Earnings call transcript Q1 2023

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Operator

Good morning, ladies and gentlemen, and welcome to Spirit AeroSystems Holdings Incorporated First Quarter 2023 Earnings Conference Call. My name is Jason, and I'll be the coordinator today. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions]

I would now like to turn the presentation over to Ryan Avey, Senior Director of Investor Relations and FP&A. proceed. Please

Ryan Avey

President and are I'm Executive Spirit's Gentile; Senior Jason, with Avey, Officer, morning, Officer, and today Financial me President Vice good you, Ryan everyone. and Tom Mark Thank Suchinski. Chief and and Chief

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

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

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

Tom Gentile

Boeing results an Thank today fin After to the you, fuselage Ryan, to good update attached everyone. of XXX to we confirm identifying the an meets and with our Once Spirit quarter I production of issue. issue, turned that with by fittings, call. begin was flight it morning, confirmation immediate the our FAA was providing Welcome manufacturing ongoing safety quality first the builds. issue want not this, top models work vertical their certain that standards. Spirit's to for attention and ensuring to our priority we the

our have revised restarted of Boeing. to production assembly production, have process in shipments We fuselages and have conforming resumed

units have well affected in including Spirit developed Wichita; the identified located owned in repair. Boeing as as have inventory Wichita in a We process units in units work and

of units in this with the current XX% dates, XX impacts and issue XX customers other units about to total. China no for Excluding Wichita, delivery

and the work July. we for be Wichita complete the which is units assessment repairs impact units the is of four We have will factory disruption on in caused completed and QX. of $XX total these it $XX end repair million, by booked for in million that The our repair current

to $XXX,XXX average Wichita $XXX,XXX the are repairs approximately your expected in information, per For to unit.

disruption some factories. quarter be deliveries our the will in our impacts near-term to XXX in and second There rework to due

We XX in are in and per rate the two program. later increases month airplanes to per month year XX to targeting XXX August production October still this for airplanes

deliver disruption, in XXX XXX we XXXX. now the and expect to associated between XXX With fuselages

are Boeing help delivery impacts, partnership stored that production issue We the schedule Boeing production. minimize has closely the and reinforcing with through with provided We working coordinating to have. new in and support leveraging fuselages us, appreciate this we strong

support customers some worked receive have to $XXX near-term liquidity. million advances to our help with We Spirit's of of cash

CEO, to QX. fewer cash report, in Boeing's As short-term a to has help million the impact earnings Dave Boeing's Boeing with cover agreed XXX deliveries cash of mentioned of Calhoun, provide advance Spirit $XXX in

of safety our to our are Spirit products and quality and very The customers. important

products around that we great the understand globe single Our day. pride the are take flights enabling employees every and manufacture

part this As attached address place to issues processes like in our followed case. fin quality of management vertical which in we system, fittings, have the we

the also protocols systems cause future. prevent similar and reinforce to have extensive corrective process in an our action quality additional occurrences are We to root implementing

in a committed impacts financial continuously of to the and culture quality are customers. fin We of our our to vertical will assessment the our as trusted strengthening attached and preliminary safety remarks. address improving Mark fittings partner his

Now turning business. to our commercial

at levels, XXXX February return by growth now demand. of XX% encouraged February of international and with air XX% the in on continued is results, global reaching strong XX%. travel at domestic traffic are We travel the Based

work commercial includes on packages stands $XX all Boeing in Airbus billion, which the platforms at and backlog. Our backlog

encounter remains in with they to terms our of the production as continue While challenging, the factories. chain arise. rates one-off increasing face address supply supply challenges supplier air pre-pandemic must to recovery our Overall, chain our issues the that levels, toward and we continue of of well and shortages health and progressing traffic associated we is we

the we remaining which million $XX $XX currency changes driven program, by foreign forward million $XX was costs million the The of loss was a AXXX production on recorded related an to schedule supplier. quarter, movements. distressed and In for non-recurring

areas One training of to good in mitigating later increases execution year. our within of the production rate planned programs. challenges major ahead production We've our hiring employees focus increases meet remains across multiple chain supply and factories upcoming XXX rate the progress and this made new

throughout expect challenges into do gradual continue going expect the year, improvement ongoing to We supply next chain year. but

of XX last other on our what programs our XX deliveries we XX program. call no is on In XXX from program discussed terms AXXX shipsets shipsets expected and of to earnings there on on change commercial this the year, the

XX continue to expect AXXX XX, deliver to about to units. We

updated For to Airbus schedule received we expected last from this an XX have and quarter. AXXX, we XXX about shipsets fewer year, discussed deliver production previously now about than

Now to on let's move our aftermarket and defense businesses.

XX% up the & compared business Defense to to Our XXXX. strong of quarter this top show Space first line quarter growth, continues

award Assault to the With Aircraft, Army. forward this as of Valor recently Textron Bell upheld, Team look the we important on Long-Range FLRAA part on for program decision and US Future supporting the

proposition phase cost design work build reminder, prototype is competitive FLRAA another application for customers, of of the a this program with began Spirit's on As best manufacturing, of the are military ago to including to decade nearly the for practices strong transition first the commercial demonstration program. capabilities. excited and value a we next This and

and and Aeronautics platforms pursue for We commercial Skyworks with Skyworks to also an the support announced UK in MOU European markets. defense

work will aircraft. detailed and support on takeoff activities and vertical long-range design collaboratively high-speed We Skyworks, to a landing,

of revenue strong aftermarket period with announced team year on same this Our margins as last Aftermarket business executing XX%. the XX% our growth is operating nacelle We signing Singapore's solutions. strategy, East solid produced aerospace The the quarter with in to with aircraft customers agreements. the growth of compared exclusive also an Engineering's recent MRO support engine several by agreement to business highlighted cooperation of and commercial ST Middle

over our and Jordan authorized Diramco colleagues' strategy and dedication global hard customers. appreciate GMR upcoming here recovery. be production and our mention both as work, aerospace to Union also I to as Aerotechniqe our for with available Wichita. locally IAM the expanding agreements in continue negotiations center. particularly signed be the the want with we our in to IAM Spirit's ramp of to Further part India lines we Additionally, pandemic our repair We

you primary over Mark? Our more our call objective with as a fair a is details Mark to reward demand meet contract increased turn on to I'll IAM competitive our now our and few the customers. colleagues the we take results. through to from

