SPR - Earnings call transcript Q1 2019 | Spirit AeroSystems Holdings, Inc.

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Operator

Good morning ladies and gentlemen, and welcome to the Spirit AeroSystems Holdings Inc's First Quarter 2019 Earnings Conference Call. My name is Rocco and I'll be your coordinator today. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the presentation over to Ryan Avey, Director of Investor Relations. proceed. Please

Ryan Avey

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

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

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

Tom Gentile

begin so that the depend Welcome Thank summarize industry, safety will planes which after those Air fly the earnings the everyone. Airlines. accidents Ryan, products by safety a in you, Lion in on safety priority. In of around Ethiopian were all the the day, most recent devastated our and first in world and everyday on on financially the We people we every why us know built. good We of I important factories XXX focusing situation and I involving of involving millions is results the to they focus to quarter strong want XXXX Spirit's today morning is the call. MAX. but quarter We recent had shortly, our

Our is go situation. out the families taking efforts to events. involved Everyone aware of MAX well all the is sincere the those tragic XXX address Boeing condolences of to in these that

the are to is the increasing on per support slats work largest engine need the of of entire work provide partner reverser in world XX Boeing, our them XX we'll fuselage, Spirit Spirit wing, they around per with customer program and month service. aircraft, that the month in and to be including the aircraft holds we an whatever flaps important have and the shipsets MAX the XX% with the It from and structure aircraft as makes proud XXXX We wings. to the pylon MAX with thrust on been which to regulators the to a XXXX. and of the MAX production the to they return

previous Our month had quarter XX increase second plan XX to of per aircraft during been production XXXX. to from the

our a recently in aircraft XX with XX we operations April production XX month. Following to which minimize We producing continue agreement per chain. per temporarily work Boeing's closely production on month, adjust announced they to to supply disruption to aircraft Xth, them decision per their we aircraft with an even their to they at rate announced to reduce Boeing as reached month of Spirit's

factory the then Seattle. on the the of parts, store the outside in Wichita in to shipsets than shipset parts. always are fuselages we do Boeing, Boeing of the is rate factories our including and Boeing During all Tulsa. will outside Boeing us to deliveries our take receive for at will until higher and we which continue period we their Spirit premises as possession ready of in a deliver will pay producing to Renton at

with previous the work done have storage the are during familiar before process. at and procedure We stoppages Boeing

We mechanisms Wichita. protect Spirit's at to are fuselages temporary inclement during from installing in storage the expense weather

Boeing facilities. XX MAX all our aircraft the until planned to to per Boeing production we of are indoors this approach burn This per to the month. staggered resumes and month parts to XX month at at the store Spirit and increase will down delivery working MAX service. XX we return in while our airlines XXX other We rate support shipsets, Boeing which their stored Spirit remain per point regulators of to production, When provide will aircraft during MAX they global will supply base XXX with aircraft period enable better fleet time will

to our past major in go implementing approach all to At producing Wichita, this XX Each the except had aircraft are have would now plant fuselages. will production produce a XXX of the has per buffer line. we of fuselages At and X per aircraft models. I've and production minor per production been each MAX some the manufacture aircraft produced involves rate point, P-X have capacity where in As aircraft XX the month Spirit we month two line would described in month lines aircraft to month. have per per month, line XX in we days each XX

lines. will levels will increased deliver aircraft is produce aircraft remain dates. when extra of buffer rate with approach aircraft poised per so we days do system achieve of have month production will XX add per month buffer below but reduce only our XX across we Boeing. to significantly the set XX XX that XX days remain a will overtime buffer line to in previous directed per advantage buffer per production by this In that each production The month at up contractors the rate. us to month, aircraft total, be to each These or While to days will three at into enable we XX to month, planned and our

the time, this of rate will XX to we hiring per headcount to occurs attrition align reduce month. During aircraft as production

us had quality, while XX at longer per well. improve stability we remaining we With are supply of chain month help at and layoffs our time. as healthier aircraft these than this actions, efficiency will enabling to get planned not planning The previously

We will take of this full advantage opportunity.

for which XX% a annual of event. XXX accounts importance the to the significant is our program grounding about Given aircraft global these of Spirit, of the revenue,

Our XXXX prior in -- would production assumed guidance XX the production aircraft. increase to June produce XXX XXX monthly monthly we that we XXXX for would

XXXX fewer return aircraft this we will schedule. timing As previously more rate at we now know per time, month MAX for we expect definitive updated per to remain reflect guidance of not by these information year guidance Due XX XX period do production for on to beginning new current we will we X some at to as had of MAX is XXX receive production of June than does Boeing's month. outlook. aircraft and uncertainties long service the What we the produce for a per forecasted remain as the when issue aircraft month that units we XXX in our

are mitigate of actions taking We as a the number on this Slide of impact X. to schedule new summarized production

the review production action in and actions reduce begun we mitigate of on we have is and reduction taking to all to expenses, efforts rate capital have units the deferred revenue, to immediate corresponding working change. improvements impacts Given production One investments expenditure the financial projects. redoubled capital taken capital our

