06 -May -2020 Spirit AeroSystems Holdings, Inc.s23.q4cdn.com/405433451/files/doc_financials/2020/... · 5/6/2020 · safety of our teams as we resume operations to support our customers,

Corrected Transcript

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06-May-2020

Spirit AeroSystems Holdings, Inc. (SPR)

Q1 2020 Earnings Call

Spirit AeroSystems Holdings, Inc. (SPR) Q1 2020 Earnings Call

Corrected Transcript 06-May-2020


2 Copyright © 2001-2020 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Ryan Avey Investor Relations, Spirit AeroSystems Holdings, Inc.

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc.

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc.

.....................................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Seth M. Seifman Analyst, JPMorgan Securities LLC

Myles Walton Analyst, UBS Securities LLC

Carter Copeland Analyst, Melius Research LLC

Jonathan Raviv Analyst, Citigroup Global Markets, Inc.

David Strauss Analyst, Barclays Capital, Inc.

Sheila Kahyaoglu Analyst, Jefferies LLC

George D. Shapiro Analyst, Shapiro Research LLC

Cai von Rumohr Analyst, Cowen and Company, LLC

Douglas S. Harned Analyst, Sanford C. Bernstein & Co. LLC

Ken Herbert Analyst, Canaccord Genuity LLC

Ronald J. Epstein Analyst, Bank of America Merrill Lynch

Robert Spingarn Analyst, Credit Suisse Securities (USA) LLC

Hunter Keay Analyst, Wolfe Research LLC

Peter J. Arment Analyst, Robert W. Baird & Co., Inc.

Noah Poponak Analyst, Goldman Sachs & Co. LLC





MANAGEMENT DISCUSSION SECTION

Operator: Good morning, ladies and gentlemen. And welcome to the Spirit AeroSystems Holdings, Inc's. First

Quarter 2020 Earnings Conference Call. My name is Eric, and I will be your coordinator today. All participants on

today's call will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an

opportunity to ask questions. [Operator Instructions]

I would now like to turn the presentation over to Mr. Ryan Avey, Director of Investor Relations. Please proceed. .....................................................................................................................................................................................................................................................................

Ryan Avey Investor Relations, Spirit AeroSystems Holdings, Inc.

Thank you, Eric, and good morning, everyone. Welcome to Spirit's first quarter 2020 earnings call. I'm Ryan Avey,

Director of Investor Relations, and with me today are Spirit's President and Chief Executive Officer, Tom Gentile;

and Spirit's Senior Vice President and Chief Financial Officer, Mark Suchinski.

After opening comments by Tom and Mark regarding our performance and outlook, we will take your questions. In

order to allow everyone to participate in the question-and-answer segment, we ask that you limit yourself to one

question, please.

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 earnings release, in our SEC filings and in the forward-looking

statement at the end of this web presentation. In addition, we refer you to our earnings release and presentation

for disclosures and reconciliation of non-GAAP measures we use when discussing our results. And as a reminder,

you can follow today's broadcast and slide presentation on our website at investor.spiritaero.com.

With that, I would like to turn the call over to our Chief Executive Officer, Tom Gentile. .....................................................................................................................................................................................................................................................................


Thank you, Ryan, and good morning, everyone. Welcome to Spirit's 2020 first quarter earnings call. When we

held our last quarterly earnings call only about two months ago, we were working hard to navigate the impact of

the extended MAX grounding and the resulting production suspension. Since then, the COVID-19 pandemic has

created a health care emergency for the entire world, which has had a particular severe impact on the global

aviation industry. More than 19,000 aircraft are grounded and traffic in April in the US was down 96%. While we

shift our attention to addressing this new challenge, we are mindful of the human tragedy which is unfolding and

the courageous work of the first responders and front-line hospital staff who were working tirelessly to bring relief

to patients.

Like all the other companies in our industry, we are also taking extraordinary measures in our factories and offices

to keep our workers safe and healthy as they perform their essential work. The aerospace industry and Spirit are

facing unprecedented disruption and uncertainty from the continued 737 MAX grounding and the COVID-19

pandemic. Both Airbus and Boeing have announced significant cuts in production across most of their programs

in response to this disruption.





At Spirit, our first priority has been to preserve the health and safety of our workforce in response to COVID-19.

We quickly enacted a robust crisis management and [ph] response plan (00:03:02) as part of our enterprise risk

management program to help us navigate this challenge. We have taken a number of measures to improve the

safety of our teams as we resume operations to support our customers, which include processes aligned with

CDC guidelines to work with any exposed individual and the necessary quarantine period, and the process to

return to work.

In addition to the steps we have taken to improve the safety of our team in the workplace, we have moved

aggressively to take a number of actions to preserve liquidity and reduce costs to align to the lower levels of

production. The actions we have taken to preserve our liquidity through this uncertain time include a reduction of

the cash dividend to a nominal $0.01 per share, the continuation of the suspension of our share repurchase

program, an MOA with Boeing to receive a $225 million cash advance and deferred repayment of $123 million

advance from Boeing from 2020 to 2022.

Deferral of over $120 million of capital expenditures, amendments to our credit agreements to allow for notes

issuance, and provide additional flexibility in light of the current market conditions, and raising $1.2 billion in senior

secured second lien notes. After raising the $1.2 billion in new capital, we paid down in full our $800 million

revolver on April 30. As a result of our proactive balance sheet management and cash mitigation actions, we

believe we have an adequate liquidity position to manage through this crisis.

