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Spirit AeroSystems Holdings Inc (SPR)
Q2 2011 Earnings Call
August 04, 2011 11:00 am ET
Jeffrey Turner - Chief Executive Officer, President, Director and Member of Government Security Committee
Philip Anderson - Chief Financial Officer and Senior Vice President
Coleen Tabor -
Cai Von Rumohr - Cowen and Company, LLC
Robert Stallard - RBC Capital Markets, LLC
F. Leake - BB&T Capital Markets
Joseph Nadol - JP Morgan Chase & Co
Douglas Harned - Sanford C. Bernstein & Co., Inc.
Michael Conlon - Wells Fargo Securities, LLC
Carter Copeland - Barclays Capital
Robert Spingarn - Crédit Suisse AG
Myles Walton - Deutsche Bank AG
Elizabeth Grenfell - BofA Merrill Lynch
Troy Lahr - Stifel, Nicolaus & Co., Inc.
David Strauss - UBS Investment Bank
Previous Statements by SPR
» Spirit AeroSystems Holdings, Inc. 4Q09 Earnings Call Transcript
» Spirit AeroSystems Holdings Q1 2009 Call Transcript
» Spirit AeroSystems Holdings Q4 2008 Earnings Call Transcript
Good morning. Welcome to Spirit's Second Quarter 2011 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. [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 would like to turn the call over to our Chief Executive Officer, Jeff Turner.
Thank you, Coleen, and good morning. Let me welcome you to Spirit's Second Quarter Earnings Call. I'll begin with a look at our business and related performance. And then, Phil will review the financial results. After that, we'll be glad to answer your questions.
Our core business continued to perform well in the second quarter as we delivered on increased volumes and realized productivity and efficiency improvements. As the recent order flow has signaled, we continue to see strong demand for large commercial aircraft and improving demand in business jet market. With an increased backlog over $29 billion, not including the recently announced orders, the long-term growth perspective for Spirit continues to be strong.
As the core operating base grows, we continue a disciplined transition to higher production rates across our sustaining products. Throughout this transition, we are focused on productivity and efficiency to drive long-term value. The 5 of our development programs are progressing towards certification in 2011. Our priorities continue to be meeting customer commitments and positioning all of our programs for long-term value.
We recently completed our go-forward plan on the 787 program, celebrated the rollout of the first CSeries test pylon for Bombardier and announced our plans to establish program management and production for the Gulfstream G280 program in our Kinston, North Carolina facility.
While the outlook is positive, we remain watchful of global economic and political dynamics as we execute our growth and diversification strategy.
Now let's talk about some of the specific accomplishments across the business during the quarter, beginning on Slide 3. Fuselage Systems delivered operating margins of 12.3% on $773 million in revenues during the second quarter, which includes the impact of deferred revenue associated with the 787 program. The Fuselage segment's rate increasing 737 production line continues to perform well as the team delivered its 3,700th ship set of the next-generation fuselage. The 787 team also made further progress by delivering 7 airplane fuselage sections in the quarter, including the forward fuselage number 44. We are pleased with the progress of our joint Spirit and Boeing 787 teams. We are pleased with the progress they're making as they work together closely to identify and implement cost improvements for the program.
The fuselage team also continued its progress on the 747-8 program this quarter by delivering the 31st forward fuselage. Additionally, the A350 XWB fuselage team continues to mature the engineering on the program and panel production is nearing completion for the first article.
On Slide 4, you see the propulsion team delivered solid operating performance with margins of 15.2% on $318 million in revenue during the second quarter, as margins continue to improve through productivity and efficiency improvements and some additional aftermarket volume. The segment's core business continues to perform well while transitioning to higher rates, surpassing line unit 3,700 in the quarter for both the 737 Next Generation Engine Pylon and Thrust Reversers. In addition, progress on newer configuration pylon production hardware continues as we shipped our 46th 787 and 28th 747-8 engine Strut ship sets in the quarter.
The propulsion team recently achieved a significant milestone as they rolled out the first test pylon for the Bombardier. This milestone is the latest example of our successful diversification strategy and focused on meeting customer commitments. The team continues to support development activities for the Rolls-Royce BR725 engine sale [ph] and design activities on the Mitsubishi Regional Jet program.
On Slide 5, you see the Wing Systems segment, which primarily consists of our Europe, Malaysia and Oklahoma operations. The wing team reported operating margins of negative 8.4% from $373 million in revenue during the second quarter, which includes the impact of deferred revenue associated with the 787 program and the previously announced $53 million charge on the G280 program.