labor million we'll rather than manage cash on more with for more and some By some of our absolute we we to capital the direct mitigate anything Boeing to certainty advance flow. change mass still million. not expenditures, supply $XXX Along new quantify only our of or previous the we an will the working expenses reducing of with efficiently indirect impact plan managing to profit. capital chain XXX and initiatives which and in discretionary variable we to production requirements, get on the from working on the to operating rates impact help to headwinds, We levels, and have production non-labor production our cost forecast delayed and of plan year realigning XXXX. this efficiently XXX $XXX change million more priority spend now MAX $XXX for as But deferred to million production expect offset

end strong closed hand cash QX, will We cash cash our will of will below million balance sheet of end have the the with cash on at and I have deal, account we generate $XXX After in in Asco QX. in QX. describe into we on billion the a $X.X taking approximately which at over the we position

$X.XXX let's At was take of XXXX. very up Now closer to XX% earnings a QX over at were billion look $X.XX. at strong. revenue quarter $XXX Adjusted results, up per first was XX% income which XX% share was million. up Operating

work doing way of part pleased the segregating highlights QX over aircraft Belairbus improve structure. of QX, position our are as next conditional the expect back although headwind treat delivering as meeting Jose a the a was starting involves a work clearance the we course be for per the in rate to more few margin month XXth to Asco half on we the is to in it a The deal. operating QX month will the because the European and in which minutes. had other segment are XX.X% produce Once track few Asco. Slide in plan We year. were well recent versus per within receive on production few will That under that for still finalize and conditions. of overview XX. acquisition now the after with face the down the paid had for be but data close XX to XX And March provide weeks. costs from the year, additional the Margins all of of of requirements, financial Asco of expected with we we're on Commission's completed of access we identify consistently we'll we which currently closing aircraft Our Commission to is should and X, place only detailed getting course now, in and data the XX XXX, required that from to the

Spirit fabrication Asco as as remains for new fit Airbus business. our the broadens and a content content compelling acquisition expands defense strategic our

excited detailed the Asco integration into of the We to executing are begin family. Spirit

costly previously from and price business to cost has Spirit incremental from to As million and the discussed, anticipated. Asco delayed and acquisition process longer more negotiated the the X% due we originally the impact have reduction have purchase $XXX we Accordingly closing. closing million than a been $XXX

it jet close economics forward, Aerion with developments fuselage for we Supersonic we update business preliminary in We the deal announced a collaboration of QX. pressurized of ASX Asco will the agreement design a growth full the for program. other In when the provide

airplane. Spirit's and solutions to to Aerion Joining for to this a efficient most us practices technical by account cost take selected be our and positive expertise early the best efficient, the program can to engineering were innovative new commercial make contributing manufacturing impact. create this We allows this success of that proud project forward team highly apply into processes. groundbreaking We look to

We or in of the also Innovation of the Aerospace in foot one square of manufacture. will with innovation Scotland leverages This announced breakthrough University which the Center institutions Centre membership and on Glasgow, research the at AFRC. the Prestwick, in site in is AFRC Spirit's a technologies in relationship XXXX. Scotland UK's leading concentrating new XX,XXX in Research Advanced investment Forming open Strathclyde's manufacturing the further AFRC creation Located our

addition, delivered to the initial production program first In low we Sikorsky. the rate CH-XXK unit

very the about foreign Marines We sales. of for prospects excited be heavy-lift the military continue to long-term helicopter this and

million $XX dividends. share million repurchases Finally, $XX with million and in we returned $XX in to shareholders

have XXX more we share uncertainty we until surrounding the the Given have MAX, clarity. paused repurchases

remainder the going As the continue to XXXX, mitigate hard MAX. to working all we of surrounding continue and we're the issues forward of manage to obviously

earlier, years and of will that airlines it remained an passengers and the said same program outstanding focused be for the are on time, to proud MAX on be I we come. the At As confident in our to aircraft we changes taking production other and the Jose financial actions to I'll lead in XXXX. very impact mitigate results. ask the all With the aspects which detailed through that, of strong remain Jose? you business, to MAX are

Jose Garcia

you, Tom, morning and everyone. Thank good

quarter our financials. summarize first me Let

higher production was XXX This model the Let's we and lower $X XX% offset on programs. Slide quarter billion, by to the was start higher recognized on XXX Revenue partially MAX non-recurring from same Favorable up on and the XXX the transition volumes the the period of approximately from driven activity. for mix XXXX. NG XXX revenue by X. as on

of until XXX excludes deal on reported adjusted higher Slide $X.XX first $X.XX XX% AXXX model higher share the This lower of XXXX. The as X. the the a to our includes the year-over-year. transaction impact the mix in the and minimize the The which share acquisition, on to the was we time of volumes program. forward increase XXX of impact from We currency deal represents EPS share quarter Adjusted impact EPS fluctuations the by losses year-over-year FX repurchases. well closing. Moving program expenses euro the on derivative and to compared executed margin instrument driven per from we adjusted as announced the non-repeat of EPS favorable improvement as program, production count Asco

capital lower the payments. FX driven amount on free derivative which to to free for Slide growth and on is quarter improved million The transaction free flow of performance, instrument. payments This incentive flow reflects $XXX working is quarter and was compared free by the the in acquisition. cash cash-based Turning cash management was the impact million Adjusted excludes flow $XXX Asco compensation strong X. year-over-year. flow of the employee of a margin comprised of XX% increase cash adjusted $X million, better cash Adjusted the at XXXX. This first

next to balanced In capital long-term we $XXX remaining our which repurchased on leaves confident deployment Slide remain operations very our to unchanged. ability cash authorization. and remains XXX,XXX X. our strategy deployment under million share $XX in quarter, repurchase We first sustain for shares the Turning million approximately current

prudent However, the pause share we it to additional MAX. have surrounding clarity we until repurchases is feel further XXX