The major cost actions we took included the following: workforce reductions of 2,800 employees in Wichita,

Kansas, and 400 employees in Oklahoma which we announced in January, and the elimination of 200 contractor

positions, a voluntary retirement program for 850 hourly and salaried workers, the extension of the IAM and IBEW

union contracts for three years, a reduction in pay for all US-based Spirit executives by 20% until further notice, a

21-calendar date furlough of production workers and managers supporting Boeing programs in Wichita, Kansas

and Oklahoma, four-day work weeks for salaried workforce at our Wichita, Kansas facility until further notice, and

an additional workforce reduction of 1,450 employees in Wichita, Kansas which we announced on May 1. We will

announce additional workforce actions at other Spirit locations in response to lower customer production levels in

the coming weeks.

Given all the disruption in the global aviation industry, Spirit stock along with many other companies in the

industry experienced a significant decline. To protect Spirit and its stockholders from parties seeking to take

advantage of this lower stock price in the current market environment, we also adapted a limited duration

stockholder rights agreement on April 23.

Before moving on, I also want to thank all the Spirit employees who are stepping up to help our communities in

response to COVID-19. At Spirit, we have been involved with a number of activities related to the COVID-19

response. One action we took is that we assembled cross-functional task teams in Wichita and Prestwick, to

assist with developing new designs for face shields to be used by the heroes on the front-line of treating patients

with COVID-19.

So far, the teams have delivered over 17,000 of these heavy-duty shields to front-line workers. The team in

Wichita also designed a special boot to protect front-line workers while they administer diagnostic tests for

COVID-19. In addition, earlier this week, we announced a partnership with Vyaire, the world's largest health care

company, fully dedicated to respiratory care. This temporary project will support their need to ramp up production

of their critical care ventilators. This includes an order from the US Department of Health and Human Services for

22,000 ventilators for the Strategic National Stockpile.





Spirit's capabilities in design engineering, industrial engineering, supply chain management, fabrication, complex

assembly, and functional system testing, align very well to the manufacturing requirements of these ventilators.

We are proud to be able to contribute in some small way to providing these much-needed medical devices that

can help treat the patients most severely impacted by COVID-19.

We will send approximately 700 of our hourly and salaried employees to this project who are part of the workforce

announcement last week. The plan is for these 700 employees to work through October on this temporary project.

The ultimate duration of the project will depend on the ongoing demand for the ventilators.

Moving to production rates. We have aligned production schedules across all our programs with the recently

announced decreased rates of production by Boeing and Airbus in response to lower commercial air traffic,

resulting from COVID-19. We've previously had an agreement with Boeing to produce and deliver 216 737 MAX

shipsets in 2020. Under the current schedule that we announced yesterday, we now expect to deliver 125 737

MAX shipsets, including 18 that we have already delivered in the first quarter. These deliveries will be weighted

toward the second half of the year.

We have also adjusted our 787 production rates from 14 aircraft per month to 10 in line with Boeing's latest

schedule. The combined 777 drops to three aircraft per month from five over the next few years. Rates for the 767

and 747 remain unchanged.

For our Airbus programs, we have also aligned to the new schedule that Airbus announced with the A320 going

from 60 to 40 aircrafts per month and the A350 dropping from nine to six aircrafts per month. We continue to take

full advantage of this period of reduced production to implement initiatives that are harder to achieve at full run

rates in order to improve quality and efficiency. These initiatives include optimizing product flows, streamlining our

factories, accelerating automation and digitization projects, and completing the transition to our Global Digital

Logistics Center. These projects will enable us to ramp up to higher rates of production in the future with

increased productivity and improved quality.

We remain confident in the recovery of commercial air travel and are working hard to maintain Spirit's position as

a leading aerostructure supplier to both Boeing and Airbus, as well as our defense customers.

Now for an update on our planned acquisitions. We continue to see the long-term strategic value in both the

ASCO and Bombardier Aerostructures acquisition. We intend to close both of these deals if all the conditions are

met and we are working closely with both parties on those conditions.

The ASCO acquisition increases our Airbus and defense content and broadens our fabrication business. ASCO's

revenue is 50% Airbus work, including all of the slat tracks across all of their programs. ASCO also expands their

defense work statement with key F-35 work packages.

The Bombardier Aerostructures deal brings customer diversification, a low-cost country footprint and expanded

aftermarket content, all of which are in line with our stated strategic growth priorities. The deal also strengthens

our relationship as a key supplier to Airbus through the A220 wing and the A320neo thrust reverser. This

acquisition also has intellectual property in the form of state-of-the-art resin transfer infusion, carbon fiber

composite fabrication, which is used on the A320 wing and positions us well for future derivatives or next

generation narrow-body aircraft.





We also closed and integrated the FMI acquisition in the Spirit in the first quarter. We are very excited about their

unique capabilities and high temperature materials as it relates to future priority areas identified by the

Department of Defense, such as hypersonics.

On the topic of defense, Spirit has a very strong value proposition for our military customers, including competitive

cost manufacturing, application of commercial best practices and design build capabilities. We have positioned

Spirit to compete for new growth opportunities to expand our defense business. FMI has brought significant new

capabilities to Spirit, which strengthened our defense value proposition. Also, with current commercial production

rates lower, we have available capacity to compete aggressively for new defense business. Over the last few

years, we have made good progress growing our relationships with the defense primes. We also continue to get

strong support from our congressional delegation. We have a strong pipeline of potential growth opportunities in

defense.