Mark Suchinski

gross Thanks, discussing that FIN expect profit impacts financial and performed impacts of Spirits the production approximately and Vertical to full in resulting opening Wichita million within Tom, financial everyone. as financial from disruptions $XX a results. which by is comments. impact million, XXXX addressed We've preliminary want begin in of $XX to our negatively his and by fitting rework the the issue reflected assessment a good morning, quarter result, Tom factory first I attach year

The rework costs average million $XXX,XXX on is available of approximately $XXX,XXX unit, to Wichita the is units which $X expected between per total. in and

the to We expect in our and to factory that service. incur previously related assert future costs in additional warranty their costs, XX repair units affected to including customer units delivered those may

in time. XXX costs and make those take XXX of units to by of half near-term reasonably The year full XX that the about XXX production Wichita to up leading the XX the the remaining deliveries estimated will rework this year. However, with place about disruption at reduce cannot back potential units additional be will of in

impacts We updated. will on as continue And to you the we'll keep information financials. more evaluate our becomes available,

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

the So and by aftermarket let's start for space slide was This revenue. defense -- quarter due XX% partially was the production XXXX. to and increased X. program Particularly from higher XXX or quarter the billion, on improvement first up AXXX Revenue on production program. primarily the and lower offset on of $X.X

of The top strong Defense million. increasing quarter over had with prior $XX Space the growth by a quarter about revenue XX% & segment line

As XXXX we were AXXX by last same driven deliveries, deliveries deliveries, Overall, overall look partially AXXX at year, XXX units. the by deliveries higher offset increased and higher period lower X% year-over-year. X% than narrow-body

earnings share We to EPS. negative of attention of $X.XX our quarter first the negative turn XXXX. let's in to compared reported Now $X.XX per

$X.XX negative protection unfavorable prior margins The jobs was to compared driven changes quarter Operating of adjusted aviation items, period. by higher in estimates EPS production year. to in program. prior the in first the the program the absence manufacturing certain that income on negative XXX X% higher related negative of the offset was partially compared to by the recognized margin XXXX, Excluding in was X% lower in was $X.XX and

first First quarter million This and adjustments million. is in adjustments million of cumulative losses quarter to of $XXX catch-up XXXX. forward losses million $XX catch-up were the and forward compared $XX of $XX cumulative unfavorable unfavorable totaled

$XX AXXX production changes, and program, AXXX XXX current forward extent, million quarter by costs. to AXXX The costs lesser million chain the supply schedule increased currency losses of the $XX was programs. from resulting and relate primarily of and driven non-recurring movement a The to foreign loss

$XX The and AXXX labor to charge and from supply of costs additional resulted schedule XXX forward result $X losses a of was the production million related changes increased of million, chain.

cum FIN relate catch-up unfavorable to adjustment, the issue. Vertical Fitting Additionally, Attach primarily XXX the

in which primarily this due higher year compared of well million, our in currency as the to we $XX of to U.S. last losses pension income Other expense was initiated the period. expense plan The million other frozen $XXX was higher quarter. termination as prior foreign

termination charges tax million, charges of The the of of expense excise $XXX associated pre-tax $XX the the pension with non-cash as majority $XX This of million, including as million. the should termination conclude totaled plan. well associated

$XX usage same tax surplus million improved XXXX, Free The to to largely was $XXX XXXX. made payment turn of during $XX cash cash to of the second quarter for let's of of flow. cash related associated excise termination compared our Cash free the driven pension million by $XXX the plan. be million. period flow Now quarter of received, will about usage by the million,

our quarter. Higher to lift cash XXX a provided deliveries flows, in first also

and $XX the quarter program flow XXX included XXXX of a related to advance free Boeing million cash quarterly repayment Grant. received in to million First XXXX related jobs $XX the

the shutdown negatively free cash that Consistent well as receipts make first the as we year-end with years, seasonality related prior employee-related in quarter impacted flow of holiday quarter. cash the benefits to was first by

Looking The ahead, issue flow on the disruption in of this risk well FIN as result forward our during in losses have impact deliveries also Vertical the year. the will cash Fitting the quarter XXX pressure free cash and as additional taken rework will a negative Attach flows. lower from

in now include headwinds, be flow cash Vertical million we million negative. expect This not Attach Fitting's $XXX these year usage can't reasonably additional estimated does mentioned our at the full free items I to the that range FIN be range of time. Given $XXX this to

full to stages flow as year free the the Fitting expect range Vertical recovering to our early and of normal further biggest disruptions rework be we the in very dependent we from production. Attach the The XXX issue, through cash XXX are associated will impact deliveries. free year flow on to full progress cash and to Because we impact our refine FIN return

we with result, to turn with $XXX With from We After of now a quarter. be balances of our that, received $XXX on million entered customers the slide to of million to customers close of $X.X advances million $XX of approximately second cash million fourth provide ended the which quarter cash quarter, let's in quarter receive $XXX into the and advances. billion agreements and will debt. X. first as And we the and our in the expect first debt cash

about cash these repay in of the million $XXX XXXX. to of in balance plan XXXX to advances million the tune and We $XX

help support advances cash these of statement sheet be as debt-like cushion, and potentially receive the incur flows. from of from Receiving as inventory disruption additional XXX financial chain. items we and lower near-term on our especially XXX categorized will supply on while the affected provide financing materials continuing to balance and these as own expect fuselages, cash rework will deliveries, advances the the We impacts the reflected to

partially on Segment production the the Now increased primarily first of lower higher in of the to XX% well changes on Performance, programs, on to revenues quarter with protection compared XXXX, recognized AXXX. the negative In related Vertical the X. current program in X% Operating XXX let's in higher unfavorable including compared period, issue XXX. breakeven offset by absence the that quarter production to jobs attach offset in and fitting discuss starting of the of same higher was as the partially commercial XXX Slide the and quarter XXXX, due the by to income volumes XXXX, our first as by margins driven the was volumes Commercial FIN Segment on XXXX estimates