Now segment at look performance. let's our

the for programs the losses the driven revenue XXX turn revenue forward and higher primarily up and volumes period our non-repeat XX% was by XX% as margin well This $X.X quarter on year last program. of production XXX results Slide same the to Fuselage billion, the the in from please Operating to segment to For due on same compared higher quarter recognized period was Fuselage in XX.X% last higher segment XXX the aftermarket program X. activity. XXX on as year. the was

the costs to we of associated APM as first XX have near-term transition the increasing rate As planned, begun XXX. quarter the on the absorbed most with already

has As you the know, transition been delayed. higher to rate the

MAXs. on last Propulsion our to volume the Slide quarter, the to turning and period XXXX first XX% XX% grow program Propulsion In X up primarily by Now going at from The to according was progressing our for and is XXX Spirit. quarter driven the year Propulsion The segment with a additional on strong a of compared of in higher XX.X% proportionately program large XXX first the for GEXX favorable the model as $XXX XX.X% production compared Operating the executing In mix engine. well revenue plan. driving transition was due Nacelles for XXX we revenue program recognized to segment NG is be margin XXXx thrust primarily solid MAX. higher same to the QX XXX results. program. reverser the very package over million were and deliveries XXXx will revenue the to quarter In proportional to

including We for delivered program units. X very to first Boeing shipments will have already the important be a Spirit. This test

Slide last to quarter driven XXX, $XXX X% the well quarter compared compared as was the program. year Wind to period was million, AXXX volume wing of XXX, up XXX higher let's the in XXXX segment deliveries. revenue Operating quarter the primarily for results, on driven Wing production performance AXXX, turn same as our first XX.X% XX. higher by to on the XX.X% by For the AXXX and margin in

does rate production of all business We're impact uncertainty we Due guidance financial reflect delay. looking aspects the increase. delayed XXX XXX of production not lessen issued production issue the rate of to the of the new date. a on the will at MAX future the guidance program, at increased financial the mentioned, Tom our of the previously schedule As XXXX the timing impacts to

conservative not adequate We approach spend to the a previous attrition. to will overtime, for contractors liquidity. and maintain belt We're our be and we will also higher of At time, hire delay production or tightening to ensure reduce the taken smoothly reduce We've proactive rates. transition same discretionary resources planned to minimize areas. to necessary levels the thoughtful

balance will confident back closing I pace that in manage prudent asset and for we been and it fixed maintain With turn flexibility comments. plans to capital to have Tom sheet over to are some investments. We our working

Tom Gentile

I'll Thanks our before Boeing for them take as challenging service. questions. some make closing a industry, on to focus MAX Jose. support comments time to we with and we're And is returning working This they the

changes of positioned MAX per to all will MAX of month future. Before planned. to the production well delivered the production the longer well very we change schedule the production in across for The result the aircraft were rate schedule, us than executing Spirit strong for our and is financial in performing XX schedule and maintaining results previously previous Overall, its is QX. programs

result will While units production fewer time also give our will quality efficiency. and it and in to year, produced improve more stabilize this this system us

mitigate several to capital the We will changes on improvements XXX production of impact offset The our the new profit along flow. actions schedule. have with the expenditures MAX changes and of taken the to working actions, impact cost partially capital production and the cash the

magnitude clarify better schedule the the will MAX to We returns changes once production the have visibility of we to service. after these

Additionally, the integrating XXX. we on With to rate questions. take are that, and your increases committed closing other QX in we'll executing the programs the and to happy be specifically AXXX Asco and

Operator

Thank you.

of [Operator now first will session. And comes Myles question go question-and-answer begin We UBS, ahead. Instructions] Walton today's the please from

Louis Raffetto

Myles. morning. Raffetto is Good This Lou on for

bit $XX if -- you year-over-year, of report you you had so Just talked you deeper losses. guys performance a a about the could year number last down fuselage. being but you sequentially or into know in up million little margin wondering dig take I did

you didn't do if you could going -- that cost staying for weren't you we you if you been? think those extra if rate where have have So think about XX, at XX up,

Tom Gentile

performance put driver was and was it really that place on delivering we're -- per month, biggest had but that margin was getting already the of had XX with for aircraft do fuselage all Right, costs XX. the fact in the XXX. to paid the And for we only still well,

a addition, a X drove quarter. X meant it loading throughout of cost. the units rehearsals QX that That just, the In were we several and in X more times or did day for lot in XX row we rate. it doing And for per days

of a the So of the cost sliding reductions, in we year. the expected that also them course are of and basically all lot over

for on going improved So at of track year. production versus now back course we're performance, headwind half the for the lower rate from XX see we're some of to margin but XX the

