May 05, 2021 | --- | --- | |------------------------------------------------------|-------| | | | | First Quarter 2021 | | | | | | Earnings Review | | | | | | Tom Gentile | | | President and Chief Executive Officer | | | Sam Marnick | | | Executive Vice President and Chief Operating Officer | | | Mark Suchinski | | | Senior Vice President and Chief Financial Officer | | Summary of Recent Events Conducted extensive review and engineering analysis on 787 to help Boeing resume deliveries Completed 80% of integ ...

Financial Performance - For the year ended December 31, 2020, net revenues were $3,404.8 million, a decrease of 56.7% compared to $7,863.1 million in 2019[243] - The company reported a net loss of $870.3 million for 2020, compared to a net income of $530.1 million in 2019, resulting in a basic loss per share of $8.38[243] - Operating loss for 2020 was $812.8 million, a significant decline from an operating income of $760.8 million in 2019[243] - Gross (loss) profit for the twelve months ended December 31, 2020 was $(440.7) million, a decrease of $1,517.4 million from $1,076.7 million in the prior year[294] - Operating (loss) income for the twelve months ended December 31, 2020 was $(812.8) million, which was $1,573.6 million lower than operating income of $760.8 million for the prior year[297] - The income tax provision for the twelve months ended December 31, 2020 was $220.2 million compared to $(132.8) million for the prior year, with an effective tax rate of 20.3%[300] - The company experienced a net cash outflow of $744.9 million from operating activities for the twelve months ended December 31, 2020, a decrease of $1,667.6 million compared to a net cash inflow of $922.7 million in the prior year[362] - The net cash outflow from investing activities for the twelve months ended December 31, 2020, was $502.0 million, compared to $239.9 million in the prior year, primarily due to the FMI and Bombardier acquisitions[363] - The company had a net cash inflow of $769.5 million from financing activities for the twelve months ended December 31, 2020, a decrease of $114.9 million compared to $884.4 million in the prior year[364] Debt and Liquidity - Total debt increased to $3,873.6 million in 2020, up from $3,034.3 million in 2019, indicating a rise in leverage[245] - Cash and cash equivalents decreased to $1,873.3 million in 2020 from $2,350.5 million in 2019, reflecting liquidity challenges[245] - The Company anticipates sufficient liquidity for the next 12 months, but may need additional financing if the COVID-19 pandemic recovery is worse than forecasted[324] - As of December 31, 2020, the Company has total contractual cash obligations of approximately $5,260.1 million, including principal payments under the Credit Agreement of $400.0 million and long-term bonds totaling $3,300.0 million[376] - Interest on debt obligations is projected to total approximately $96.6 million over the next several years, with significant payments due in 2021 and 2022[376] Operational Changes - The company incurred restructuring costs of $73.0 million in 2020, as part of its cost reduction strategy[243] - The company reduced its workforce by approximately 6,800 employees globally and implemented a four-day work week for salaried employees at its Wichita facility[256] - The company suspended its share repurchase program and reduced quarterly dividends to $0.01 per share in response to the pandemic[251] - The company has paused its share repurchase program, with $925 million remaining in the Board-approved program due to the impacts of the B737 MAX grounding and the COVID-19 pandemic[373] - The Company reduced its quarterly dividend to $0.01 per share to preserve liquidity, with future dividend payments subject to Board discretion based on operational results and financial condition[374] Production and Deliveries - Approximately 19% of net revenues in 2020 were generated from sales of components to Boeing for the B737 aircraft, down from 53% in 2019[253] - Deliveries to Boeing decreased to 256 shipsets during 2020, compared to 867 shipsets delivered in the prior year[293] - Deliveries to Airbus decreased to 591 shipsets during 2020, compared to 869 shipsets delivered in the prior year[293] - Spirit delivered 71 B737 MAX shipsets in the year ended December 31, 2020, compared to 606 shipsets in the year ended December 31, 2019, reflecting a significant decline in production due to the B737 MAX grounding and COVID-19 pandemic[371] - The B787 production rate was reduced from 10 aircraft per month to 5 aircraft per month, resulting in a forward loss charge of $192.5 million for the year ended December 31, 2020[259] Market Conditions and Future Outlook - The company expects continued negative impacts from the COVID-19 pandemic and the B737 MAX grounding on its operations and financial performance[249] - Boeing resumed deliveries of the B737 MAX in Q4 2020 after the FAA lifted the grounding order, with ongoing demand challenges expected due to the COVID-19 pandemic[256] - The company expects domestic air travel demand to recover sooner than international demand, with B737 MAX production rates anticipated to return to pre-pandemic levels before widebody production rates[258] Segment Performance - Fuselage Systems segment net revenues for the twelve months ended December 31, 2020 were $1,725.9 million, a decrease of 59% compared to the prior year[304] - Propulsion Systems segment net revenues for the twelve months ended December 31, 2020 were $784.5 million, a decrease of 62% compared to the prior year[306] - Wing Systems segment net revenues for the twelve months ended December 31, 2020 were $798.6 million, a decrease of 50% compared to the prior year[307] - All Other segment net revenues were $95.8 million, an increase of 787% compared to $10.8 million in the prior year[308] - Fuselage Systems segment operating margins were (26%) for the twelve months ended December 31, 2020, compared to 11% for the same period in the prior year[305] - Propulsion Systems segment operating margins were (5%) for the twelve months ended December 31, 2020, compared to 20% for the same period in the prior year[306] - Wing Systems segment operating margins were (8%) for the twelve months ended December 31, 2020, compared to 14% for the same period in the prior year[307] Acquisitions and Investments - The Bombardier Acquisition on October 30, 2020, resulted in a total goodwill amount of $565.3 million, with preliminary purchase price allocation still pending[272] - The company deferred $32.9 million in employer payroll taxes under the CARES Act, with 50% due by December 2021 and the remaining 50% by December 2022[256] - The company recorded a deferral of $31.5 million in VAT payments until March 2022 under the UK deferral scheme, along with receiving approximately $5.4 million in Employee Retention Credit subsidies from the UK government[256] Risk Factors - The Company operates in various non-U.S. markets, with facilities in the U.K., France, Malaysia, and Morocco, which exposes it to foreign operational risks[379] - Inflationary pressures may impact the Company's long-term contracts, although some contracts include price adjustment provisions to mitigate these effects[384] - The Company has agreements to sell trade accounts receivable balances with Boeing and Airbus, which are dependent on the financial strength of these companies and could impact liquidity if disrupted[375] - The Company has long-term supply agreements for raw materials, expecting stable pricing in the near term, while also focusing on strategic cost reduction plans to mitigate potential cost increases[385] - The Company has not entered into any off-balance sheet arrangements as of December 31, 2020, indicating a focus on maintaining transparency in financial reporting[378]

