Spirit Aerosystems Holdings, Inc. (SPR)

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Spirit AeroSystems Holdings (SPR)

Q2 2013 Earnings Call

August 12, 2013 4:30 pm ET

Executives

Coleen Tabor

Larry A. Lawson - Chief Executive Officer, President, Director, Member of US Government Security Committee, Chief Executive Officer of Spirit Aerosystems Inc and President of Spirit Aerosystems Inc

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

Analysts

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

Howard A. Rubel - Jefferies LLC, Research Division

David E. Strauss - UBS Investment Bank, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division

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

Carter Copeland - Barclays Capital, Research Division

George Shapiro

John D. Godyn - Morgan Stanley, Research Division

Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division

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

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Spirit AeroSystems Holdings, Inc. Second Quarter 2013 Conference Call. My name is Mayesha, I will be your coordinator today. [Operator Instructions] Please note this conference is being recorded.

I would now like to turn the presentation over to Mrs. Coleen Tabor, Director of Investor Relations. Please proceed.

Coleen Tabor

Thank you, and good afternoon. Welcome to Spirit's second quarter 2013 earnings call. I'm Coleen Tabor, and in the room with me today are Spirit's President and Chief Executive Officer, Larry Lawson; Spirit's Senior Vice President and Chief Financial Officer, Phil Anderson; and Heidi Wood, Spirit's Senior Vice President of Strategy, M&A and Investor Relations.

After brief comments by Larry and Phil regarding our performance and outlook, we will take your questions. [Operator Instructions]

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, Larry Lawson.

Larry A. Lawson

Good afternoon, everyone. Thank you for joining us today. We scheduled this call to move expeditiously and to provide information to you as soon as possible. We had a chance last week to discuss with you the most recent outcomes of our strategic and financial review, we relayed the decision to offer the Oklahoma sites for sale and we gave you an outline of the charges. Today, we can provide a complete picture of the financials, and as you can see, overall, we're making progress.

We reported $1.5 billion in revenues, with $209 million in operating income before the $448 million charge, a $239 million loss after the charge. Operating cash flow was $60 million and our backlog rose $2 billion sequentially to an all-time high of $38 billion.

We reported earnings per share of negative $1.47 after charges. On an adjusted pre-charge basis, earnings per share was $0.72, which was up 44% year-over-year.

I want to go straight to the charge and begin by saying we're not happy about this. As you heard, we took a charge of $448 million in the quarter, $426 million of which reflects the revised cost projections on the Gulfstream G280 and G650 wings. Last week, we gave you a preliminary range of $350 million to $400 million prior to the conclusion of the review, which was based on a 400-unit block on this G650, which is in line with market forecast. Ultimately, last week at the conclusion of the review, it was determined to use the previous block size of 350 units spread over an additional 2 years to 2019. We will continue to review the block size in future periods and determine when the modification is appropriate.

Looking forward, I would like to summarize the points I made at the management call regarding our recent decisions and our strategy. We can get into more details during the Q&A. We have taken a number of actions to include the sale of Tulsa, a reduction in our workforce and an organizational realignment. We are aligned to our customers, focused on program commitments, we've added some great talent and we are reducing costs. We are making the hard decisions.

Spirit is intensifying the focus on 4 key things I think is worth reiterating: disciplined decision-making and market focus, focus on performance, on cost and on cash flow. We believe we have a strong value proposition in the design and manufacture of some of the most complex aerostructures in the world and the best value for our customers. With the healthy mix of maturing new programs and commercially-successful long-lived programs, like the 737, the 777, the A320, the 787 and the A350, we are very well positioned to participate in the commercial aerospace up cycle.

In this context and with a keen eye on performance, cost and cash, we are refining how we use our resources and balancing our mature program performance against the investments necessary for new programs. We are determined to advance our differentiation in the marketplace. This provides a framework which you can understand, both[ph] our underlying performance and our strategic decisions around divesting the Oklahoma sites.

My last comments concern our focus on cash. All of our financial metrics are important, but we are especially focused on cash flows. We will challenge cost, focus investments, choose markets and incentivize the right decisions. We will drive value for our customers, our shareholders and for our employees.

Read the rest of this transcript for free on seekingalpha.com