The other margins, know thing accelerated that, had XXX margin into as from way XXX on also structure and to periods revenue we the you Boeing XXX. I'd say quarter is fuselage the the based about We a on pricing do this changed the the it is future the program. with with zero

rate we segment direct attrition, in actually well, had to below fuselage planned. the well down But going so, for as headwind that down over labor previously again, it and the margin And a the come -- to was be will down for we're go the also the that over start so year. going that contractors improvement significantly year, significantly fuselage. to -- Jose get will on course the to so see the we and the we're And time, of on cost align the margin we'll go forward will not backfill as XX, as and mentioned,

Louis Raffetto

another proceed follow-up or else there insurance costs unique? $X quick was million, in was one anything the Just there unallocated negative

Jose Garcia

had dispute, was No, settlement the what long-standing the warranty had we settlement we there of a reserved. reserved than and was in gain less the a on which

Tom Gentile

that a So reserve. it's release of just

Jose Garcia

Yes.

had a there. So we benefit

Operator

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

Doug Harned

that at XXX I are, better mix -- the Systems know talked I I If time those Wing only those get you about strong had, the on Wing Systems, look Propulsion in and the margins and propulsion you assume. would when are AXXX, model you mean, going to over factors

the moment, to give you're set in timing, I mean, up So kinds QX? the of take MAX issues away around to, seeing the margins these the structurally if you are were for better units that

Tom Gentile

Doug. exactly, Yes,

also changes the And XXXx, lot continue. both And you a were to reason thrust trends simple the and those when in nacelle bigger fan which bigger also the of changes is, the pylons including at bigger the the and the XXXx in the expect cowls. MAX in the require build inlet the reversers. we entire case of We engines and look cases,

on the so grew substantially those. packages And work

we've of reduction lot terms cost so, in effort And our a areas. programs put in of those

And so, see forward, better we as we will go margins.

one year going in improvement we And be said not than of and this our the faster In into next year, margins fuselage. you're a but going up calls, fact beyond. we on the signaled that's see wing key previous only propulsion that, of to that margin driver go the to our and

Doug Harned

in to a extent. of in had fuselage just some to also you've rate, should propulsion XX you where the cost And make some sure, those and issues the the month for had wing exist extra

something, of? is that we aware So that -- be I a was mean, -- that is there in negative that

Tom Gentile

offset You're in again areas got at in the did they But fuselage. reduction absolutely the on are fuselage in right, sliding than overall our actions the over lot those a of year. will course exist. we've that be cost they that of more did just It's benefits

then momentum will MAX as the QX headwind to that, we bit we the to production went expected that still before. year. of little gain lower through although a we I So have for We'll and described the change margins be the see

Operator

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

Carter Copeland

give called of in little a just propulsion the So out. mix could wonder impact look, us if on propulsion, I you you detail the bit that

was on profitability the mentioned. then going on any AXXX you that what delta there Just commentary and

both those Thanks. be So would helpful.

Tom Gentile

Okay, well, on two things XXXx.

package just propulsion with bigger is bigger what that, Doug was saying got The just the to is first engine. I proportionately the

GEXX-XXXB XXXx, is the look the XXX was GEXX in XXX you the if inches The diameter. at inches XXX-X diameter. it So for

everything but grows proportionately. bigger, it's So

and XXX-X standing at the have we at propulsion and compared in cowls and when the significantly to the it's look them you some if And look So package. of XXX-XXXER pictures we fan it's much the reverser, people the bigger. you see larger inlet front thrust where just

made the bigger. been drive transition. is lot as thing one is we've we've just package that's to a bigger, So that, the reduction cost work able And significantly of

The other versus QX we XXX about see the to a know fact XXXX. to in start volume recovery in the did is,

XX get to the we again, XXX as So versus X higher up month. to at, the of this there up shipments where back were X levels production we expect but we get from And to were were. X. we through Perhaps not to that transition, back per

So that those are to going drive the things XXXx. are X

on programs, some some well the now kicking factory the programs. Airbus In driving terms And our only new also of and a capital as productivity not improvements the taking And made cost supply and forward, We've that's in are chain. of AXXX, that quality that we terms productivity. just working in, those of we on made then program improved but the on is are have just out that efficiency. in been in the something lot we've of we invested go also Boeing as through we've efforts as

driving that things the program, improved the are AXXX those So are profitability.

Operator

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

Rajeev Lalwani

early incurring to made some and on? XQ to also that and you of as bit so about too maybe did costs as that opportunity an how trying come Tom, some color talk much for going steady you you the you where catch-up that you the out? those then see more is catch can up, were that really provide up were of ramp comments can a show back surge some wanted in is we through to the to as you it I etcetera. XQ XQ XX, see or a And little we quickly didn't to the quicker in cost of Can be Can as a costs to get around year?