the million. during $XX first quarter unfavorable segment recorded comparison, catch-up cumulative previously cumulative forward during in change the $XX quarter million of $XXX charges million included first adjustments. I In mentioned, forward unfavorable the estimates both As XXXX, the adjustments of losses and catch-up losses for and of of

income Additionally, XXXX. jobs the program same segment the recognized $XX in related million the of period protection to of

revenue unfavorable let's development quarter, turn cost of & of cost first production. current & changes higher program on $X $X $X year Space the to XXXX, loss Defense same $XXX reversal related absence due than were to forward of of compared and first XX% XXXX. due and in year grew to period to XX% of the higher Operating the favorable recorded the million unfavorable Now increased excess in and last to to in received the PA X. decreased million Defense million capacity The Space in the primarily activity excess to higher to income margin $X the for and Slide XX% estimates and in quarter adjustments program cumulative capacity quarter of in of jobs million compared catch-up period million XXXX. segment

XXXX. are spare strongly part travel. compared recovery for was first to the to XX% protection million decreased shown to first the X. primarily and quarter air Slide Aftermarket growth to the to jobs be of the segments Operating up -- quarter of compared part related $XX were the aftermarket of primarily due margin global XXXX, income the sales. to program million, quarter in the Aftermarket in due absence continues on that for higher in $X.X XX% revenues of recognized to supported by year XX% Our XXXX,

disruptions, the have and closely to units process we've conforming units. were units and the working with producing rework near-term very but in affected This started rework to we forward, Going to Boeing Wichita, drive Boeing. identified the XXX will delivering some

and us, chain some back to ramp our near-term As supplier underneath the increased half supply up towards in supporting Tier our year. of a as the been X we've liquidity important with very a able work large relief obtain to customers rates production we back

half well in the order the line XXX focus higher production the and higher prepare rates to position in in XXXX primary for ourselves back Our of deliveries and is second complete production stabilize in the for as to as rework the XXXX. quarter year

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

Tom Gentile

inspection and identified lot recently have we we Mark. support near-term what issue and this to In as to Thanks, and we through quality with appreciate that has But we process, customers. the repair we will support work them this the do of need know drive summary, XXX strong time, disruptions. Boeing identified issue. partnership we an have our a provided during

XXXX in aerospace as the targets Aftermarket. our revenue look Defense It's as over in we the strengthen that to so well of partner. feeling we growth we will rates part support driving to continue revenue can next a trusted safety we commercial of more recovery, As our our couple confident quality processes customers our both are all and as increasing as that also of years, and note production important in

We in have growth front a of embedded of us. lot

are primary working execute of on years, day out our the we've and is to our in rates chain. and no production. we our those There hard those day growth so doubt continue be will But And challenges. factories over mitigate few focus higher last to that simply ongoing challenges to experienced returning as supply in

chain when arise supply issues throughout infield We our are supporting our supply active base. increasing and support

flow over to the are in higher hiring generation enable help free future We increases increased previous production several rates actions are and important of years. training production earlier and making rate employees years. the by drive cash in increased next investments our These much for proactively compared to

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

Operator

Our is first [Operator from JPMorgan. with Instructions] Seth question Seifman

Your line is now open.

Seth Seifman

much very Thanks and good morning.

Tom Gentile

morning. Good

Seth Seifman

the I of Does I the that target of wonder wonder into I million. you cash bit. a Good I advances? could. include I morning. $XXX million The if if dive million $XXX flow outflow, to could $XXX new little think mentioned

Mark Suchinski

doesn't. of to section flow are financing be as my in reflected they opening It -- cash be debt the our comments, will I Seth. the like No, statement. advances going in What and treated

So won't and they performance cash operations. obligations, cash not not be manner perspective, be and will flow any accounting those will since they treated XXXX statement be treated as be back that as will flow tied an paid From as the in from are treated to same in the financing XXXX. in

Seth Seifman

Great.

Okay.

address that a make Okay. little but contracts Got you on about not can that it. with just contracts with sure of like and talk company can then substantive. how and of XXX place profitable XXX. the and B-XX little Tom, you are the kind you FLRAA, are in business where maybe up And to a have and make a the just the to the something that the on on defense sure significant XX side more winds opportunities the bit we

Tom Gentile

programs contracts on the our contracts. example, currently cost-plus we Well, many Right. the with they're that are have B-XX, defense in for contracts. cases, And typical defense

they'll in the low we'll rate we it do fixed But those lot ensure that, Bell then make will starting plus you're and that as right. contracts total rate. on are converting get price Now, and off But cost a then, sure experience, accordingly. Textron FLRAA situation need to the initial costs with a be time when understand a We go that by contract will is profitable fixed contract future, to the have what the and similar absolutely we to get of contracts. forward. that so over convert we to It we when as into we be fixed-price production can portion

Seth Seifman

Thanks.

Operator

Capital Markets. RBC from next Our is with question Herbert Ken

is line now Your open.

Ken Herbert

for which the aircraft regarding the is in costs you maybe associated least for at I But MAX. see Yes, qualitatively, the or out Tom and can either hi, your rework with on of -- service. Mark. all aircraft, good differs at and how detail the the the thanks to the wanted talk customer work morning,

If what with have you're doing, good physical does you that, that a work to the obviously, don't compared work of around timing or costs associated understanding the in maybe how today just Wichita? vary

Tom Gentile

Right. Ken, repair Well, similar. the the for is work

completed the the they and do be an and working we further a when different the will of is terms that, it aircraft, aircraft. done. we're how aircraft that's system do fuselage working in or even on on gets a Boeing because In approach What's completed have production rework,

the area, get where structures involves, replaced ultimately rework systems. be fitting the the them need potentially to access so also removing for around to and some And some will to moving

And the where repair difference. is they'll few that's replacement the they It's so remove replace itself more to the exact the get have done. some systems, then just area a But replace to structures and after also the fitting and those to access they to need before is that same. the

Ken Herbert

have you repair done? the is could in Wichita, done something Is And aircraft is? the where work do or to itself that that be

Tom Gentile

It the do can done units Wichita. be We'll that where are the aircraft in is.

repair a the is, to has issue, in immediate what a frequency repair. determined defect the be will the is units made. are in that is, do now, replacement. they it the so you disposition determined not The have really be. the yet units storage, that by treated when will observed, and the are those be out Right flight fleet disposition there'll then factory, what inspection, if frequency there'll differently. important and needs they Wichita. not repair But a will of inspection is in been to in Boeing's It's that and FAA be inspection what happen And determine, it's safety they'll We the and have that units Boeing that note, will to though,

Ken Herbert

Great. Thanks, Tom.