With that, I'll ask Mark to lead you through the detailed first quarter 2020 financial results. Mark? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc.

Thank you, Tom, and good morning, everyone. As Tom mentioned in his opening remarks, there continues to be

a significant amount of uncertainty surrounding the impacts of the COVID-19 pandemic. Our major customers

have reduced their planned production rates in light of this pandemic and may make additional adjustments in the

future as we all learn more on the impact of COVID-19. During this unprecedented and unpredictable time, we will

continue to assess and make decisions to ensure that Spirit remains financially healthy during this crisis.

So let's move on to our first quarter results. Please turn to slide 5. Revenue for the year was $1.1 billion, down

45% from the same quarter last year. This reduction was primarily due to the 737 MAX production suspension

that began on January 1, as well as the production pause related to the impacts of COVID-19 that began in

March. We delivered 18 MAX shipsets this quarter compared to 152 shipsets in the same period of 2019. Overall,

deliveries decreased to 324 shipsets compared to 453 shipsets in the same quarter last year.

Now let's turn to earnings per share on slide 6. We reported adjusted EPS of negative $0.79 per share compared

to positive EPS of $1.68 per share in the same period of 2019. The first quarter adjusted EPS excludes the

impacts of planned acquisitions, restructuring costs, and the voluntary retirement plan executed during the first

quarter of 2020.

During the first quarter of 2020, there were several significant expenses incurred related to the Boeing-directed

737 MAX production suspension, as well as the impact of the COVID-19 pandemic. As a result of the MAX

production suspension that began on January 1, we recognized lower margins driven by significantly less

deliveries, excess capacity costs of $73 million and restructuring expenses of over $43 million for cost alignment

and head count reductions. Additionally, we recognized abnormal costs of $25 million resulting from the Boeing

production suspension related to COVID-19 that began in March. Further, we recognized the non-cash charge of

$69 million resulting from the voluntary retirement program offered during the first quarter of 2020.

In addition to the expenses I just described, we also recognized forward loss charges of approximately $20 million

in the first quarter of 2020 related to the 747, 787, A350 and BR725 programs. Our first quarter results do not

contemplate the impact of the recently announced lower production rates by our customers. Airbus lowered

production rates by approximately 30%, Boeing lowered production rates on the 737, 787 and 777 programs. The

announcement of the lower production rates is considered a subsequent event and is not reflected in our first





quarter financial statements. These lower production rates will likely result in an unfavorable change in estimate

adjustments during the second quarter.

Based on our preliminary assessment, we expect to incur an incremental forward loss of approximately $70

million to $90 million on the 787 program in the second quarter, and we expect to incur an incremental forward

loss of approximately $15 million to $20 million on the A350 fuselage program in the second quarter.

Now turning to free cash flow on slide 7. Free cash flow for the quarter was a usage of $362 million, compared to

a source of $201 million in the same period of 2019. This year-over-year decrease is primarily due to the negative

impact of working capital requirements largely resulting from payments made to suppliers for inventory received

prior to the 737 MAX production suspension and significantly lower deliveries in the first quarter. This was partially

offset by $250 million received as a result of the February MOA with Boeing.

In April, we amended our credit agreement to allow us to raise secured second lien debt and provide additional

covenant flexibility. Following this amendment, we raised $1.2 billion of 7.5% senior secured second lien notes

due in 2025 in a private offering. And we used these proceeds to pay off the $800 million revolver on April 30. And

we'll use the remaining $400 million for general corporate purposes. In conjunction with the notes offering, we

terminated the $375 million short-term delayed draw term loan facility.

Looking ahead, we project negative free cash flow for 2020, largely resulting from our customer's recently

announced production rate reductions due to the impact of COVID-19. In addition, our recent customer's

production facility suspensions will have a further negative impact on our second quarter cash flow. We expect

our cash usage in the future quarters to be less than what we recognized in Q1 as we resume production across

the programs including the MAX, and begin to realize the benefits from our cost mitigation actions. However, the

lower production rates resulting from COVID-19 will have a negative impact on our ability to generate positive

cash flow in 2020. Additionally, we expect slower cash flow recovery going forward, due to our customers'

recently announced production rate reductions.

During this time where revenue will be significantly lower than before, we will continue to assess and adjust our

cost base in order to minimize cash spend and we'll continue to do so until production levels return to the point

where we are once again, generating positive free cash flow.

Now, let's turn to our Fuselage segment performance on slide 8. Fuselage segment revenue in the quarter was

$552 million, down compared to the first quarter of 2019. Primarily, due to lower production volumes in the 737

program, resulting from the Boeing-directed production suspension that began on January 1, as well as COVID-

19 production shutdowns that began in March.

Our operating margin for the quarter was negative 15.7%, compared to 13% in the same period of the prior year.

This decrease was primarily due to lower margins recognized in the 737 program, due to excess capacity cost of

$51 million, with significantly less deliveries in that quarter. We also incurred $30 million of restructuring expenses

for cost alignment and head count reductions, incurred abnormal costs of $15 million, resulting from the COVID-

19 Boeing production suspension in March, as well as pricing terms on the A350 program.

Now, let's turn to our Propulsion segment performance on slide 9. In the first quarter, Propulsion revenue was

$225 million, down compared to the same period of the prior year, primarily due to lower production volumes on

the 737 program, resulting from the 737 production suspension, as well as COVID-19 reduction shutdown that

began in March.