Tom Gentile

Yes, absolutely.

in we've mentioned First lines we terms I that down all, these switched to cost X of XXX already those of have on buffer and production, the getting the days.

quality that act days them workforce where as fixing buffer work issues unscheduled our present those apply or days may travel to and have we various emerged. basically also that's entire take can So

those with And for overtime the up workforce. so, what contractors we used use now be days with will and taken active to unscheduled

contractors our as So we below previously start planned as quickly, down see very will levels. overtime the well to well move the

so, QX that also happening, mentioned And in an like that going on all discretionary We've of identified number that. as other will as we're expenses. as so well discretionary we on taking purchase the is see impact a of services, to you travel, start costs actions

event area. so, in significant that And has really instigated a this activity

going were that's as again resources already QX changes Those way. under down away The that surge, that's So I to And those come now. to in well. go started. related are already mentioned

go Now XX, resources those of to we that rehearsals need to going aren't surge we don't and the course stopped.

go So when start not to to later get until going to XX back to do much any rehearsals XX. year ready more we're in the we

so over we've So the production that, year all the offset the and those things of all in MAX kick the And changes. QX. impact to in start mean actions mitigate they I cost of think that you'll laid out to of see the the course improvements

Operator

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

Seth Seifman

a quarter. flow, talk little in which I wonder if you about could was the strong quite bit cash

know you some been had source about front in talked XXXX. were that strong that cash Now us? of last year of on and that you Is and front that still up in a payables reversal

Tom Gentile

Yes, to performance. and drive helped really come well, me, the cash let strong Jose going I'm he's and because answer that area on this ask focused to on flow

So Jose you? could

Jose Garcia

the mean, margins. Yes, one driver really so, was I improved number

lot perform than last of year. in So, we even the was did modest we improvement terms rate a fuselage, in margin though dollars, better had,

had the billing we our chain have supply of momentum on quality, XXXX. do industry, to a around of longer inventory line capital on a days have in getting reduction also was some as our a target general, past employee were payment the And moving the better the benefit say, We put especially we collections, incentive working also around good the chain inventory with But terms stay around results some we management, year which resolved, early payables lower supply in the working big days. all compensation, a items healthy. capital which help that would pressure these playbook, result really on and I was we're due will in But outstanding this were. rate big going obviously payables in in into

You programs CapEx noticed first place, starting to the effect that's the also slightly put we that so in quarter. show in less, the probably that too of delay was CapEx

Tom Gentile

over standpoint of the cash have the of from we more year. levers So the course

on expect momentum to from cash, the just got we the to Jose we've most of QX, going be production more initiatives mitigate, and side, on we're after good that to going continue drive the We're described. to see So able XXX headwinds impact slowdown. to the profit but

Operator

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

Kristine Liwag

calling we Kristine Liwag curve? should expected about programs? learning XXX are for these And and you how your It's the unit each versus of trending cash AXXX, how think profit for for Ron. Tom

Tom Gentile

Right. Well, XXX is line forward up be position will and loss to unit still it XXXX. in a

will new that from it's will at So last that agreement up exceed our level in program cost. we've zero Boeing, and when At place we a with remain then. year line point, put margin we XXXX to until XXXX as said that unit pricing signed

with goal projected working the down take Now. But XXXX. program. exceed it on is at cost is just Boeing continue what our to line initially unit that cost will to

to in impacts XXXX, recall, Airbus had we of with million up which get regard the $XXX announced mid-XXXX. that's losses AXXX that about $XXX to we did with about forward XXXX deferred, global out was about So had With but we when as all we at the back you healthier margins, million. settlement point that XXXX, beyond in

basically but and it's flow right some have ASC margins course units. Team and get that we million There revenue less to track adjustments so, flow is reset to recognition the along changes we're was XXX became positively it's results. we program over efficiency cash and improve when it to now or $XXX goal higher, hard now to collect positive. overall generating positive but ways, positive to last that. margins. and productivity more the went the And of And been new working basically on And to the the XXX cash our very system, contributing

that. with pleased we're So

Kristine Liwag

recorded fuselage, Or you you changes execution? related all programs changes are what's segments contract Can mentioned? favorable better and propulsion discuss that? to quarter, driving the that loss the forward of few in adjustments these a on in then, these were across And wing. in you your because And

Tom Gentile

It related program better been the factory to driving analytics. chain improvements, savings, supply really It XXX execution. has mostly process was the data team was and automation,

the that whole of So series performance, the resulted initiatives the in improved of reversal program. in just that improvement loss drove forward and which

Operator

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

Sheila Kahyaoglu

that potentially. means deferring kind I on the And you. CapEx. the about somewhat note, all we XXX Thank talk your guess about, of how just other non-essential we maybe in Can a at NMA when changed what aircraft? you're discussion programs related some that for if has think

Tom Gentile

about you longer mean programs. to there's see those impact just front always make the With situation for sidewalks, delay when like capital regard And expenditure to we very taken period in again to of the capital see infrastructure. I what to are But overall you hard really a expenditure, of you ways serious all a us, with kinds serious new we the could type roofs have replace, it's things, have very our repair, defer a buildings wouldn't and look at we've that situation, expenditures these maintenance can to with important. what find a of time. or of for capital do

we we and while did, preserve what lot growth growth so we of the that that's changes we a or wouldn't R&D. made defer productivity So, would activities the initiatives, but impact we that maintenance

really was focus the that So there.

