Spirit Aerosystems Holdings, Inc. (SPR)

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Spirit AeroSystems Holdings, Inc. (SPR)

4Q09 Earnings Call Transcript

February 4, 2010 11:00 ET


Alan Hermanson - Investor Relations

Jeff Turner – President and Chief Executive Officer

Philip Anderson – Interim Chief Financial Officer, Treasurer and Vice President - Investor Relations


Ronald Epstein - Bank of America Merrill Lynch

Doug Harned - Sanford C. Bernstein & Co., Inc.

Carter Leake - Davenport & Company

Howard Rubel - Jefferies & Co.

Troy Lahr - Stifel Nicolaus & Company, Inc.

Noah Poponak - Goldman Sachs

Lucy Guo - Macquarie Capital (USA), Inc.

Robert Spingarn - Credit Suisse

Joseph Nadol - JPMorgan Securities, Inc.

Matt Vittorioso - Barclays Capital, Inc.

Seth Seifman - JPMorgan Securities, Inc.

Finbar Sheehy - Sanford C. Bernstein & Co., Inc.



Good day ladies and gentlemen and welcome to Spirits AeroSystems Holdings Incorporated Fourth Quarter and Full Year 2009 Earnings Conference Call. My name is Jerry and I'll be your coordinator today. At this all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions). I would now like to turn the presentation over to your Mr. Alan Hermanson, Director of Investor Relations. Please proceed sir.

Alan Hermanson

Good morning. Welcome to Spirit's fourth quarter and full year of 2009 earnings call. I am Alan Herminson and with me today are Jeff Turner, Spirit's President and Chief Executive Officer and Phil Anderson, Spirit’s Vice President and Interim 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 to limit yourself to one or two questions.

Before we begin, I need to remind you that any projections or goals we may include in the discussions 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 would like to turn the call over to our Chief Executive Officer, Jeff Turner.

Jeff Turner

Thank you, Alan and good morning. Let me welcome you to Spirit’s fourth quarter and full year earnings call. I'll begin with a look at our business and associated performance and Phil will walk us through the financial results and guidance and after that we’ll be glad to take your questions.

First let me say I’m disappointed with our fourth quarter and full year 2009 results, we’ve fallen short of our projections. 2009 has clearly been a year filled with disruption and challenges nonetheless our performance has not measured to my expectations. Having said that over the past 4 and half years our team has been aggressively executing our long-term strategy for growth and diversification and our vision has matured. Our core businesses are funding significant portions of our growth, as we start to see some of our new programs enter their initial stages of production. In particular four of Spirit’s new programs entered the flight test base in the fourth quarter of 2009. Programs now in the flight test development phase include the Boeing 787, the Gulfstream G250, Gulfstream G650 and the Rolls-Royce BR725. Additionally we have two more programs scheduled to enter flight test this year.

Its truly exciting to be part of the progress our customers are making and to be part of the next generation of large commercial and business jet products. 2009 marked key milestones for Spirit as our core businesses delivered significant ship sets (ph). But we have made good progress over the last four years on improving costs and efficiencies. We did not capture all the anticipated cost improvements, largely in the 737 and 747 accounting blocks as they concluded in the fourth quarter of 2009. This resulted in an unfavorable adjustment to these initial accounting blocks. Over, approximately $26 million or $0.13 per share, also included in the $26 million charge, with 5 million of absolute in surplus inventory that was identified prior to block closure. Additionally the CH- 53K program, which is in the systems development and demonstration or SDD phase, accounted for $8 million or $0.04 per share charge, due to additional development costs supporting our weight improvement plans.

As our initial design has required refinement to meet our weight commitments. As we work through the design elements of this program, the program forecast continued to be profitable and we have expectation of significant following work. As our development programs mature over the next couple of years, we will continue to focus on program execution while addressing typical development challenges including design evolution, change in weight management and scheduled compliance. We’re tackling these challenges by working with our customers, fulfilling program requirements and ensuring solid action plan during place that will yield the desired results. While executing our development efforts during the quarter we continue to support the 787 program with the restarted of the composite fabrication area, while preparing our supply chain for production ramp-up.

The team is excited to see the 787 in flight test and is beginning a regular production pace. While global economic conditions show signs of improvement and we see stabled nutured in demand for our products. We continue to remain cautious regarding the outlook for commercial Aerospace. Our focus is on supporting our customers while staying poised to react to market changes, overall our backlog remains substantial at 28 billion.

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