Operating margin for the quarter was negative 2.4% compared to 19.7% in the same quarter of 2019. The

decrease was primarily due to lower margins recognized in the 737 program due to excess capacity cost of $16

million, restructuring expenses of $9 million, and abnormal cost of $6 million resulting from the COVID Boeing

production suspension that began in March.

Now if we turn to our Wing segment performance on slide 10. During the first quarter, Wing revenue was $291

million, down compared to the same period in 2019, again primarily due to production volumes on the 737

program, as well as the COVID-19 production shutdown began in March.

Additionally, there was lower revenue recognized in the A350 program due to pricing terms. Operating margin for

the quarter was positive 4.7% compared to 16.1% in the first quarter of 2019. This decrease was primarily due to

lower margins recognized in the 737 program due to excess capacity cost of $6 million, restructuring expenses of

$4 million, abnormal cost of $4 million resulting from the COVID Boeing production suspension that began in

March and pricing terms on the A350 program.

In closing, this is a difficult time, not only for Spirits but for the entire aerospace industry. These past few months

have certainly been challenging, and we have had to make some very difficult decisions. As COVID-19 continues

to have a major impact on the aviation industry, we will continue to assess and make decisions to ensure that

Spirit and all of our stakeholders are positively positioned for the future. Our primary focus will be on liquidity and

cost management throughout this crisis.

With that, I will turn it back over to Tom for some closing comments. .....................................................................................................................................................................................................................................................................


Thanks, Mark. Our focus at Spirit right now is on managing costs to align with the lower production rates that we

described, and preserving liquidity through these uncertain times in our commercial business. We are taking

advantage of this period of lower production rates to improve our factory processes to enable us to increase

production rates in the future, with higher levels of productivity and quality. At the same time, we will work closely

to integrate the three transformative acquisitions in 2020 of Bombardier, ASCO, and FMI.

In addition, we have positioned Spirit to compete for new growth opportunities to expand our defense business

over the coming years. This year, in light of the significant demand to produce ventilators, we are shifting some of

our open capacity to that effort to fight against the COVID-19 crisis. Executing on these priorities will help us

become a leaner, more diversified, and more balanced company in the future. We are confident in the long-term

growth and importance of air travel. Spirit is well positioned to participate in this growth as a key supplier to the

industry.

With that, we will be happy to take your questions.





QUESTION AND ANSWER SECTION

Operator: Thank you. [Operator Instructions] And our first question today will come from Seth Seifman of

JPMorgan. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Seth M. Seifman Analyst, JPMorgan Securities LLC Q Great. Thanks. Thanks very much, and good morning, guys. I was wondering, I guess just kind of in the

commentary about the acquisitions. So, if we take the cash on the balance sheet at the end of the quarter and we

add, let say, the $400 million net, and then we take out the acquisitions, it kind of leaves you with a little over $1

billion. And just want to make sure you guys see that as kind of adequate to deal with the rest of this year, given

the cash burn that's expected over the next three quarters? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Seth, yes. Thanks for the question, and the answer is yes. We do think it's adequate. We also as you know raised

$1.2 billion of high-yield bonds of second lien securities. That give us an additional cash cushion. So, we've been

able to pay off the revolver and have $400 million in addition for general purpose – for general corporate

purposes. So, we're confident the liquidity position is adequate even after completing the two deals. .....................................................................................................................................................................................................................................................................

Seth M. Seifman Analyst, JPMorgan Securities LLC Q Okay, great. I'll stick to one for now. Thanks. Thanks very much. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Myles Walton of UBS. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Myles Walton Analyst, UBS Securities LLC Q Thanks, good morning. Maybe on the estimate of forward loss for the 787 and A350. Just wanted to make sure

what's embedded in those in terms of your longer-term view of production rates, maybe specifically on the Boeing

787, 1405, in what period now is that going to occur, I think it was previously 1Q 2023? And is the A350 forward

loss charge not larger because you were in a profit position, and you're effectively getting back to a zero-booking

rate? Thanks. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Well, let me just take the first part of the question. With regard to the 787, it takes the – forward loss does take

into account, not only the reduction to 10 this year, but going down to 7 or 8 next year, which Boeing has also

indicated. And so, the 1405 unit does push out now into later 2023.

On the A350, again, we're assuming the six rate continues for the indefinite future that Airbus has already

announced. .....................................................................................................................................................................................................................................................................





Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah, Myles. I think, Tom summarized that well. The block on 787 extended, roughly, somewhere between 10

and 12 months, because of this rate slowdowns, and so therefore, the fixed cost absorption is really having an

impact due to lengthening of the accounting contract. And then, I think your comment on A350 is correct. We

were in a profitable position in A350 and with the lower production rates here, it's put us in a much closer position

of being breakeven at this point in time. .....................................................................................................................................................................................................................................................................

Myles Walton Analyst, UBS Securities LLC Q Okay, I'll leave it at one. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Carter Copeland of Melius Research. Please proceed with your

question. .....................................................................................................................................................................................................................................................................