has Now Boeing. that, MAX press on Boeing right its probably NMA, service. is now major with release back to the in getting focus Clearly the its for is better regard that said to question

Boeing haven't all the of NMA period about to this we at during time. talking been So

MAX Our been have sure given making the delivering and the entirely been focus that adjusting has schedule changes on there to quality production schedules, and just some our delivery redesigning it. we're

focus our right where that's is now. So

Operator

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

Robert Spingarn

That's you're just then and you excess the of I Boeing, that's a not this here? some any they situation cost kind getting to do Or but advances for in contracts? obligation I compensate part. on higher just second, know Couple is cash have things from here contemplated the have Tom, start question. fuselages? do How the the wanted level then to XXX I XXX. you there, And for much finished excess space first of have

Tom Gentile

news here and space. we of a Well, in lot first flat space. have good Kansas is, land of and we're off, The plenty

plenty more many planned. sits can that on We the Our Across any as facility we company Air campus, Line. store the have have X-mile a it's former Boeing square. large we now And Flight space. a than very fuselages street Capital as of which we we Defense facilities, scenario in have are have called

cash no with Boeing So, at to all to that. that on with chain us working work do help we capital. specifically regard on supply constraints advance, the With

for transitioned So already a had bought suppliers all XX, equipment lot again inventory their they XX. our had and to of

it's a that bit take going little us so, down. longer to And work to

down helps indications is from so, involved some takes but inventory address And to the shipping, for now the and and we've given advance in capital new production time there working levels work Boeing it and that.

Robert Spingarn

a to fact hit The that's plan, you're below producing lower more absorption. earnings. The that permanent and

Tom Gentile

no into We trying work difficult flexible Right. for and of with we're There We're they contracts through to always Boeing them is go this supportive period. compensation be to to that. built things, trying be adjust as adept. the

economics an actions was unexpected event. of changes. if But Spirit, look we're the Of production the you it taking the overall mitigate course, at to at impact of this those

this good with in we -- the production a obviously very no stabilize return planned worked the period direct the remain had there to year. poised compensation while deal to out so, and Boeing, rates to And production that later during is us help Boeing we from

mitigate as remain impact worked well Spirit and chain to to this organizations the think stable together supply transition I and as of So allow two during possible period. the very its have this

Robert Spingarn

level XX% years, we're us? And had is of we've to but the Okay. rates variety ramps, noise past this is and you've about mature of all of the years. issues, we've X just behind X up couple margin targeted for had put of business profit at profitability, the ex the we've had once What then higher a over things. EACs margins X, So looking a at XX%

Tom Gentile

were last we we back when number, XX.X% stable. in we a because were where said XXXX was that's about What good year

we stable aircraft more three per at XX month. So about XXXX, than years XX%. been there at to if you and We've were were for go we back

in there those. was of industry, to a there's Now step from fast there's still, in the material lots labor always to and to headwinds, productivity is good you stand I number offset and customers, run our have say, downs, in but expectations have we XX% XXXX. back there is increases

took we as we the so, what basis be. projection that long-term And for number think our will

adjusted upwards we our course, recognition. change revenue Now had that we've of reform, because tax a XXXX, in we've since had

that long-term said so target and And we XXXX what than higher said, our was be we confident and there. remains we're that's target, long-term our And it XX.X%. in why should we'll still get

them, headwinds to going long-term we're and still we've XX.X%. mitigate target the year, Now range got is work that in this to those offset but

Operator

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

David Strauss

read Tom, Boeing into that? until I anything Xst through runs next the MOA of runs we May -- with should year, think

Tom Gentile

does Because what's then and MAX right to we XX go back real to we had key into to at at back is going picked we when the do and go Boeing XX date does we're pick when and correspondingly go now, XX. service a back date. when mean, But the I Boeing No, XX. to is, happen that is

and time. for shipped go higher we'll aircraft rate to get So to than off to going down we're to we a period will And stored are be that burn of Once than at, are inventory. a they producing Boeing. start those then or more they buffered

production has May bearing a operational And service, really to date when really MAX then for and be what picked. the does contract back points the when the when no return is, going to important issues. note What's of to run relevant XX. we and any go that's go just are we the of. so, The those needed take does Spirit on XX Boeing to does was to to it to or But

David Strauss

mean, Okay. give how operating supposed adjust Boeing your time were down? to if And is contractually, actually normally, I much, you then rate if to they how much had lead things

Tom Gentile

were for And both and closely We did able work for like look very relevant. penalty solution how do worked We is we there to Boeing support the our we obligation, the time figure and what did, situation it's to a if in work a we -- we parties. And every up very forward. a challenging there out come very that really very meet don't that. that's contractual a whole lead as Boeing. goal time. with effective we day with at is this, but go we and industry It's that a as But nominal they look not it's is on

