Spirit AeroSystems(US:SPR)2021-08-04 20:54Financial Data and Key Metrics Changes - Revenue for Q2 2021 was $1 billion, up 55% from the same quarter last year and approximately 11% above Q1 2021, primarily due to production on the 737 and A320 programs [21][22] - Earnings per share (EPS) was negative $1.30 compared to negative $2.46 in Q2 2020, with adjusted EPS at negative $0.31 compared to $2.28 in the same period last year [23] - Operating margin improved to negative 10% from negative 57% in Q2 2020, driven by cost-reduction actions and increased production rates [24] Business Line Data and Key Metrics Changes - Fuselage segment revenues were $492 million, up 51% year-over-year, with an operating margin of negative 7% compared to negative 77% in the prior year [31] - Propulsion revenue improved to $242 million, up 43% year-over-year, with a positive operating margin of 12% compared to negative 10% in Q2 2020 [32] - Wing revenue increased to $259 million, with an operating margin of negative 6%, an improvement from negative 35% in the same quarter last year [33] Market Data and Key Metrics Changes - The U.S. air travel recovery has been strong, with TSA traveler throughput exceeding 2 million passengers on multiple days, indicating a rebound in demand for narrowbody aircraft [6][8] - Domestic passenger market demand is still down 22% compared to June 2019 levels, but the upward momentum is encouraging for the industry [6][7] Company Strategy and Development Direction - The company is focusing on revenue diversification in defense, expecting growth of roughly 20% in 2021, and is also exploring opportunities in urban air mobility (eVTOL) [16][19] - Recent acquisitions are expected to enhance the aftermarket and business jet businesses, with significant progress in integration and realization of synergies [13][15] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the impact of COVID-19 variants on air traffic recovery, particularly for international travel, which is expected to recover at a slower pace [20] - The company maintains its free cash flow guidance for the year at negative $200 million to $300 million, net of a $300 million cash tax benefit expected in the second half of the year [12][37] Other Important Information - The company recognized a $46 million forward loss on the 787 program due to fit and finish issues, but is working closely with Boeing to resolve these [11][19] - The company ended the formal consultation regarding the Belfast pension plan and plans to close it to future benefit accruals by the end of the year [15][88] Q&A Session Summary Question: Concerns about the 787 rework and supplier issues - Management is confident in addressing known issues and has identified necessary rework, with ongoing collaboration with Boeing [42][43] Question: Forward loss charges and cash implications - Majority of forward loss charges are expected to be cash expenditures this year, with some continuing into 2022 [49] Question: Production rate alignment with Airbus - The company is prepared to meet Airbus's production rate increases and has been working closely with suppliers to ensure readiness [59] Question: 787 program and fleet inspections - Current analysis shows no immediate safety issues, but inspections will continue as part of the rework process [67][70] Question: Future cash flow and operational improvements - The company aims for positive cash flow in 2022, driven by increased production rates and inventory destocking [54][56]