Tom Gentile

Thanks, Ken.

Operator

Kahyaoglu next question with Jefferies. Sheila comes Our from

open. is line now Your

Sheila Kahyaoglu

morning, into think to you. guys. Good lot you this Thank dig And quarter..

Tom Gentile

Thanks. morning. Good

Sheila Kahyaoglu

on million given want to But AXXX, production maybe not quarter the in if okay, real $XX there. the change forward losses and of the I a that's focus schedule of much

maybe non-recurring to generate shift this us How any starts supply cost chain So this there? can program does to cash? the you about expectations of when on talk

Tom Gentile

supplier. situation, Right. of to stepped and of non-recurring due losses was Well, in it and involved the driver. to primary We lot the mentioned had the a That resolve forward a costs. the majority distressed the -- we was

we then the some There years the compared That in exchange changes plan. to and foreign forward some loss, well. of looked there were schedule were the as helped additional out issues what some had we drive as in

it. drove So that's what

slide program, In XXX we've go very forward, of the Spirit, right. a it's we program. to great the going what profitable be but schedule the seen to have on seen Ultimately, terms for it's the

right purchase we now works way initially had so of that we And through it the period when accounting. the in we units loss out we're time fewer calculation our completed and forward seeing right is coming out now, the that made

And so forward what's creating the loss. that's

Mark Suchinski

a me component forward let think million the real is XXXX. Sheila, that isn't Hey, this. out and AXXX loss program But because Yes. just quick loss large in the forward jump projected of I is $XX through

you to to so payments And in making a understand maybe we're this big component there's help XXXX. XXXX that a onetime of and kind XXXX, the of little better, supplier

cost impact real next the forward loss years. we're several over we've XXX% in so and forward But a program, impact loss got that And now. of book to right cash is spread because the out

Sheila Kahyaoglu

great Seth's that's if That's it. I wanted on to then okay. color. up Got follow And question,

How are you they signed mitigating contracts OEM kind they guys do such have B-XX go fixed on And phases? about cost when V-XXX and currently And there? do FLRAA. price contracts risk. of Just as plus? think to with we understand the you Do into

Tom Gentile

development have in phase. be into cost price currently, rate initial and do And when some it Well, low into contract. a still fixed that we point will with the Right B-XX, and will Right. yes, in now, gets the engineering plus future. we're shift it's production, manufacturing it

the price are will taken we more development on right a low initial contracts of those of It all Bell into as the now account. then and rate going plus to into cost off FLRAA considerations, fixed program, start in production. and are a as get be into and final Textron With course, shift

Sheila Kahyaoglu

you. Thank it. Got

Operator

Strauss David is question with next Barclays. from Our

is line open. Your now

David Strauss

taking delivering are you delivering the now say by you Can to you Boeing. Tom, means? effectively Does to actually for Boeing that or question. clean a impression to Boeing, just then units start Boeing. WIP you MAX that your define shipping you're the when that completing mean that would Thanks the what are -- in and under in line? unit you we'll before sticking units the I ship was have would shipping Boeing directly WIP, fix you your again then and Great. sticking own the to off

Tom Gentile

We're Yes. into Well, we're to David, and doing completing them ship we're units a units both. conforming putting shipping and units, Boeing, in place.

In fact, I units place we Wichita would here Boeing in Boeing inventory been in us recovers. while say the have owned factory has ship helping the to that Wichita, in deliver the

do But we that. the China, of new XX units, were supplementing are to of available, are example, for XX in those, require repairs, current Wichita, for units destined which that for are available for available XX we not So are have units like example. but now about right delivery taking customers those aren't of right now, deliver. XX they're delivery And because XX producing

those conforming place that are here to those expect by the in repair for XX to in the short producing Wichita, repairs that's are So we ship how the that been in July. no do out of done -- units not deliveries with supplementing term and we've end be of that -- units. And defects Boeing Boeing also the new units in units require stored taking is

Mark Suchinski

now this our we we're doing conforming and start in our up at units production rework or working call items good And were WIP, reworking time, repairing it, also work we're ship producing new things all happened. issue the David, units, producing our the three in producing really that we're place David, that factory a units, factory here. separate -- units, doing Yeah, a in three We we're rework -- same process and within so to restart set within we're when we're so can units. We're factory.

really second support all the our here to do quarter those three we're customer. attempting to So in of

Tom Gentile

information, were that And work to be in you our units repaired. Yeah. to needed just XX process, give the in there

those. already we've three of So completed

go. then mentioned, in to XX have XX We as units to I needed had inventory that just And the we repair. that stored were

four of on today. and repair started the have two complete first will We those,

David Strauss

Great. That's great color.

reduction Can Can on that your -- out follow-up by probably of six at I month kind three a pretty you're around you implies you're there. significant you that -- AXXX, quick rate of give delivering reduction? know mean to a any that As below Airbus. I typically months. stated color ahead XX

Tom Gentile

given just to you year, Airbus relative schedule I has We're their say And looked the if the deliveries. would delivered we to us. that aligning to at numbers, last them over

reduction last they So aircraft. market built they up to a was not turned as be it require subject And could many buffer. out, as of fairly But this that it change. a as XX year, But still do significant since conditions quarter about units. change

we'll be remain we and to schedule agile, So their and responsive flexible requests.

David Strauss

much. very Thanks

Tom Gentile

welcome. You’re

Operator

Our next question is from Doug Harned with Bernstein.

now Your line is open.