Operator

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

George Shapiro

on ask have XXX. I aircraft Okay. -- to the wanted XXX -- pool XXX roughly the

or So a the status, so have because pool, were quarter, that costs pool in assume, was the what's extra margin. lot factored going completed subsequent effectively April of completed pool the be that into better in will the to would it's I

Jose Garcia

quarter. first of block Yes, in George, completed was XX% the the

So really units. of a we're into block going the second quarter XXX in new

again expect this margins next improved rates ex block. the impact, do we So on

George Shapiro

comment could just comment lot, a you you percentage a we or that give then higher much everything XXXx you mentioned it? because revenue how is being better bigger, much if of on, you so on some revenue just you like get -- can how And Okay. could get Tom better get, the color on that just

Tom Gentile

inches Well, a engine. as the XXX I in The XXX was difference has XXXx saying diameter. bigger is to inches

factories supply so, in program. entire be the margins all is business reverser on depends that on the margin And the higher, we're our to chain, our across But up but the package so in and to obviously the revenue scale thrust entire work nacelle -- the, improve doing the proportionately. that our issue going

CFMXX-XB is So engine happened the same that's a the with -- the smaller engine. MAX, bigger thing LEAP the bit in scale CFM-XB little that than

we is so engine the the and that pylon which stronger. thrust similarly is built it the wing holds the also reverser for to bigger And And bigger.

cost propulsion, improved engineered in our fuselage. working through also the but revenues. chain key driving that's our supply factories And rate is drove And point is I so here We're doing initiatives factories. in But driving we're We're impacting also and the the not automation and that all think only side. with our the suppliers. our margin working really margins, factory on We're that things efficiency. wing what's on productivity what's our on driving

George Shapiro

Yes, higher what might higher question seems -- it at what deliveries for thought somewhat the maybe is even get than sales explains adjusting would percentage asked the propulsion have I trying it. the mean, just more to that be I even they which might I sales about -- because also and revenue

Tom Gentile

thing think that MAX I -- it shift. the it's drives Well, the another George is

all basically producing So and not produce to XX% going MAXs forward went and QX PXs. XX% QX only we're to NGs many at for very going -- except we were in it's in probably

really And model mix that change a higher drove on that so was the of it level as propulsion. well revenue

Operator

comes Cai Rumohr next Please von question & from our go of today Cowen ahead. And Company.

Cai Von Rumohr

off to that from getting does the you're there. to So, those days. line that he he mean incremental or growing overtime. have mentioned take X you was on buffer What guy days Tom XX for basically X Does the

he So just going work now is normal back hours? to

Tom Gentile

Yes, we well, days having were just line. X per buffer clarify, to

to on month. do to the we'll not X unscheduled workers days But for another your question no, each X we're apply the furlough and days we're is, are So planning those add workers days existing going going end to depending work. buffer and going layoffs. just we're is or before to we answer any it's to about on not the X, What

a time we over it we've because more And days need we and system, level done. were many to base had our certain and in is factory, we contractors before our won't the we factory What get is won't do you every have work done contractors. things that need amount work always And will in now So as of is, have plans. traveled a much into that buffer way getting and of need was time. we we that and built that our over

will that's so, the days people And on on kind is they will that buffer what do do work. of --

way, advantage Now would which can out is also time. normally But plenty work per days believe is training, work XX that, for aircraft of to it tag those at this of the we're producing month. there use and We time of APM, come doing do. of still

continues. that And so,

just the up has rates, we month. each days by XX, higher have there. to when take up And days and because line eventually go of we go take the way if back more to we and so, be we'll do buffer we X capacity buffer per up And a lines we'll out XX

productivity up enable the set non-scheduled rate And go buffer how that's use buffer days in we the and production the So system. have improve to days us to and down efficiency.

Cai Von Rumohr

And it the stay the I last delivered. like, looks at year delivered rate versus of so shipsets Boeing, combined, this XX? one something have to than your, of them go fuselages XXX that and on or you've the ahead long if they've you'll year last lead-time are like lower mean, you How XX to they more XX,

Tom Gentile

of deliver in them, didn't QX. obviously anything ahead have been Well, we they

on we'll in them. The as we XX terms at to when at So, issue rate a to going per Boeing issue. the we're we'll build I they stay part off let's to when of it up XX, of said, goes XX, because some at inventory of back forward. we X how depends when stay fuselages, long say, go now to higher up XX, back it really burn that's month go, producing they XX than And go

off of those per know burn at at get time. so, at And points in takes we'll be to that month, X inventory break as many months as And we'll we XX it have rate we forward. that Yes. for as us a

You're welcome.

