that you every a Unfortunately, do comfortable that. with have things quarter. are happen quite few

some with about parts. $X $X They're associated one-time some Fuselage to point aftermarket-related of the going not or in degradation little repeat a are forward. These million half a themselves things. have going activity is million. A did we spare margin quarter, on This

So, with quite we look will where in are future. like margins comfortable the

Thomas C. Gentile III

Yeah.

I is chain booked we're and The through this XX% on been great other most supply of the alone, next but say savings those we've over making progress. bit initiatives thing of years, would quite are year. just several parts our in probably year went our a working next We starting

see we'll year, next big some of start So, those see to we impact but didn't year. this them savings the of

George D. Shapiro

so Thanks Okay. much.

Sanjay Kapoor

answer, with a but comfortable George, hopefully you're It's that long answer.

George D. Shapiro

No. answer. Thanks. Yeah. good a It's

Operator

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

Kenneth George Herbert

Tom morning, and Good Hi. Sanjay.

Thomas C. Gentile III

Morning.

Sanjay Kapoor

Morning, Ken.

Kenneth George Herbert

the in out a softness piece obviously it's called higher piece wanted to the business. on what it, anymore your the about imagine that or the activity should in and of business, quantification a times a if small something Can we margin I I you saw across couple maybe forward? of you've know provide one-time but specifically it segments. follow-up, you just and several was on a the of moving of aftermarket structural going quarter think how nature I'd

Thomas C. Gentile III

no Well, Boeing recall, We airlines. to with so PMA directly new a our having you longer selling we as we're right Boeing spare sell in of had parts. all a of year, last terms where license, we're agreement not to

some Sanjay of as spare parts the of do how terms repairs, said, just is the parts. those. to we a And, of continue the the cost couple there in spare But of We activity sourced aftermarket aberrations were some MRO. majority this quarter, with in

It Boeing. shouldn't this And those repeat really so, we're limited with to year, itself. resolving was

provider So just from spare being parts terms selling of just aftermarket directly transition PMA structural the reflection of nothing the to to business, in Boeing. a a making the it's

the focus with parts go expect up. Boeing's we forward, should those service we business, sale go of As the on actually actually spare

we we're expect few we don't resolve aberration our repeat. And So the on see confident those to parts, quite after position. with

Kenneth George Herbert

Thank you. Okay.

Operator

comes ahead. von question next Cowen. Cai with Our Rumohr Please go from

Cai von Rumohr, CFA

much. very you Thank Yes.

running a you take negative adjustments, if been the million it looks So, we positive. it's had all and $X like

to adjustments suggest that $X we pattern Thanks. yet, walk your negative should otherwise. why adjustments? is say which might cases having You been are have looking And and, expect of, improving million having Can what you that? had you to In negative? positive forward, us they on balance, go through, performance back of did

Sanjay Kapoor

let So, fair again, try that, me question. a Cai. That's,

out spread in Recognize rates. $X and we the Firstly, number, are our it's it's up numerous programs. a lump various know going but across segments million, I our

rates Going up in easy. is never

– your You second sort benefit do question. of pivoting see the to I'm now of your part

booking the with XXXX if like we've see in our the these As increases today and Tom that, compared results XXXX much margins chain or generate tighter we EACs execute and, should said we our the the recall, associated said, supply across see and productivity because to, that, focus of or XXXX, benefits. our you'll on are rate that, board. Having raised

X% do as at can thousand not, see, few cash quarter, on each $X.X each well, terms focus we all what realized and in so downs see going but and free are performing tell a margins we a few you or on. from we opportunities or risks are to are hundred program few are see every to million And of level X% dollars you I in naturally, but back in program operationally macro you going terms a a flow, then of this is to ups noise. in here

Thomas C. Gentile III

of the we change a everybody just And XX, would to that's through one lot obviously, issues. had And we say of up industry. in a went rate to for the things is, big manage I and as