Financial Data and Key Metrics Changes - Revenue for 2020 was $3.4 billion, down 57% from 2019, primarily due to lower production rates on the 737 MAX and the impacts of COVID-19 [48] - Earnings per share were negative $8.38 compared to positive $5.06 in 2019, with adjusted EPS at negative $5.72 [49] - Free cash flow for the year was a use of $864 million, compared to a source of $691 million in 2019 [54] - The company ended the fourth quarter with $1.9 billion in cash and $3.9 billion in debt [60] Business Line Data and Key Metrics Changes - Fuselage segment revenue was $1.7 billion, down from 2019, with an operating margin of negative 26% compared to positive 11% in the prior year [63] - Propulsion revenue was $785 million, down from the previous year, with an operating margin of negative 5% compared to positive 20% in 2019 [65] - Wing revenue was $799 million, down from 2019, with an operating margin of negative 9% compared to positive 14% in 2019 [66] Market Data and Key Metrics Changes - The defense business grew by over 20% in 2020, contributing to overall diversification [48] - The company expects Boeing commercial to account for 44% of revenue in 2021, down from 74% in 2019, while Airbus is expected to account for 23% [40] Company Strategy and Development Direction - The company aims to be a diversified design and manufacturing champion, focusing on Boeing, Airbus, defense, aftermarket, business and regional jets, and non-aerospace manufacturing [25] - The acquisition of Bombardier assets is expected to generate approximately $700 million in revenue in 2021, growing at about 15% annually [76] - The company plans to pay down $1 billion in debt over the next three years, starting with a $300 million floating rate note redemption [41][62] Management's Comments on Operating Environment and Future Outlook - Management views 2021 as a bridge year for recovery from the 737 MAX grounding and COVID-19 impacts, with expectations for improved production rates [81] - The company anticipates that single-aisle aircraft will recover first, benefiting from a backlog that is 85% narrow-body [43] - Management remains committed to regaining an investment-grade credit rating in the future [62] Other Important Information - The company implemented significant cost reductions, totaling $1 billion annually, or about 40% from the 2019 non-material base [11] - The company has established a forward loss liability of $282 million primarily related to the A220 program due to production schedule changes [70] Q&A Session All Questions and Answers Question: Can you provide perspective on the margin performance in 4Q versus 3Q? - Management clarified that the target margin is 16.5% once MAX production rates reach the low 40s [87] Question: Will the A220 program generate profit in the future? - Management expects the A220 to be profitable after the three to five-year forward loss period [89] Question: Do you expect MAX deliveries to pick up in 2021? - Management expects higher MAX deliveries in 2021 compared to 2020, with Boeing prioritizing delivery of built but undelivered units [95] Question: How will excess capacity costs proceed through the year? - Management anticipates a 30% reduction in excess capacity costs in 2021 compared to 2020 [100] Question: Is the Bombardier pension contribution included in the cash flow walk? - Management confirmed that the Bombardier pension contribution will flow through operating cash flow and is included in the cash flow walk [113]