Doug Harned

now the even levels had And some for? made hope you Good current organizational trying seen challenges last we've morning. behind is I you we've quarter, us operational Thank MAX the you. through before new on issue. still and would here, to you've When XXX, understand and that the got you the with AXXX look start what coming at challenges deliver some of and taking And changes, can get the issues now. to that performance you the that you confidence that I'm charges can you're these give and really think steps this

Tom Gentile

Yes, Doug.

with all AXXX. organizational strengthen on in brought AXXX we Airbus quarter, and side last the the our will the help did the programs. changes, for us hires external teams example, different to So in, several and we've that continued of make We've some

will in operations engineering quality that So will execution. significant that and those people expertise in areas and bring help us on

engineering we quality was to of issue, related close strong to an in a have the a to on issue obviously some team, XXX, get recover working And to all unexpected the been but here quality on the we production lost. they've and in team, this Wichita operations issue, again track flowing that and execution back with also units Boeing get address and association team,

times I coordination the And like this, have line, In strong teams, the terms shared in having accelerate also companies for the terms engineering, best of to of big challenging but the a practices come XXX chain, of program, issue. the those strong with and one down curve. operations, and things come We've say address share two really really to is our how together to repair would information, lot help in do of on supply the learning example, Boeing.

I of back can meeting from the cooperation go we think also issue production recover confidence that gives throughout we as level this that year. the get so rate increases us and And to

Doug Harned

issue quarter, what delivering below at the a you specifically I -- know rates AXXX, then they've which there. at And is your are to point? your lower rate Can you their rate the signals at you supply that demand you're constrained -- from is basically your well. goals as this and delivering had are, is in it's been or on constrained months the but your at response by Airbus by signals the situation, -- it supplier now four chain describe the delivering

Tom Gentile

You're talking the about AXXX.

Doug Harned

Yes.

Tom Gentile

and schedule, delivering Airbus’ that. with we're to aligned We're

this things track So we But on their as we hit our and to full supply behind recovery are is have plan delivery but number executing that. schedule schedule for based the the the It's in of mode, track for and year. year. to about is on shortages track We hit some are on like year. And to deliveries on XX. for do the the for normal recovery factory deliveries is

Doug Harned

right. All good. Very Okay. Thank you.

Tom Gentile

you. Thank

Operator

von Our next Cai Rumohr with from question Cowen. is

Your now open. line is

Cai von Rumohr

for taking the Yes. Thank call. you much very

in can the give the you fittings. how appreciate can plus so Boeing of us involved. are XXX or some have terms inventory cost of many would I help in planes in in But the are out that calculated XXX some I estimating XXX the So difficulty fleet. of

about accurate Is X,XXX over somewhat planes. that a relatively So range?

Tom Gentile

kind that of of And Calhoun on you Boeing earnings in airplanes -- mentioned call, are Dave said the about the has affected. and the its think, in I storage. I factory think Well, those XX%

So in of that's right. realm the

and observed, field process there terms XXX It's inspections we that's that In of inspection, out said, not replacement. to And to closer think, on in field. the as is there's defect change, involve the founding compared frequency because been if hasn't a is again, going be bounding. units field, work high likely to known about this of the the is the there XXX. And yet. And current yet. But But then I would work. the a terms the in little in will disposition understand. could a bit the then the probably I It's in still in XXX determined that how

Cai von Rumohr

how Got at some That's of on about very of got helpful. terms couple you how addition now numbers pay you've they to of your of through give when balance are out Can get off? going understanding, XXXX, these a you advances of debt given And refinance the in in have then, terms so burning And XX to back what's to, your then, you're billion those if to to million XXX it. sheet. And forward you right, the been those that? burn us help last thinking you've quarter quarters. in losses $X.X in million all

Mark Suchinski

in let Cai, here. me just jump Well,

And we the on I If quarter, have at first we're forward sheet, our look the at of forward sitting end you're think million. losses losses to books. that our at balance you as relates $XXX we're of short-term transparent the right, pretty it

is But XX is next what not that liability essentially, And of reduce which XXX% means that so the we'll burn That's those that's having some what's what's loss off, some as et -- there's months, what balance. cash are forward over losses our and on cash, flows, will because quarterly been an And cash the noncash like embedded in costs we impact book we're depreciation, our flows. costs, cetera. that's facing.

get out relief, 'XX. and pushed some We've we rates them as the advances. in You're XXXX higher right, 'XX into us to move production

expect April we've XXXX. positive we in, call bonds then, position standpoint. got of flow a a they do those, where bit of is to based of cash billion worth come it, our today. that will cash And to due $X.X on definitely from little have And a We time free address be but

these of looking we puts we're will into balance of all takes. be how probably large a And those, some that's trying to refinance portion and We those move to as portion XXXX.

Cai von Rumohr

Thank much. very you Excellent.

Operator

with Our Research. question next from is Walton Myles Wolfe

now line Your is open.

Myles Walton

Good Thanks. morning.

advances you've cash about million liability, So and or of treating flow. of $XXX million lower talked in you've taken cash about $XXX the free

the of curious, yet difference, as be of of should interpret to costs So, determined? we that being upper the risk I'm just boundary the Mark, sort

Mark Suchinski

to us wouldn't Myles, -- help cost to as correlate advances try of with I No, cash support the don't the issue. this

weeks those it's that been to of there few. haven't into starting two we've able work a process. -- -- units. to We reworked this been We've few Boeing determine a

reduce continue fleet month. the prepared continue think XX to to cash disposition final break our receive That's we sure the base second a to you receipts. as the units XX, I is supply parts It's rate in the we to out quarter. be from And we at really more XX there. not at make going for think about units to that XX.X because want delivering

combination a it's here in the So near-term.

lower production at parts continuing current of that parts make to receipts we when build. rate, impacts that have parts break we correct schedules sure to us which cash the lower is to -- have the deliveries, we and The receive the

well the that talk challenges lower on relates of plans that rate make -- the to We supply year there's supply buffers. chain big the there's And standpoint see of right investment going and it fact in chain to at sure from from a lot as due continue have up coming pressure So as inventory the a cash definitely pressure have big we as that's into this end OEMs receipts to we're have making our to and a of are XXXX. we standpoint. on

we're fact inventory a deliveries near-term of and relief is extra with us some be of going help be the that that cash the as to lower going carrying to that So are to result that. just

Myles. And so size I that really, how up, would that's

Tom Gentile

will in will XXX, we units XX we XXX be year full to likely said, XX delivery of XXX. is or the target It in our terms as units. impact be said And the QX. what the for And

said units the year. the why mostly potential XX flow the It's we to that that's XXX. $XXX there's of for of of deliveries related shortage cash pressure, million on So $XXX to pressure million

Mark Suchinski

in deliveries It's Yes. inventory.