So of XXX, more quarter of this usually lot a a positives, challenge. which generates was

learned lot the we'll break. break, And all that a out year. this We incorporate year. next straightened should for be rate that from next next be Now, rate to able

and been focusing one really delivered XXX and Fuselage, have quality we on in weeks. past a program, initiative best-ever called an also really which actually we we lot for of to our Boeing, Flawless the on Boeing the just had We fuselages quarter, few better this the

challenges, those position of create also but in some So, a next things really put us for year. better all

Cai von Rumohr, CFA

you. Thank

Operator

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

Seth M. Seifman

very good morning. Thanks and much,

Sanjay Kapoor

Seth. Morning,

Seth M. Seifman

good head trajectory It what sort and walk the that of implies end we you XXXX? progress as the and on could drivers AXXX quarter. the through us this year the about the of pretty into Maybe into of was

Sanjay Kapoor

the see hurricane all rate to and breaks supply midst is in the execute happens, creating in as plan. are in the happen this obviously we said of you our the well. making in block surge that at end units, issues, Sure, day, in Seth. we XXX From program, remarks, the I increases of And talked making everything et of over AXXX that tracking that productivity here right the falling of context the past, had, about were we and of a recover was of in it's result our appropriate the that amount lot like on prepared plan. getting as Boeing of when our et said the this there factories, on, And mean We've chain, we past, $XXX that some rate getting the know, cash the of place, to and we the if future, size capability, execution next the sure We've we cetera. that a we program cetera, into in learned of as falling on in hiccups focus is approximate the with that. the right expect investments dealing way. our own I of million

So, track, from on recognizes make say the are that overall, I'm they put they my happen, hard on have work. listening that's plan, to this Kinston plan. all in I to team but would sure on not hard also work it's Seth.

Seth M. Seifman

very Thanks Great. much.

Operator

from Research. Sheehy question ahead. with Please Finbar Out next comes go Bernstein

Finbar Thomas Sheehy, CFA

morning. Good

delivery a rate drops as X.X further end you as X effectively into per on had I'm month? your XX, step-down or year, should revenues the the expect reduced Boeing then... just rate a And to of rate month. delivery obviously, XXX, next confirming that per the down, XXXs to down you going we On

Thomas C. Gentile III

deliveries at to our They're Boeing, of still for deliveries test be bit year the X.X different because be X aircraft. end a customers. going little Well, their Boeing to will next deliveries producing a are rate

be delivering rate at to still we'll the Boeing. X year next So of

Finbar Thomas Sheehy, CFA

then view? So at step-down, essentially the we're point the from of of bottom your

Sanjay Kapoor

that overall obviously, Tom Finbar, XXX year get but to that a impact bake as guidance, right. small well. The there probably next our is And we'll when year. is this XXXX. units we absolutely year fewer talk EDP will be next delivered, units into compared about there

Thomas C. Gentile III

us the impact yes, the But, the this hit rate reduction major of year. on XXX

Finbar Thomas Sheehy, CFA

Thanks. Okay.

Operator

from Jason comes Citi. Please ahead. go question next with Our Gursky

Jon Raviv

Jon Jason. Hey, It's morning. good on for Raviv

Sanjay Kapoor

morning, Jon. Good

Thomas C. Gentile III

Morning.

Jon Raviv

away question on from XXXX. XXX How production up growth the sales goes target buckets about some pricing that step-downs, of X% do Can that to those different in offset into of which whether growth by drivers it's outlined Following previously? defense, to kind in XXXX, Finbar, fall you you've third-party rate X% range other headwind talk accelerating this increases fab?

Thomas C. Gentile III

Right. Well, most it programs driven XXX, the will be on rate increases the of bit still the and little like XXX by the AXXX. on

So that's to a of big driver it. going be

in supply our start kick-in addition, next mentioned before, chain margin, will I of terms to as In savings for year.

