Spirit AeroSystems(US:SPR)2021-02-23 21:20Financial 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]