| --- | --- | |---------------------------------------------------|-------| | | | | | | | Fourth Quarter and Full-Year 2020 | | | Earnings Review | | | | | | Tom Gentile | | | President and Chief Executive Officer | | | Mark Suchinski | | | Senior Vice President and Chief Financial Officer | | February 23, 2021 2020 Cost Reduction Actions Implemented cost reduction actions: Reduction of 8,000 commercial aviation employees Reduced executive pay by 20% Implemented 4-day work weeks for salaried workforce at Wi ...

Financial Data and Key Metrics Changes - Revenue for Q3 2020 was $806 million, down 58% from the same quarter last year, primarily due to lower production rates on the 737 Max and the impacts of COVID-19 [20][21] - Earnings per share (EPS) for the quarter was negative $1.50, compared to negative $1.26 in the same quarter last year; adjusted EPS was negative $1.34, down from positive EPS of $1.38 in Q3 2019 [22] - Free cash flow for the quarter was a use of $72 million, compared to a source of $214 million in the same period of 2019, reflecting negative impacts from working capital requirements and lower deliveries [29][30] Business Line Data and Key Metrics Changes - Fuselage segment revenue was $421 million, down from the previous year, with an operating margin of negative 23% compared to 11% in the same period last year [39] - Propulsion segment revenue was $171 million, down from the previous year, with an operating margin of negative 9% compared to 21% in the same quarter of 2019 [41] - Wing segment revenue was $168 million, down from the previous year, with an operating margin of negative 14% compared to positive 14% in the same quarter of 2019 [43] Market Data and Key Metrics Changes - The company expects Boeing commercial revenue to account for 45% of total revenue in 2021, with Airbus at 24%, defense at 15%, business and regional jets at 8%, and aftermarket at 8% [16] - The acquisition of Bombardier assets is expected to generate preliminary revenue between $700 million and $800 million in 2021 [16] Company Strategy and Development Direction - The company has implemented approximately $1 billion in annualized cost reduction actions, representing a 40% reduction in the non-material base [7][48] - The acquisition of Bombardier assets is aimed at accelerating strategic transformation, increasing Airbus content, and expanding the aftermarket and defense business [12][14] - The company plans to reduce the current buffer inventory of 128 737 shipsets to a permanent buffer of 20 to 25 units by lagging Boeing's production rates by about five units per month [9] Management's Comments on Operating Environment and Future Outlook - Management indicated that the aviation industry is in the early stages of a multi-year recovery, with expectations of continued near-term challenges [18] - The company anticipates free cash flow to be negative in 2021 but significantly improved from 2020, with expectations of positive free cash flow in 2022 [10][34] - Management expressed confidence in the recovery of domestic air travel, particularly for narrow-body aircraft, which constitutes 85% of the unit backlog [12] Other Important Information - The company successfully delivered 20,000 critical care ventilators to customers in over 20 countries, which was accretive to results [17] - The adjusted Q3 liquidity position was reported at $2 billion following various financial maneuvers, including the termination of the Asco acquisition and raising $900 million in new secured debt [11][36] Q&A Session Summary Question: Can you discuss underlying margins excluding forward losses? - Management noted substantial improvements in margins quarter-over-quarter, with normalized margins for the 737 program improving from negative 20% to negative 3% [52][53] Question: What should we expect from cash flow next year? - Management indicated that cash usage for the next year could be around low single-digit hundreds of millions, factoring in cash tax benefits and potential positive contributions from Bombardier [60][61] Question: What is the outlook for Bombardier's cash flow profile? - Management stated that the Bombardier business has been impacted by COVID-19, and they are currently working on establishing an annual operating plan for 2021 [76][79] Question: What is the expected production rate for the 737? - Management confirmed that they are planning to ramp up production to 10 aircraft per month by January, lagging Boeing's production rate by about five units [101] Question: How does the company plan to respond to Airbus's rate increase for the A220? - Management stated they are preparing to meet the potential increase in production rates as requested by Airbus, ensuring all necessary resources are in place [92][93]