Carter Copeland Analyst, Melius Research LLC Q Yes. Hi, and thanks for the time. I'll stick to the one, on the comments around free cash flow, I realize there is a lot

of moving parts here and you don't have guidance, but you hinted a little bit at that, the phasing of the cost out

and normalization of production at the lower rates. I get that you don't have expectations for positive free cash

flow for the year, but do you think by the time we get to the end of the year, Q4, you could have a positive free

cash flow quarter, or is that 2021 occurrence in your view? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Well, Carter before when we were discussing cash flow, we were thinking we'd get to free cash flow positive by

Q3 of this year on a run rate basis. But with the most recent production reductions that Boeing has announced on

the 737 MAX for Spirit, being 125 units, we expect that that's going to get pushed out about 12 months. So, we

are expecting... .....................................................................................................................................................................................................................................................................

Carter Copeland Analyst, Melius Research LLC Q Okay. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A ...negative free cash flow this year. Next year, we expect to be breakeven, but we'll be getting to cash flow

positive on a run rate basis by about mid-year in 2021. .....................................................................................................................................................................................................................................................................

Carter Copeland Analyst, Melius Research LLC Q Great. Thanks for the color. I'll stick to one. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Jon Raviv with Citi. Please proceed with your question. .....................................................................................................................................................................................................................................................................





Jonathan Raviv Analyst, Citigroup Global Markets, Inc. Q Hi. Thank you. Sticking to the cash question. So I appreciate the color around hitting run rate positive in mid-2021.

Tom, can you talk about some of the moving pieces and what you're able to do to the production line right now to

generate more cash starting in mid-2021, and going forward? Is there a particular volume that you need to make

cash on these programs, or are the changes you're making now going to put you in a much better position?

And really thinking about things like A350, which has gone to no profit here in 787, which has not generated cash

for a long time, and won't generate cash for a while. So, any thoughts on those dynamics will be much

appreciated. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Great. Well, with the lower production rates, one of the things we've done is we've aligned the workforce to those

lower production rates across all programs. And so, that – it was the 2,800 employees in Wichita in January, the

400 in Oklahoma in January, 1,450 that we just announced last week in Wichita. And there will be other employee

reductions across the other programs in the other sites in the coming weeks based on the timing. So that's one

way that we are able to adjust to the lower levels of production.

Your other question was regarding free cash flow? .....................................................................................................................................................................................................................................................................

Jonathan Raviv Analyst, Citigroup Global Markets, Inc. Q Yes. How do you make cash on 787 eventually? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Oh, yeah. On 787 and A350, again same thing is the workforce is variable. And so, we will take down workforce

to align to the production rates. The other thing is we're continuing to work on our cost reduction programs. The

original intent was to get to a positive cash flow position and profit position on 787 by line unit 1405. With the

reduction in rate, that's now expected that becomes harder. We'll have to get a couple of hundred thousand

dollars more of cost reduction, but the good news is we'll have more time to do it, because the 1405 gets pushed

out about 18 to 24 months. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. I think the only thing I would add is we've got a variety of projects that we're looking at. With the excess

capacity now in Kinston in our 787 facility, we have some opportunities to do some in-sourcing and some move,

some work around that would allow us to do a better job of absorbing our fixed costs, which ultimately could help

the profitability of not only A350 and 787 but also allow us potentially to win some new work here.

So, in addition to just the straight cost actions that we continue to focus on around head count, our fixed costs

structure within the facilities, there are some work opportunities and moving some work around that, I think, would

allow us to maybe better utilize the capacity within those facilities. .....................................................................................................................................................................................................................................................................





Jonathan Raviv Analyst, Citigroup Global Markets, Inc. Q Thanks. I'll leave it at one-and-a-half questions. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from David Strauss with Barclays. Please proceed with your question. .....................................................................................................................................................................................................................................................................

David Strauss Analyst, Barclays Capital, Inc. Q Thanks. A quick follow-up and then a question. I guess back on Seth's question around the cash balance, I think

you're going to be roughly a little bit of over $1 billion in kind of pro forma cash on the balance sheet. You're

talking about burning cash for the rest of the year. And I thought your covenants require at least holding $1 billion

in cash on the balance sheet, at least for a while. So if you could just comment on that.

And then on MAX, relative to the – you're going to do 125 production delivery this year, do you think that has

room to actually move up at all in 2021 based on what Boeing is looking at today and the kind of delivery they

might be looking at, given how far you are ahead of them at this point? Thanks. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A So, on the cash balance, yes, the covenants are for $1 billion – to maintain $1 billion. And we expect that we will

be able to meet the covenants. So that's the expectation.

Regarding the MAX, the rate right now that Boeing has given us is 125 for this year. It will move up in 2021.

Again, everything is subject to market conditions. But we expect by the end of 2021 to be hitting rate 31 in the

current plan, but it could change. But it will definitely be higher in 2021. And we are working on our production

system to have the flexibility to [ph] respond (00:32:58) to Boeing, whatever their production rates are. And we

[ph] work (00:33:01) with them and we communicate with them. And depending on what market conditions are,

we will be prepared to respond. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. And on the cash, just to help you guys do some math here. At the end of the first quarter, we have $1.8

billion of cash. We raised $1.2 billion. So that would put our cash balance at $3 billion. We took $800 million and

paid down the revolver. That would leave us with $2.2 billion in cash, and Tom talked about the $900 million

needed for the acquisition. So after you back out the acquisitions, we'd be sitting with $1.3 billion of cash, just to

provide some – somewhere between $1.3 billion and $1.4 billion of cash. So just to help you do some math here,

$1.4 billion is a significant amount of cash that we would have, if you just factor in what we have to raise and

what's required to support the closing of both ASCO and Bombardier. .....................................................................................................................................................................................................................................................................