And will so that side help the things. of margin

we're terms on in addition rate increases, forward the mentioned, to to initiatives In of continuing push be the growth, our in as defense. new to I going fabrication and

as incremental And impact so, business while well most defense of it will from be business. incremental fabrication some the to as see rate increases, we'll start

Jon Raviv

you. Thank

Operator

Carter Our Copeland go from ahead. Melius. comes question with Please next

Carter Copeland

morning, gentlemen. Hey, good

Sanjay Kapoor

Carter. morning, Good

Thomas C. Gentile III

Morning.

Carter Copeland

years, versus of I kind of several next lowering several that with bit you that should an has impact course Am the thinking guys can over the risk – go know, years? this whatnot the of we agreement what Sanjay. of The gains Question more I that just EAC, last terms to, capture, Boeing amount on of of wrong? over about productivity that uppers assume concept explore we've and push structurally just the the retirement of sharing want seen speaking, don't little back, I a in

Sanjay Kapoor

attributes we're we working Carter, on. all as two for are But there improvements that up listen. with Boeing. Clearly, we've Yeah, know, productivity no, signed

a should very we On brick-and-mortar to well, signed and context we've of execute that And that invest gains very more than bullish we our we frankly, And been in and that productivity And natural our top CapEx, I associated do execution. we've supply cost that benefit benefit cost Firstly, can, that how with our and there's about are very footprint. cautious careful quite that, we've we're the on careful increases. that that Boeing. we we've with, about fixed rate in signed Boeing. up not offset doing the with absorption we absorption that how repeatedly about methodically, so think create the numbers with if talked to we've fixed expanding going chain offset up about are been

the sort margin at said, and maintain clearly, margins, of end these to So, of do maybe expansion that like reflect the in day, we line. bottom Tom some try and want

So at looking are it. that's how we

Thomas C. Gentile III

such free I'd then including savings they the a and for say agreement, And Carter, those productivity exactly chain in now bit little our after enhancements, to what locked we're on our were going go productivity to offset those in Boeing, better. developed And to do knew the as we they way supply get. was side, initiatives, so other a

So think, we'll work initiatives, Boeing. while out our the delivering fixed because committed particularly amount in well, results to of is to productivity productivity chain, going of keep a agreement, I very able the to supply be

Carter Copeland

That's Great. color. helpful

whether quick there content Airbus given with opportunity a mentioned strategic happened. some initiative; might Just follow-up, as what's situation? any now, there content and you wondered Series Is the C see given on you a if the comment military you on opportunity the Bombardier

Thomas C. Gentile III

support, the the And Well, would the on think obviously really C be Series, program we're do so I we better for already going so program. forward, good. the be with might Airbus' do pylon proud that to

base. addition is supply periodically that, its develop to to In looking Bombardier

have on we do bid work that. in so continue And packages received to to we'll some past the and

to we'll packages supply. deliver on new good So, the pylon future. looks participate continue And to that and bid it already like we that has program work a

Carter Copeland

Okay, guys. Thanks, great.

Sanjay Kapoor

Thank you.

Operator

from Please Walton ahead. with Deutsche Bank. go Myles comes question next The

Myles Alexander Walton

morning. Good Thanks.

Sanjay Kapoor

Morning, Myles.

Myles Alexander Walton

two parts. one question margins, but on Just I had guess

that the this on Thanks. The second quarter. new burn deferred is, the of first step-down be AXXX when Should level block booking a now $XXX,XXX in accounting on current think aircraft accounting block rates pricing? the you any of gross reflective next is the the representative you that the you'd is new into I you XXX, in adopt margin the start block? fully next down accounting expect the production, about accounting do next year, standard And and Is new booking? we of per