| --- | --- | |---------------------------------------------------|-------| | | | | | | | Third Quarter 2020 | | | Earnings Review | | | | | | Tom Gentile | | | President and Chief Executive Officer | | | Mark Suchinski | | | Senior Vice President and Chief Financial Officer | | November 3, 2020 Summary of Recent Events Continued actions on labor and non-labor cost reductions; reduction of 8,000 commercial employees and $1 billion of annualized cost savings Encouraged by progress on the 737 MAX return to se ...

| --- | --- | |---------------------------------------------------|-------| | | | | Second Quarter 2020 | | | Earnings Review | | | | | | Tom Gentile | | | | | | President and Chief Executive Officer | | | Mark Suchinski | | | Senior Vice President and Chief Financial Officer | | August 4, 2020 Summary of Recent Actions 2 | --- | --- | --- | |-------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------| | | ...

Financial Data and Key Metrics Changes - Revenue for Q2 2020 was $645 million, down 68% from the same quarter last year, primarily due to lower production rates on the 737 MAX and the impacts of COVID-19 [33][34] - Earnings per share (EPS) reported was negative $2.46 compared to positive $1.61 in the same quarter last year; adjusted EPS was negative $2.28 compared to positive EPS of $1.71 in the same period of 2019 [35] - Free cash flow for the quarter was a use of $249 million compared to a source of $192 million in the same period of 2019 [42] Business Line Data and Key Metrics Changes - Fuselage segment revenue was $327 million, down from the same period in 2019, with an operating margin of negative 77% compared to 12% in the prior year [45] - Propulsion segment revenue was $170 million, down compared to the same period of the prior year, with an operating margin of negative 10% compared to 19% in the same quarter of 2019 [46] - Wing segment revenue was $123 million, down compared to the same period last year, with an operating margin of negative 35% compared to 14% in the same quarter of 2019 [47] Market Data and Key Metrics Changes - Global passenger traffic fell by more than 90% in April and May compared to last year, with airlines losing more than $415 billion in revenue in 2020 [10][11] - The aviation industry is expected to take several years to recover, with domestic travel rebounding first, followed by international travel [10] Company Strategy and Development Direction - The company is focusing on cost reduction and preserving liquidity in response to lower production levels due to COVID-19 [11][43] - Significant cost-cutting measures have been implemented, including a reduction of more than $1 billion in costs or 40% of the non-material base of the business [15] - The company is also diversifying its operations, including partnerships with Virgin Hyperloop and Aerion for new transportation technologies [25][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the significant challenges posed by the MAX grounding and COVID-19 but remains confident in the long-term resilience of the aviation industry [11][51] - The company expects to return to cash flow positivity by 2022, contingent on production ramp-up and market recovery [56][100] Other Important Information - The company has made the decision not to renew the lease for the San Antonio facility and is assessing its global footprint and machine capacity [14] - The company is actively engaged in discussions with defense primes to leverage available capacity to support defense business growth [25] Q&A Session Summary Question: Can you elaborate on liquidity and cash breakeven? - Management indicated that cash burn will continue through next year, with expectations for cash flow positivity in 2022 [56][57] Question: What are the normalized margin targets at lower production rates? - The goal is to improve productivity and efficiency to achieve higher margins when production rates return to higher levels [65] Question: Insights on MAX production ramp? - The company plans to align employment levels to a production rate of about seven units per month, with a gradual ramp-up expected over the next 24 months [71] Question: Update on Bombardier transaction? - Both Bombardier and Asco deals have conditions that need to be met by specific long stop dates, with ongoing discussions to fulfill those conditions [89] Question: How do you view the 787 and A350 forward loss charges? - Forward loss charges are expected to be lower in Q3 due to updated production rate forecasts from Boeing and Airbus [111]