David Strauss Analyst, Barclays Capital, Inc. Q And, Mark, so I guess you're implying that the cash burn won't drop you below that $1 billion through the rest of

the year? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A





That's what I'm saying. .....................................................................................................................................................................................................................................................................

David Strauss Analyst, Barclays Capital, Inc. Q Okay. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Sheila Kahyaoglu of Jefferies. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Sheila Kahyaoglu Analyst, Jefferies LLC Q Thank you. Good morning, Tom and Mark. And maybe I could just follow up on that last point, Mark, and ask

another question. If you're at $1.3 billion, you've already burned $360 million in the quarter, and you don't expect

to be breakeven for another four quarters, can you just clarify that? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. Let me just be more specific. Obviously, both Boeing and Airbus just recently announced their production

rates. So we're reacting fairly quickly around what impact it will have on our revenue. As Tom indicated, we've

taken some workforce reductions. Obviously, there'll be some costs associated with taking those folks out.

But the ultimate goal here is to get those – get the production system aligned to the production rates and get the

system tuned up so that the back half of the year, we're in a normal production environment. And we've been

talking a lot about cash, and as we indicated, we consumed $362 million in the first quarter.

Based on what we know today, to be more specific, I would say we're looking at potentially $600 million to $700

million on a full-year basis as it relates to negative cash flow. So, I think you guys are going to continue to poke on

that. And I think I'm being even more specific for you. .....................................................................................................................................................................................................................................................................

Sheila Kahyaoglu Analyst, Jefferies LLC Q You got it the number. Thank you. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Okay. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A And I would say, Sheila, that one of the thing is we took a lot of actions on workforce and other cost items in Q1

and Q2. And those were expenses in the first half of the year, we will start to get the benefit in the second half.

So, the first half of the year, obviously with production rates being much lower, the cash burn is higher that starts

to go down significantly in the back half of the year. .....................................................................................................................................................................................................................................................................

Sheila Kahyaoglu Analyst, Jefferies LLC Q Okay. I think I used up my question. So, I'll go back in the queue. Thanks, guys.





Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from George Shapiro of Shapiro Research. Please proceed with your

question. .....................................................................................................................................................................................................................................................................

George D. Shapiro Analyst, Shapiro Research LLC Q Yes. I wanted to ask what the definition is for EBITDA, because it looks to me like you could violate either the

interest coverage ratio or that first lien leveraged by the third quarter of this year. And then just to follow up on the

last question, seems like you'd get close to $1 billion by the end of the year in the liquidity, but you've said that the

first two quarters of 2021 would also be negative, and that liquidity ratio – requirement runs to the fourth quarter of

2021. So, if you could just comment on that. Thanks very much. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yes, George, I would say that your question around the covenants on the first lien, we're very comfortable with

that. The first lien would be just considered our – we've paid the revolver off, so that's first lien debt. All we would

have is the term loan, some lease commitments, and then the – one of our bonds, got pulled along with that. So,

from a first lien debt standpoint, we have less than $1 billion worth of first lien debt. So, I'm not really concerned

as it relates to meeting our covenants around the first lien.

As it relates to EBITDA, we do have add-backs that are part of our credit facility. A variety of different add-backs

related to things that are restructuring or non-cash like the VRP. So, when you think about the financial statement

EBITDA, it's slightly different for bank purposes. We have a variety of different carve outs that we get to add back.

And as a result of that, we spent a lot of time looking at our projections here and taking a look at our covenants.

And I won't say that the end of the year doesn't get tight, but at this point in time, our projections indicate that that

we will not breach any of our covenants. .....................................................................................................................................................................................................................................................................

George D. Shapiro Analyst, Shapiro Research LLC Q And the $1 billion liquidity for the first-half of next year? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. So, as you saw in our credit facility, we do require having $1 billion of liquidity. The revolver counts against

that. So we've paid down the revolvers. So in theory, we have full access to that $800 million. So, I would say as it

relates to the minimum liquidity requirements, we're very, very comfortable that we can meet the minimum liquidity

requirements that are part of our credit facilities. .....................................................................................................................................................................................................................................................................

George D. Shapiro Analyst, Shapiro Research LLC Q Okay. Thanks very much. .....................................................................................................................................................................................................................................................................





Operator: Our next question will come from Cai von Rumohr of Cowen. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Cai von Rumohr Analyst, Cowen and Company, LLC Q Thank you very much. So, what are you assuming in terms of cash contributions from ASCO and Bombardier,

given they're heavy with Airbus as are you? And that with COVID, it's got to be a little more difficult to integrate

them. And also, how does that relate to cash because if your numbers are right, you're going to have $300-odd

million negative cash in the remainder of the year. So that gets you to the $1 billion. So it kind of sounds like

you're going to have to access the revolver again. Is that correct? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A No, no. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Well, first of all, the answer is no. We aren't planning to access the revolver. Cash contribution from ASCO and

Bombardier should to be positive. Obviously, they're affected like the rest of the industry by the COVID-19 crisis,

but we expect that once we complete the acquisitions and integrate them, they will be positive overall, but

probably less than what we were originally planning. And we'll determine that as we continue to evaluate them

leading up to the closing. .....................................................................................................................................................................................................................................................................

Cai von Rumohr Analyst, Cowen and Company, LLC Q Thank you very much. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Doug Harned of Bernstein. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Douglas S. Harned Analyst, Sanford C. Bernstein & Co. LLC Q Good morning. Thank you. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A [indiscernible] (00:40:39). .....................................................................................................................................................................................................................................................................