Sanjay Kapoor

program. in that the yes. me future. degradation blocks is signed answered our through. like Myles, and question, question is are our I what And productivity, Yes Carter's and I agreement, here to mean, we have and supply we our Sure. just obviously, answer the margin we chain let objective reflected certainly ourselves working first. on the current no into through That since second primary

different. Actually, is the if over it's XXX. perfect about And, not recall, you $XXX units, a we question million. the the math, asked but little math again, You recover on had said about we'll XXX

around are probably curves, bit a $XXX,XXX on because like there a naturally will our step-downs that's and more are tainted AXXX little $XXX,XXX, are price the step-downs. little step-downs get a shipset. That where curves the So

that clouded something will that's get bit. a little So

You somebody did have I'm whether up would else XXX. in not ASC question. bring sure that

I Sometimes, thinking that maybe was ask question. me Carter will

is if my So, cash also put obviously I last talk And, I just recognition revenue with I impact a margin the to bit there's XXX, time everybody it's our just should flow night me which important. and everybody, on let little changes obviously, impact, okay XXX, And a before on in that's no little measure. remind core wondering I want it actually delve because spent script. if about into

have have for to but AXXX it's an going on flow what not XXX we Myles, impact, impact an So, forecasted cash on could ourselves.

performance, difference that's and, us. The of performance to us. in behind you we've or though of called the method, in change methods that even to costs are the means modified filings to than like XXX this point little the report the at which on doesn't different XXX, the it clarity our both is adjustment losses, to we the our cumulative time. for based And the But talked retrospective on earnings which time an XXX either forward sort do of Now, over duration And kind time. implementation, in in we're upon losses relates are sort it the more past, front and XXX, will year. of bit that. initial AXXX therefore, that contracts effect for on which next level, costs And Q very is revenue in going obviously and adopt what forward of relates sort because the it's basically, on retained January a see the we when recognizes on GAAP will of is point macro are

given obviously, we'll margin. also of forward. into margin will that on impact XXX question, share through retained And, will kind step-down But to zero So, later the the deferred a going with see positive then XXX, earnings per will are adjust programs XXX, earnings going other revenue zero your and some remain consistent some years, all on not, getting broadly back the have the forward. of the contrary, unchanged.

XXX compare that whether in the we the end be providing XXXX and the programs, be all or you at the XXX it both So, will results on of will XXX. day,

I clean was some all cash And X% and impacts, there into flow while will our this X% goal. is get want to comparison. end you again, one, on you'll this baked no of see to free a change So just obviously, EPS

So, think get this I want it is but to out. sitting there, a out long I that's answer, something just

Thomas C. Gentile III

I plan we are just we on to Yeah, the program, announced would and add, what on last XXX year.

very and have with teams doing And supply so operationally chain well our the curves been our initiatives. learning

we are that we articulated last for so on the year the plan And AXXX.

Myles Alexander Walton

Sorry, Sanjay.

to you when you'll to those that to step-downs out XX the... one at on margin? Or will XXXX, so zero item, point, continue in it Just be price booking be the losses get the to clarify

Sanjay Kapoor

program margin quarter, Myles, be it'll loss mainly in No, $XXX we said like going zero forward, forward again, recorded last we the because us. the of million is that ahead a

Myles Alexander Walton

Okay.

Sanjay Kapoor

$XXX the flows going flow those it's us whereas where cash and the positive, of million, into are is be losses XXX, not cash behind headwind frankly, unlike forward future. a And the – going will out the most

Myles Alexander Walton

Understood.

Okay. you. Thank

Operator

ahead. LLC with Credit The Suisse. Securities from Credit Spingarn (USA) Suisse - go M. Robert Good comes Please Spingarn next morning. question Robert

Sanjay Kapoor

along some I prior about Credit a Good perspective. at next to level, lines several the a So Spingarn LLC from questions, of Securities morning, Robert. ask M. Robert cadence of - the over high wanted Suisse you the (USA) flow years, cash

to X%. You've X% the obviously to guided

headwinds about thinking XXX in next with with element? five the already even that To is various were fourth the XX X% the that course, all timing fluctuate If step-downs; between agreement there flow have. range does we the how a et the headwind; the giving I cetera? and through, quarter so: that pieces and you extent You're XX, what now, this the of Boeing, and years during you went from positives declining; cash CapEx, the moving guess, just X%,