Operator

Please next question of Michael comes today SunTrust. ahead. go Ciarmoli our And from

Michael Ciarmoli

question Just Cai's maybe on there. follow-up a

Tom Gentile

yes. is answer The

So factory, and Boeing the our own outside us and point. FOB at right they the that fuselage On-Board, deliver Free pays now we shipset

store books. Now their will but Boeing will it, be owns it paid have and for but it will -- they on it we it,

well. as And so, they'll have the insurance liability

also outcome. us was we that was we good something help structured. capital and terms the that And flow. So And good Boeing Spirit. it think a for it's deal very working than cash And a will obviously that it's of part in of

XX they deliver fuselages, XX, while while Boeing service. building be of the to store point they back Let keeping able of is that, chain to can very They'll follow-up in supply they're me them. MAX once they we ahead into at are is just terms -- that, gets them but go the them the fast of aircraft, delivering

And in us so, they'll effect up very to to be quickly. able catch

as So will fuselages factory, deliver that's they'll that for own at they work, already they how as and outside we'll but store do paid pay it us the point. them the our aircraft so, them, we of have

Michael Ciarmoli

who've out I at one, those remain their back message to, the or to ramped make you does what's sure a just inventory healthy more in guys on ready would XX. are then to mean, for just And maybe you that how sub-suppliers and and through XX? supply flow working suppliers Does that excess the -- prepped inventory your build who they been capital are to take position for for chain? figure you trying I'm have to prepped, last XX.

Tom Gentile

each It really varies on a case-by-case basis. working We're individually with supplier.

with make Our suppliers financial the who attention weaker may come suppliers solutions. their not we have of health monitor to particular schedules all sure we're a of goal positions. our We're variety changing we've right away. and up of is to financial paying But

the was cases the sure of throughout cases converting inventory, Boeing. In we're chain what goal owned them we advance absorb supply to some that some vendor is we're purpose inventory. this process. down from so healthy owned the the be might and in tapering make remains inventory So the The can that Spirit

for And so, unique tailored we're single developing every supplier. really solutions

Operator

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

Hunter Keay

the you As and view also obviously with it, going on you risk forward? this but highlighting sort prioritize think necessarily MAX with MAX the going of some you issues are about M&A, you Thanks. with Asco, how not Boeing but of does to about maybe the your concentration itself, some the how change do headaches what had to think of the

Tom Gentile

for mentioned things, more to a too Airbus And the military long European great I fabrication deal learned get for content, because strategic the in as really European It content, lot of longer more Well, also isn't more capability. we've Asco us, But is in it's approved. a this of deal scheme a Commission took that. process.

that. not So at all we're discouraged by

Asco to $XXX In how is. into fit million of to that we good account by that million a strategic I fact, And mentioned, $XXX period. a adjustment encouraged did take as price extended get we're from

we So remain focused. very

that are to and quite to partner other be to is both on same continue I to of and program. XXX we're those Boeing. We grow business. that. programs see be do our the Your opportunity aware significant point said, the Boeing of as to proud concentration a time At we of. to with want we obviously proud parts course, the we MAX of We're And about want grow one of on

inorganic as to low-cost remain will things military our content, more so, we go more strategy Airbus capabilities. on footprint, more more continue And like country content, forward, fabrication

inorganic remain focuses certainly of those, our So strategic strategy.

Hunter Keay

were kind before? going to little it you bit this to diversify urgency remain try just And you're ramp maybe of as a Tom, urgency issue recent as does the ramp as the sort or still just disciplined to of

Tom Gentile

a this don't Certainly many rush we tremendous on be doing remain a situation to when a disciplined. to others. overpaying. up you had whole has want industry, including anything that's bad Spirit But and We or impact do want in deal Boeing the end to and

about inorganic to So our going remain disciplined we're very strategy.

Operator

of today's final And Vertical Partners. Krishna from Please question ahead. Sinha comes Research go

Krishna Sinha

think the David earlier your his the next this question halfway of end MAX on -- through mentioned through year, that year. out in through definitely I MOA stretches

could the So whole Or this in is at there on that I that is is inputs? down guess for month ironclad of possibility on it worst-case Boeing that is guys? to scenario XX than or kind a Boeing's there just you for rooms really guys move stay given year? you rate lower still any that MOA you push down you just

Tom Gentile

obviously, where them aircraft the happens. what of XX or the to they MAX XX month. increase sure at are with again, plan. does terms now the which when going what back to previous on XX that to will earlier, and would to establish we're But XX to work and make we And I the does to service key per if MOA back was Boeing the dates production does said beyond situation Boeing changes, Well, then return with aligned in its milestones the rate when be,

working closely complex to support So that, airlines this world to however this we're what responsive around work situation, We we're with they can't need we going and very is and to with presuppose to them going and be Boeing process. we're regulators going in a the can.

Krishna Sinha

your when the buyback don't in a issue cash And know but go possibility you do depressed follow-up, that maybe any you prepared an balance the guidance revised you'd at the then just you're second the time that repurchase with regular is of on sheet at that you here share quick million there? cadence $XXX mentioned when you price accelerated do end and remarks resume or just quarter. will in there that issuing a on guidance, to I the kind planning remains your going at of if have

Tom Gentile

that be to high going we the that we And back Well, which have point when service. this if is will, key cash, when point back of will a repurchase we at level more the we normal program. MAX expect the still -- share into to gets we, go

opportunity. XXX% of service, repurchases back is into the to over always approach. last of our return absence be toward is years inorganic goal the capital allocated in several share MAX of And sort past the some Now we'll once we've the would that in

Operator

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

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

Spirit AeroSystems (SPR) 2 May 192019 Q1 Earnings call transcript