Douglas S. Harned Analyst, Sanford C. Bernstein & Co. LLC Q Airbus and Boeing have talked a lot about the challenges in the supply chain. You're right in the middle of that.

And since a good portion of your costs is procured costs, how do you think about your suppliers? And I say that

when – in thinking about what – whose responsibility in a sense is your supplier base to make sure that they are

healthy? I mean, Boeing is thinking about this. Airbus is thinking. Clearly, you must be as well. And there is the

opportunity in smaller suppliers for some government support. So how do you think about keeping that supply

base healthy, and what risks are there? .....................................................................................................................................................................................................................................................................





Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Well, you're absolutely right, Doug. The suppliers in our industry are our critical partners, and it's important that

they stay healthy, so that we have access and security of supply for the current production and as production

rates increase. So we've been monitoring the financial health of our supply chain very closely. No doubt there are

going to be some suppliers who are going to need financial support during this period. But we've been working

with them with a number of different levers to provide relief.

So, for example, we have a vendor financing program for payment terms. We can work on their inventory levels,

looking at purchasing some of their finished goods. We can extend the contracts for them. So we've got a lot of

different levers. We've also been helping them really facilitate access to various government programs, not only in

the US but in other countries. We held a conference call for more than 120 of our suppliers co-sponsored by the

US Chamber of Commerce to help them understand the CARES Act and how to access it. That's been a great

source of funding for a lot of our smaller suppliers. So we've been doing that.

Also with Boeing, with the first MOA that we did this year, we did create a joint Boeing-Spirit task force to monitor

the health of the supply chain, because a lot of our suppliers also supply Boeing directly. And so we've been,

again, working with them, jointly with Boeing, in order to maintain the financial health of the supply chain, because

it's very important that the suppliers get through this very challenging period and remain viable so that they can

support not only current production but also the production rates increases that we expect in the future. .....................................................................................................................................................................................................................................................................

Douglas S. Harned Analyst, Sanford C. Bernstein & Co. LLC Q The reason I asked is that you've talked a lot about reduction in cost, in the workforce and your facilities, which all

makes sense. What I'm getting at here is just how do you look at this part of your cost structure? In other words,

are you able to take costs down? Is there a risk there? How does this play into the outlook that you're laying out? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Well, over the last few years we've done a lot in our supply chain to get to competitive cost. So I've always talked

in the past about the six pillars starting with our clean sheets, where we look at what the should cost is of all the

cost that we have. We have a very structured strategic sourcing process to help the customers – or the suppliers

get to those clean sheet levels of should cost. We provided support to help them get there. We set up centers of

excellence to in-source work where we can do it more competitively. We've also done what we call hotel bids, for

hypercompetitive competitions to get to those clean sheets. And then we transferred parts. So over the last few

years we've transferred more than 15,000 parts to make sure we have the most competitive rates.

So we've done a lot of work over the last few years to get the competitive rate. Now is not the time to continue to

push on the supply chain. What we've been doing is helping them transform their operations to achieve these

lower levels of production. In many cases, we've extended contracts because essentially the air traffic has gone

out three years. The production rates have gone out three years. And so our deal with Boeing, for example, on

the 737 goes up to 2033. That gives us a lot of flexibility to do back to back contracts with our suppliers to give

them a longer horizon over which to amortize their investment. So we're working very closely with our suppliers to

help them get through this challenging period. .....................................................................................................................................................................................................................................................................

Douglas S. Harned Analyst, Sanford C. Bernstein & Co. LLC Q





Great. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Ken Herbert of Canaccord. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Ken Herbert Analyst, Canaccord Genuity LLC Q Hi. Good morning. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Hi, Ken. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Good morning. .....................................................................................................................................................................................................................................................................

Ken Herbert Analyst, Canaccord Genuity LLC Q I wanted to just maybe shift gears and talk about something positive. You highlighted, Tom, in your comments

some good news, specifically in terms of increased opportunities and maybe backlog growth better than expected

on the defense side. And I'm just wondering if you could sort of level set us on how important or what percent of

revenues you expect defense to be this year? How the CH-53K is progressing, in particular? And then maybe a

few opportunities besides the recent acquisition to maybe see some better than expected growth in defense?

Thank you. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Right. Well, I mean defense gets up to probably north of 15% this year of revenue, but it's not necessarily the way

we wanted to achieve that, that growth, because the commercial side, obviously, has come down. But you're

absolutely right. Our defense business is growing very strongly right now. It will be more than 20% growth this

year, partly because some of the defense programs that we're on are getting into higher rates of production. And

we've also started to win some smaller work packages for our fab business.

And now with the open capacity that I mentioned earlier, because of the slowdown in commercial, we can

compete very aggressively for more defense business. So, long term our aspiration, we've said it's going to be $1

billion over the next three or four years as the programs around get into full rate production but ultimately, we

want defense – even when we return to full rates on the commercial side to be 40% of Spirits business.

We think we bring a tremendous value proposition to our defense customers, particularly in things like composite

fabrication, design and engineering, and now with FMI with high temperature surfaces and very unique and

competitive applications for things like hypersonics. So, we have some pretty big ambitions on defense. As I said

this year, it's 15% of our revenue. It'll be $1 billion in the next couple of years, but ultimately, we want it to be 40%

of Spirit's total revenue even when commercial rates get back to the levels they were at in 2019. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A





Yeah. I would just add and I don't want to get into details, but I would say, I'm personally – pleasantly surprised as

it relates to the number of new work opportunities there that are being coming our way on the defense side. And

so it's a compliment to our defense team, how they performed under current work. And so we're seeing some

really good opportunities to grow the defense side, to kind of offset the production rates that are coming down in

the commercial side. So, I just want to compliment our defense team. .....................................................................................................................................................................................................................................................................