Thomas C. Gentile III

cut goal a incremental but and year-over-year take have some But Sanjay cash I'll detail. first the can into our lumpy always Well, over is more go flow, improvement. time, obviously, is to

next XXXX. so than And was XXXX. will we better better be than XXXX said year

to to incrementally bit do each want little So obviously X%, we X% year with our a laid to while we've better try out programs.

material. that. like of which And so, with Boeing a in our step-downs escalations the trying traction high-level in that things just variety looking the and supply constantly whole also and like Airbus And we productivity We're initiatives, cost of have also price we're at customer reduction other getting we're like initiatives. with discounts, And in things program. labor program, and our chain also a offset things things all That's great to view. are dealing

Sanjay? So

Sanjay Kapoor

number we the be Yeah, the our somewhere next be clearly want starts And I the and then are see, it out-years, – for on rate Robert, happening path it but And a growth are a kick in we're once with supply to to today, if making right, guidance with in with Tom's like on us, chain I the not between whether this improvements XX, least the we X. XXX or you all about, these X% you're that'll we giving get a year, that in the we defense, those want right X%, to X. you start it's and year, we're the strategies do a stabilize. are mean again, in have with number – see XXX, And programs question. better, to there. talked fabrication obviously, fair start areas in a of the whether and hopefully or, that at that's then increases investments –

natural Fair that we did takes us see you. Spingarn current look Credit we so than what Thank in Securities - that's Okay. always And Robert And enough. long-term, better flow Suisse in M. progression it. a (USA) year. we at LLC good how cash

Operator

The with Fargo. Pearlstein Please next ahead. question Sam comes from Wells go

Samuel J. Pearlstein

Good morning.

Sanjay Kapoor

Sam. Morning,

Thomas C. Gentile III

Morning, Sam.

Samuel J. Pearlstein

et to when compare cetera? you're need in And kind just how you to different of opportunities, an evaluating that the of you from metrics in to us perspective. couple order of Tom, can size do you you're looking a I of kind us pull that trigger then, guess, there the would buyback, see at? of that help companies need remind terms mentioned you range of accretion, Is had you M&A to with the anything

Thomas C. Gentile III

they a Right. But our that make footprint, military competitive. and have meet first lot more diversify also foremost, with some whole Well, said a different of opportunities. with cash have strategic Airbus we they and of really which obviously firepower help but sheet hand is more size. I cost what be deals more content, us we're our looking on customer cost help base, And range which country of balance our at is we're low some to criteria, content on, our that do focusing and to some will

our deal, And So look foremost to we each are at threshold. it's things. meet return as those first the got and

we're And average at to weighted will accretive addition of to be that's they our to capital. From things obviously looking So EPS. of always They've got terms be in in important. cost at we'd we we're look synergies addition standpoint, at multiple a we where at. when than obviously lower to businesses that, look in trading multiple to they a be like at would

company. Every different different, deals our have to us use but we more deals. base, improve us strategic know, of that diversify bit to make a are provide we're a help is that So, attractive our accretive looking company to ultimately variety a will what and as more customer little we you for methods evaluate make position deal valuable a are cost us advantage that and

Samuel J. Pearlstein

would with to to go from if I months things follow-up low the reason the two the about? end can what the EPS be end only of still the think to And terms high just really range in on quarter, quickly, $X.XX vary in to the

Thomas C. Gentile III

may that at our toward obviously, our we want next the some investments next of Well, now, of we, high as position look always for I end also quarter, are range. to to fourth for of get the year we our pushing all cost But and initiatives year. right we're at mean, productivity into the improve looking

of internally, of regardless high EPS the to or kind our always of revenue influencing whole or a variety range, But it. that there's again are it's So flow. things we're of cash end pushing