Myles Walton

question had sort the you on on a of XXX, And had supplier bankruptcy Last Tom. supplier XXXX, you quarter scope. had that, fourth XXX In a had you take Okay. to summer, the of, work their quick you you, one for high-level to take house. in

the in risks XXX. supply a supplier affairs of state got of give where and quarter and us your Can here chain the are like on the you You've aren't? another

Tom Gentile

Yes.

fragile. rate As getting of with such suppliers have the to us, Like production MAX we've increases, been now of suppliers And lay that train as had through then And a in materials. said, massive coming the cycle they're right challenging the is -- had not they've people. cash the the we to crisis, very out grounding go And supply and came them to already away. advanced because lot and faced cash balance the issues a staff, had decreases pandemic. those sheets chain production of into fragile in the recovery, new off hire try by is lot conversion

pressure haven't a tremendous on it. creating the with chain to suppliers and it's supply smaller lot of So been able the cope

ones you So day. dealing and they you to can step every where three assure too, I ones been resolve that big be smaller and we're happen the issue. there mentioned examples, had to with we in have

got more completely And the chain year yet, them next to I the offloading every distressed that not better. talking and we helping working with think working or supply year. them out cases fix we as But of material through them our part in chain some supply go in It's expect We're XX some fragile. work stable suppliers, base We been it day. pressure. XX into give supply helping most why and or is this day some every is about. probably that's buy people challenge disruptions just plan, the we've is field their getting the

But part it unload supply this it fragility chain just we exists move that been out the through because either got a We've that they've a different of all employ. I it. to challenging of of can they're suppliers. We strategies time, coming other or in variety very think it's

good is going the rates opportunities. are and up, Now that the news is production there

at light every the still still end working tunnel, of there's and So fragile day. we're it's it the but

Myles Walton

you. Thank

Operator

from Melius Research. is question next Our with Rob Spingarn

now is line open. Your

Rob Spingarn

on if Hi. this this issue? Good from is supply chain, issue -- are morning. this of costs any I don't originated these the recoverable already, but you've covered any that from know supplier the

Tom Gentile

within The issues so. don't believe are really Spirit. contained we No,

Rob Spingarn

Okay.

Mark Suchinski

Yeah.

So recovery, those a suppliers from of disruption. Rob, this supplier potential but particular the do can are have that But that happen the previous after recoveries caused in some not there's had one, in typically from quarters, through we we the mentioned others working we these of process fact. us much

fact. sure stable, that then incurring production suppliers with in to so those keep after some costs And working to get to we make order these the we're and try recovery for us

Tom Gentile

attach talking fitting. my FIN you Yeah, about were thought mistake. Vertical the I

the For for example. supplier issues,

Rob Spingarn

I I was. was. No

Tom Gentile

Okay. yeah. Yeah,

So for issue, the supplier Vertical FIN a attachment yeah. not it's

Mark Suchinski

issue. supplier It's a not

Rob Spingarn

Okay.

-- maybe there ask and supply the but bring these The applies recover other to work is on still of which it's any was going on around in-house. a understand you bring based thing you point I at answer, the need on pandemic this need suppliers fragile And program, it aren't sounds this maybe and grounding, I things some in. and to to wanted because like certain -- your the of chain prior to is

some of the suppliers such the heard other from in have things We industry.

Tom Gentile

have have from our And very work The the answer in in Spirit, not a and largest of world. And quite unloaded that always a it. were unit the yes. large we chain of perform. to suppliers bit for balancing fabrication we supply is able distressed We're one

we in Sometimes the push We has other out work. But work. certain, year inward. net flow bring for been this

we work have programs strategic very to And that to that a do unloaded business. of we're able strong operation from issues capable have We fabrication suppliers. fabrication a one with resolve that. lot we advantages suppliers a is, the we distressed basically in it's have in is good various that do that is news of order The have

Rob Spingarn

Thank you.

Operator

question from George with Shapiro Shapiro is next Our Research.

Your now line is open.

George Shapiro

in in that Tom, has an XXX require. wanted said Good field Boeing you ask XXX, of is inventory morning. maybe. question like response Yeah, think, got I the and Cai's to earlier, work I we to We

Tom Gentile

rework. No, them clear. no, say, didn't there's I be no. inspect. me to in would just say Not have require let XXX field George, we the required said just would all that are rework, to of I XXX

George Shapiro

And roughly, you ask. going to of said of about XX half you so of I out required had -- was part rework. or what That's XX Okay. what what

because out we to you got XXX,XXX imagine rework the there I that would more part the to negotiate doing amount everything assume that Is XXX,XXX requires if bill disassemble rework. the that? So would is you're due? for than then that to you half of total how would get there. come be of you it to And that going Boeing with to back And

Tom Gentile

don't defect And the that a we first That an in be units Well, if Yeah. is part rework. there'll And identifiable the result will there just disposition. of rework of say know only field inspection where me all, required. there where defect. be is it will how of be determine an to let also require many will a

estimate But repair. So this that's will at would number. why it that any be then process. we'll will Mark be that said be or a because half inspect I defect, we It will whole it gone we can't not say it through a if time there's haven't there

asking potential claim. could you're to back they regard us possibility. there Boeing any that is, think units With come I that a what repairs, a That's is with to

issue. have now, sure make impacts production And it. very we with flight to sort Boeing is through are have our the that identify done the The focus working now. addressed and to to immediate which schedule. and to for are work that a Boeing. address next on that we system And where flight the we focus is sure no these primary really we've again we with then safety recover make repair, and normal issues, well done. of any right things have collaborating next get which is to can doing the that's Right is flowing of thing processes We safety There's

But disposition the address with other fleet production future. will processes the on the that in Boeing over the is The focusing and finalized. we and have the the -- now, in normal schedule focus and repairs right getting we the issues

