Spirit AeroSystems Holdings Inc's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Spirit AeroSystems Holdings Inc (SPR)

Q1 2012 Earnings Call

May 03, 2012 11:00 am ET

Executives

Coleen Tabor -

Jeffrey L. Turner - Chief Executive Officer, President, Director and Member of Government Security Committee

Philip D. Anderson - Chief Financial Officer and Senior Vice President

Analysts

Robert Spingarn - Crédit Suisse AG, Research Division

F. Carter Leake - BB&T Capital Markets, Research Division

David E. Strauss - UBS Investment Bank, Research Division

Michael Sang - Morgan Stanley, Research Division

Carter Copeland - Barclays Capital, Research Division

Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division

Joseph Nadol - JP Morgan Chase & Co, Research Division

Cai Von Rumohr - Cowen and Company, LLC, Research Division

George D. Shapiro - Access 3:42, LLC

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division

Noah Poponak - Goldman Sachs Group Inc., Research Division

Eric Hugel - Stephens Inc., Research Division

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Spirit AeroSystems Holdings Inc. First Quarter 2012 Earnings Conference Call. My name is Gina, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mrs. Coleen Tabor, Director of Investor Relations. Please proceed.

Coleen Tabor

Thank you, and good morning. Welcome to Spirit's First Quarter 2012 Earnings Call. I'm Coleen Tabor and with me today are Jeff Turner, Spirit's President and Chief Executive Officer; and Phil Anderson, Spirit's Senior Vice President and Chief Financial Officer.

After brief comments by Jeff and Phil regarding our performance and outlook, we'll be glad to take your questions. In order to allow everyone to participate in the question-and-answer segment, we do ask that you limit yourself to one question.

Before we begin, I need to remind you that any projections or goals we may include in our discussion today are likely to involve risks, which are detailed in our news release, in our SEC filings and in the forward-looking statement at the end of this web presentation and as a reminder, you can follow today's broadcast and slide presentation on our website at spiritaero.com.

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

Jeffrey L. Turner

Thank you, Coleen, and good morning. Let me welcome you to Spirit's First Quarter Earnings Call. I'll begin with a look at our business and related performance and then Phil will review the financials. After that, we'll be glad to answer your questions.

Let's begin on Slide 2. Let me begin by saying how thankful we are for the safety of our employees, contractors and our community in Wichita during and after the recent tornado. I'm extremely proud of what our team and partners accomplished in a very short period of time, to bring our Wichita facility back online safely. It's a testament to the team we have here at Spirit, as well as our unions, customers, suppliers and government and community partners.

I would particularly like to note our partner, EB [ph] Construction for their tremendous support during this difficult period. I am pleased to say that due to the team's execution of our disaster recovery plan, all employees returned to work on April 23 and have shipped products across all core programs since the tornado struck on April 14. This performance, along with our first quarter operating results, exemplify what this team is capable of achieving.

Now turning to the first quarter results. Our core program demonstrated solid operating performance, as we delivered 16% more commercial airplanes and recognized over 40% higher aftermarket sales for the same quarter in 2011. Our backlog, at over $33 billion, continues to illustrate the strong demand for our core products and our development programs transitioning to production.

As the large commercial aircraft market continues to be positive, we remain watchful of global economics and political dynamics while closely managing our capital spend to support increasing demand for our products.

Now let's talk about some of the specifics across the business during the quarter, beginning on Slide 3.

Fuselage Systems delivered solid operating margins of 14% on $623 million in revenue during the first quarter, as volumes across core programs increased. The Fuselage segments 737 high rate production line performed well as the team delivered its 4,000th shipset of the Next Generation fuselage. The 787 team made progress by delivering 8 airplane fuselage sections in the quarter, including the forward fuselage number 64.

While we are still early in our cost improvement efforts on the 787, the joint Boeing and Spirit teams continue to track per plan to identify and implement cost improvements across the program through value engineering, supply chain architecture and production flow.

The fuselage team also continued initial production on the 747-8 program this quarter by delivering the 45th fuselage. Additionally, in the quarter, the team shipped the first A350 XWB composite center fuselage to our Airbus customer in France.

On Slide 4, you can see the propulsion team delivered strong operating performance with margins of 16.7% on $344 million in revenue during the first quarter, as volumes across the core programs and aftermarket increased. The propulsion team's core business is strong at high rates. As we delivered the 4,000th Next Generation 737 Engine Pylon sets and Thrust Reversers in the quarter.

The segment's 787 team delivered Engine Pylons for unit number 65. Progress continues on the 747-8 engines truck production, as the propulsion team delivered the 41st shipset.

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