Samuel J. Pearlstein

you. Thank

Operator

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

Kristine Tan Liwag

Good Liwag calling guys. Hi. It's morning, actually in for Ron. Kristine

Sanjay Kapoor

Kristine. Hello,

Thomas C. Gentile III

morning. Good

Kristine Tan Liwag

to expect Tom understand better grow market? years you next or to programs Are and we expect share billion you've from defense. that already to want target these that you won for take in something Sanjay, manufacturers in do the your the $X other few

Thomas C. Gentile III

Right.

current programs order want annually. we said, to XX% we get some we'll growth over of billion XXX business, we have initiatives, as we're programs, that are make we defense is Marines on can the CH-XXK $X our want for the helicopter We're That a us drive heavy-lift programs time, to to of organic said XX% the $X time we increase so have but And, continuing current great fortunate. those. to the over With that to get the billion. But said, The to the they Marines. that.

In addition, sales. foreign they'll military be

to right. on that. program program that seven the for so be to own of suppliers going to important defense. $XX And we're And a Boeing. proud billion one that's program B-XX, be for that's very we're on its And national fortunate in a And be very

military the programs, the derivatives like of and some have we addition, the the of P-X KC-XX. In Boeing

take robust the major million. you on initiatives all of that new programs. look a And have bidding of very with programs, today a programs. with we're in defense the terms at $XXX very to we're build already primes. we at And if current got so, And continue defense We've actively about new pipeline what we'll on

Kristine Tan Liwag

operating cadence of and That's CapEx or profile price about Are think growth? cost-plus support this how should programs? risk Can discuss these to Great. we you fixed these the helpful.

Thomas C. Gentile III

through be of as it's next in investment, programs, on so range And all into going programs in we of $XXX programs current program, year. significant capital into there they're obviously, guidance typical amount and million all the that new phases, of will some we'll terms defense years, million And, engineering typical but our that. for the forward, the and a for will few the the defense capital margins get number. Well, we've be development those but expenditure, normal as built $XXX of that's be nothing built Right. as the said, into non-recurring their a work so to

Kristine Tan Liwag

Thank you That's very much. helpful.

Thomas C. Gentile III

Welcome.

Operator

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

Sheila Kahyaoglu

thank good and you Hi, taking morning question. my for

Sanjay Kapoor

Sheila. Morning,

Sheila Kahyaoglu

the Good MAX. from NG morning. I wanted to to ask transition the the about

You prepared mentioned it your remarks. in

some sort you of How to where mix next of are maybe Just and in about process? impact the you've the far? think the year we seen and do challenges positives thus that

Thomas C. Gentile III

his at earning Dennis call, outlined position. Well, just MAX the remarks in Muilenburg, Boeing I the Boeing, say, who's of would the CEO

said he so, is it'll And and delivered XX to that XX% what XXX be of to-date about they've XX% for MAXs year. the deliveries the

XX uniform think it's up XX So, because beyond is a not we're that and NGs and from while got in was explaining mirror then that, that. going Sanjay situation, I MAXs. obviously, rate What we you to

you've XXX, XXX. NG, the for XXX, the So the got the

a got version. VIP You've

freighter a version. got You've

got the You've MAX now P-X have X. version. the the we X, X, the MAX MAX And

year NGs be going rate, XXX all and up. XX% So XX% the this the overall is going deliveries of up it'll are and at are And, all said, down Dennis as to the in going MAXs between the now XX. but we're

lot all factory So there as those the you make is transitions. a complexity of in

our plant any really have And team to our sure managing Now, is and address we're don't go. it challenge. very working is that slip-ups to experienced, we major a we through improve but it. to the hard quality make as We're very operational in

Sheila Kahyaoglu

Thanks.

Thomas C. Gentile III

Okay.

Operator

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

Hunter K. Keay, CFA

Good guys. morning. thanks, Hey,

Sanjay Kapoor

Morning.