George Shapiro

more at rate quarter, forward? for follow-up the it's could mark one MAX. adjustments quarter, take a you sure, than or XX%, the a And cume Okay. it of everything and costs negative I the If more guess deteriorate less cume run the I'm on XX% the decent in I Will Is and underlying about because going negative catches. Mark. that excess looked you margin charges better, little get if got fourth the it out

just on kind your process So of that. thought

Mark Suchinski

exactly right. George, Well, you're

XXX disruption costs first the to of quarter, units. be, have call, continue our I you first in in factories. factory certain to our I commitments levels added on our And which some roughly last that the additional quarter, was We support had the told had think within to we achieve delivery

FIN. so of And like those if the you strip the and the the impact things Vertical losses items out, onetime forward

I as would want you're if company kind right, think you the to normalized what disruptions. a like those it about look of without think

in month. some will year, And both we plans It's or and of things as the a as seven see the the that's help deal rates, absorption what It's after back production rate, the up half uplift more to margin the good start cost move margins costs. excess higher up eight move as the And are. the create Vertical of move second per starting the expand. we those we units you'll in the point FIN, of and quarter, those we benefits. with the impacts our that's It's lift reduction fixed into

a because work the stabilize factory that through is shut customers. production. their part associated to production Boeing our as Boeing, the this, didn't do Tom big units, the So so said, as we for We've support get system work down Vertical of several fix. portion got with rework to anything hard the we first back the FIN We really weeks going, first. we're as things to booking to of deliver units can cost And

further So book behind got we've schedule.

of margin we'll job increasing our which standpoint, we from really break rate So to the put on is XX. a start ourselves see down the production all factory, a the in -- good rework, focus behind producing, stabilize position burn to operational this really execute that, schedule lift. back And next an the is do a in and good the that, then August, do

Tom Gentile

in point is increase planning do rate just Yeah. the per made there XX to because production And October important I'll an month. in George, to XX aircraft Mark reiterate August we still are to

in that headcount A year. month. throughout can them plan. production aircraft this our XX on lot the experience, part recovery of we trained are have and for job rest We the rates of getting the so That's per those place of hit

George Shapiro

the Thanks, very color. for Okay. much all

Tom Gentile

Thanks, George.

Operator

Liwag next Morgan is Stanley. Kristine Our question from with

is line now open. Your

Kristine Liwag

Tom, you've Mark, embedded of cash that's what's cash to confidence chain, following how free that up for your the risk? And on your suppliers? comments captured earmarked guide support regarding updated is the level capital in provide incremental much supply fragility your working the flow

Tom Gentile

is strong terms and that now we've we transferring Well, lot things years up. free our fragile, And actions, work operation, time. those we're gained of as able the items are over because last help very taking suppliers. as work is suppliers. the transfer experience between it work fabrication is when we good the And always known flow taken in but the could between deal required. chain news account to supply There would off have But I unknown cash paying a at we be said, described, also that with mean that shore terms -- into a so to it's we needed a I I lot of of of that several can And unload when capability guidance. in we surface,

and are in So issues risks forecast. can terms our known I current think cash the any of into we incorporated mitigate

Kristine Liwag

color upcoming is I give when if outlook, in expiration guide? think labor how And that also your color. could full embedded second, how do can the negotiations agreement us your in you for are on on year your labor And much you Thanks about follow-up a any going? ends increase June,

Tom Gentile

started Well, Great. main and now and the teams the initial X, very relationship the negotiations are is in negotiations started. dialogue positive engaged just going table The have May It's and dialogue. constructive well. on

as is we before, I said to our we make as forward. primary go sure a contract reward with competitive Our objective, employees

certainly through that. lot, performed we And our that a very want both have recognize well, an to in of they and been agreement. it's have employees Our and we interests really reach

is the is underway. and the objective, that that So discussion that's already

or like agreements labor the know in with of or the Alliance other the impact, have United been with St. Whitney industrial IAM at market we Lockheed and or Pratt places what companies other obviously, Boeing terms Louis. specifically In Launch

And up. and will account. future And forecasts estimates of we taken those our we so, end are think into all guidance based on we've where

that what our we have competitive has using do Now in happened, contract change, employees. benchmarks already of can are a of offer terms we of developing course, in and but terms for those

Kristine Liwag

you, Thank much. Great. very

Operator

next Michael Our is from question with Ciarmoli Truist.

line Your now open. is

Michael Ciarmoli

the just guys. Thanks guess on questions. I taking of got the cash for basically morning, Good the million -- you've on balance sheet. $XXX

XXX. burn me Help exactly mean, risk what we cash a you're here do need cash? big $XXX not advance. know $XXX you leaves you be with that I could If the million, to understand going of million why to that

Tom Gentile

particularly cushion. million And the and $XXX that's we the reason you're really there's some were about it $XXX $XXX always our numbers. million to It are and additional the We've -- fortunate is run prudent gave cushion. was felt cushion, us surplus million underlying And to felt those really to to than have because that's able us, prudent cushion some just just we I above reason. us it that to threshold. right, And make between put the have additional other right had the We customers some said think want business. that to we don't were that sure we support any other Boeing.

Michael Ciarmoli

Okay. is this an attached an advantage? interest-free Is that, rate interest there or to cash

Mark Suchinski

interest-free. The advance Boeing cash is

Michael Ciarmoli

guys. Perfect. Thanks, Okay.

Operator

Noah with is Poponak question next Sachs. from Goldman Our

open. now is line Your

Noah Poponak

Hey, Mark.

Mark Suchinski

Good morning.