Hunter K. Keay, CFA

of even narrow-body clear, little versus Airbus more an is that priority either is, of list and you how guys it, like low a for and M&A, that to just you need mentioning, you obviously, thank to in totally all are cost maybe about that country. towards OE of orientation that Thank question mentioned on three platform like checked order? be component of you. bit the And a aftermarket? Airbus, priorities or or Is part Just three maybe content boxes those thinking as think the we wide-body about second military sort be

Thomas C. Gentile III

them three, be in those, hit deal but I hit Great. Well, to doesn't it'd hunting couple. terms An grounds. all it nice three if call a really the criteria; individual of have

So areas those most are just are the of that interest.

how a supplier they're With filtering to opportunities. different aircraft. tremendous that's we're of just the So obviously, Airbus, regard

good the have of you entire the engine. and That's We the units. most going growth the the pretty into growth have for a biggest you That's AXXX have where really them programs future. of with industry where set number narrow-body on is the The the AXXX.

a we're of priority So business. us for structures a we And as about think that's it. clearly

replaced. say mean, always time, And equipment, rather right lot doesn't have build don't first on a so need so things I structures aftermarket. original our than focus always they has the naturally. I of been be we to aftermarket

our faster. we growing to equipment. is original focus and like choose, had in narrow-body is on choose, we'd And we if obviously if and had to Airbus, both, So but bigger

Kailash Krishnaswamy

Brandon, think I one for time have we more question.

Hunter K. Keay, CFA

Thanks, very helpful.

Kailash Krishnaswamy

we question. time Brandon, have more for one

Operator

All right. Thank you.

comes Stallard from Robert go with Please Our last ahead. Research. question Vertical

Robert Stallard

morning. much. Good so Thanks

Sanjay Kapoor

Morning, Robert.

Thomas C. Gentile III

Morning.

Robert Stallard

Just the sign about that's chain. been wondering supply if any chain with in had there's you ones you the There's tighten the existing rate or to about some Do seen a deal Airbus plant thing that. that? I And been the within potentially trying up the to talk equipment in of couple inventory the think you talk quick level the taking was have Airbus a capacity up of other your facilities XX of the AXXX. on month. to buffer

Thomas C. Gentile III

They've increase indications they AXXX, how really Airbus be. many said haven't would needed, if the talked that made can they that of XX. has any On but about

go capacitized are XX. we So to above

requirements us. We to articulated that are has never I've capacitized to meet Airbus XX number. the the heard

other with goal as they meeting And that I going in comment their we're say than definitely that, on increase So need that line forward. won't of XX. we can to

the could repeat it, second now part please? you Okay, your question,

Robert Stallard

mistake, about XXX. XX, Yeah, is on talk My the actually sure. it XX, not

of other the that. The as ease have regard that ramp any you if inventory, had sign said down as Airbus level other progressed I to of wondering has seen has. the been suppliers issue that to now it buffer has is some trying far was inventory

Thomas C. Gentile III

Airbus we've the just different to and they up, are some go as for risk mitigation. that buffer rates in looking programs with as Well, is put for about contingency talked

we we've so of supply. on appropriate that to isn't so And so to any an been maintain level buffer work trying that, there disruption that with them

risk about all it's mitigation. really, So

Robert Stallard

them way that too and down? opportunity other no chain actually and much almost an sign You've the seen the of in saying going bring it's inventory there's to now

Thomas C. Gentile III

program, to Oh, been no. rate about AXXX to mean is I talking up the especially in AXXX, we've No. delivery. them going right avoid making now, buffer to what have we with sure stocks any disruptions adequate

Robert Stallard

Okay, much. very great. you that's Thank

Thomas C. Gentile III

Thank you.

Kailash Krishnaswamy

for earnings call our Thank Okay. today. This all for you participating. concludes

Operator

is conference Thank you for attending concluded. now presentation. today's The

disconnect. You now may

Spirit AeroSystems (SPR) 1 Nov 172017 Q3 Earnings call transcript