Noah Poponak

of you're inventory on XQ on pacing maybe Mark, free in the the especially quarterly you've and could minute of a you got lower the year, just spend rest the the here, through shape higher? cash while taking the go to deliveries flow given

Mark Suchinski

Sure, Michael's cash and advances what negative about, know update relates to of full is $XXX $XXX we commentary discussion around And your million. it cash hey, negative kind the million to the Noah. year

cash fuse the fact balance our we're your But to not in what just will there deliveries XX in or we XX is. take nuances flow be while that inventory quarter, the continuing to XXX at quarter And deliver. lower second launch to by looking that of XX units we to talked XX know going is cash right? about You

a to cash the that second impact in short-term obviously is free So, flow quarter.

on we guys going need of help you cash, supply in it's guys you the to not keep our focus why healthy, production, run don't out to And support you out sure we like, we customers, you because chain rate. up we're -- but hey, make with of as your go

consumed okay? going so, And going to first a to -- is as in second And more quarter quarter. challenging, than to operationally bit the be a consume quite we're it's going we that just the of cash result obviously

and And we relates a third most think to steady the factory, fourth and the half units, was our flow of a about year challenging the the of in range, on back then through half we factory, inventory cash in That the the hit first always standpoint. when going deliveries, positive production be to quarter a on rate And burn-offs as inventory in we delivering overall year viewpoint receipts, the improve drum year. was the we cash right? to always as the the improve the it XX plan, flow stabilize rate throughput help the move and was and from recovered going margin of us cash into back a got the the half would the

and cash quarter, We in in -- cash well, the -- But focused flow. we jobs recovering factories trickle that customer we're flow I second if improvement back our into quarter our positive the type in continue the to some still on very very, take occur, expecting will still -- right, still situation place July. our think in our to trajectory so, quarter, and rework cash nice do the on a should focused be supporting free of situation that some year right? because be of and half there'll there's And we're getting third impacts should a

highly be here will plan back will some cash the quarter And be to costs with And execute we second be future. production. and to to and in but deal in tougher year, with from the at how into positive. and got quarter of standpoint, then flow rework the the time true the dependent continue the we point that all first we've But will we move have half the than of game on the expect that's dealt production second that as a restart be

Noah Poponak

than Is XQ a larger usage out reported if the the XX the. strip or XXX, I

Mark Suchinski

the XX. Larger than

Noah Poponak

the I larger the page? strip pension XXX than it Is if out

Mark Suchinski

Again, in tongue couple this be and disclose just point, want right? here, don't this a you I'm but depend not to to ready at that it's guys of not give trying weeks you're to really cheek on. and we're We're I to into -- number going this, a

hold through quarter. the have so let's another with time to some And this, out work second us after what we you and report Give give we'll here.

Noah Poponak

No, enough. fair

Just calibrated as trying also plus as possible, answer. get to an

Mark Suchinski

I understand.

Noah Poponak

the categories occur? when -- will or -- the delivered to of Michael's in rework two question in and then active cost you there. that what's to of of Boeing will The payments the and that? rework timing what's all not those scope When fleet. speak Can

Tom Gentile

repairs, fleet cost yet will just for be what we we is and a long as That as determination take sit first. period well. like normal there of do long and each allocate We don't the processes through very Boeing obviously I that. how individual place down period And of mentioned their schedule terms we'll before, Yeah. takes time Boeing's of the quickly again, Well, take a whether working over aircraft. the any it. understand they're our a required. will take as based to know time on that do time -- over place over But in place that and And is let's if inspections the with be rework will the a flight of cycles

Noah Poponak

that -- tell? it's is are or will or your $XXX,XXX what's it's just be to estimate cost yours multiple And rework to $XXX, Okay. XXX to that, not the your not you early -- best fuselages of a too

Tom Gentile

It's We that us $XXX,XXX. repair $XXX,XXX too a early. know to to for it's unit,

that and way they remove I structure in are they Boeing, to complete, with aircraft have completed more some all to systems. more the said, aircraft, As have

costs higher be than ours. will their So

Noah Poponak

Okay.

for the Thanks details. Okay.

Mark Suchinski

whether rework, essentially And bit of to to or parts we are little it Boeing that. type no them the it's same different just -- of do a going it But the it's complete take cost longer the does it.

Noah Poponak

of like to Xx not little higher. bit higher just that Mark, So sounds, likely lack going be It's sounds a a but a not visibility. that number -- a of multiple to Xx

Mark Suchinski

don't. I Again,

Tom Gentile

It's a to bit little say, early but.

Mark Suchinski

those I You thinking about it but discussions, think right. wouldn't have you're

Tom Gentile

they repair remove the structures It's type exact The and have that repair. just same Yeah. to more of and systems replace. is

Mark Suchinski

Right.

Noah Poponak

Okay. Thank you.

Operator

Arment next from question is Our Baird. Peter with

open. Your line is now

Peter Arment

I morning, that Good all for Thanks. think free figure thanks with trying and to just we're Noah, cash Yeah. details And Tom flow Mark. all Mark those out.

Just a quick Tom. one,

long Just should kind then rate be plans appreciate on I or are get of at your how that of you'll month you're the program, And going the Maybe you be a XXX kind production into the you we -- rate? hold that? to that expect quarter, it. you fourth be going as five before? around just to leading the doing

Tom Gentile

plan this to deliver the XX. is XXX Well, XX year Yes. to for

to currently are up getting five. We rate

But conformance before probably year. Boeing the will we the will up right again, schedule. And the to the year. of go schedule later with so in seven be end And in then there

are So schedule. ramps deliveries for the for current we rate XX. the to year up, meet And the this Boeing the lined we will XX have and XXX

Peter Arment

Thanks. that. Appreciate

Operator

of from is Epstein with America. question Ron next Our Bank

Your is line open. now

Unidentified Analyst

is today. actually Andrey Ron for on This Natchez everyone. [ph] Hi,

back question, be the everybody how chain? kind to Boeing, to supply was respond to asking streamline it So of receptive supply approach operations further, by an might would supply you'd guys down buy even things given Is chain. and sort of, guess how going on that a something going what up I at broader up the chain Wichita? you back

Tom Gentile

can respond companies that what are no that. leave offers to have to. have Boeing to Well, will plans like something I respond and We're public make for idea to things. I to People related to a public company. we those would Boeing's

Unidentified Analyst

I'll Yes, leave it at Understood. you. Got that.

Mark Suchinski

you. Thank

Tom Gentile

you. Thank Okay.

Operator

you Thank That's our day. joining for last question the all us. for

will lines. We your now disconnect

Spirit AeroSystems (SPR) 3 May 232023 Q1 Earnings call transcript