Ken Herbert Analyst, Canaccord Genuity LLC Q Great. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Ron Epstein of Bank of America. Please proceed with your

question. Mr. Epstein, can you check, if your line is on mute, please? .....................................................................................................................................................................................................................................................................

Ronald J. Epstein Analyst, Bank of America Merrill Lynch Q Good afternoon, guys. Yeah. I was on mute. My apologies for that. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Hey, Ron. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Hey, Ron. .....................................................................................................................................................................................................................................................................

Ronald J. Epstein Analyst, Bank of America Merrill Lynch Q Just following up on the previous question. One of the themes that we've heard out of DoD as a response, DoD's

response to, like an industrial policy response to the pandemic is trying to push more money down into the supply

chain to help suppliers, particularly those suppliers who have large commercial businesses. Have you seen DoD

– that DoD effort impact your business, where you've got ample commercial capacity where they're trying to

maybe use some of that commercial capacity for defense programs to help stabilize the business? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Yes. Well, first of all, what I would say is the defense primes have all been very helpful during this period. They

got a lot of support from the federal government and they in turn, have been pushing that down to their supply

chain including us. And one of the ways they've been able to do that is very short payment terms. They've also

been able to look at some of capital and tooling that they're able to convert and then also looking to expand the

current work statements with incremental activity within the current programs. And all of those are ways to push

cash down into the supply chain and they've all been very helpful for Spirit.

And as we go forward what we've been able to demonstrate to the defense primes is that we have opened

capacity and it's available right now, not only on capital and tooling and infrastructure but also on trained

workforce. And we are ready to compete very aggressively for newer packages on existing and upcoming

defense programs.





We have over 1,000 clear engineers in terms of security clearances. So, we're able to compete on a whole range

of different projects. And we think that's an attractive value proposition right now, given the situation that we're in,

and we're competing aggressively as Mark said. .....................................................................................................................................................................................................................................................................

Ronald J. Epstein Analyst, Bank of America Merrill Lynch Q Got it. Got it. Then just one follow-on, if I may. What's your thinking around contingency, if we were to see more

MAX delays or further OEM production cuts? One of the responses I heard from the investment community, I

think everybody did, was after Boeing statements and Airbus's statements that, sadly they might be a little bit

optimistic depending on how long this thing lasts. So, how do you plan for that? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Right. Well, first of all, on MAX as Boeing announced in their earnings call, they've really decoupled the

production schedule from the planned return to service. And obviously, the FAA is working on that, they're making

sure, it's a safe return to service. But production is decoupled, they're starting right now. They've asked us to start

right now.

So even if there's some delays in the return to service, right now, it's decoupled from production so it doesn't

directly impact it. If the production rates change at Boeing or Airbus for whatever reason, it could be a MAX return

to service, or it could be the COVID-19 crisis, then we would have to adjust our cost base to those lower levels of

production. And the one thing is we've demonstrated already that we've been able to reduce workforce in line with

the production levels.

And a lot of our cost base is, in effect, variable and can be adjusted to production rate. So as we talked about a

little bit earlier in terms of our supply base, when we were talking about with Doug is 60%, 65% of the cost is in

suppliers. Well, with production rates lower, we're buying less material from suppliers, so we're able to reduce that

part of the cost base. 20% or so is head count, and with lower production levels, we will reduce head count to

align to those levels. So we can do quite a bit to align to lower levels as a contingency, if rates go down further for

some reason. .....................................................................................................................................................................................................................................................................

Ronald J. Epstein Analyst, Bank of America Merrill Lynch Q Got it. Thanks. Thank you very much. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Robert Spingarn of Credit Suisse. Please proceed with your

question. .....................................................................................................................................................................................................................................................................

Robert Spingarn Analyst, Credit Suisse Securities (USA) LLC Q Hi. Good morning. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Good morning.





Robert Spingarn Analyst, Credit Suisse Securities (USA) LLC Q I want to ask a version of Ron's last – or second question, but not so much about rates going below Boeing's plan,

but if mature rates stay at Boeing's plan, meaning that, Tom, you just talked about variable costs, but you also

referenced the eventual recovery to 2019 levels. Let's say we don't and out a few years from now, we're at 31

MAXs, 7 787s, 3 777s. Given the past importance of volume, I would imagine you can't do 7% to 9% free cash

flow as a percentage of sales under those rates, or can you, or would it be something lower? .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Right. Well, obviously the financials and cash flow improve as rates go up, particularly on MAX. But let's say MAX

levels don't go up as much as planned or don't reach 2019 levels for three or four years and same thing on the

widebodies. What Mark described is something we're doing is we are aligning our cost base very much to the

lower levels of production. So we've reduced head count, but we're also looking to win new work, particularly on

the defense side to fill up some of that commercial capacity to offset those fixed costs. So that's one of the big

levers that we didn't have before that we will be pushing very aggressively.

The other thing we're doing is, as I mentioned in my comments, is we're taking opportunity from this slower

production period to really drive a lot of improvements in the factory. We're using a lot more digitization and

automation, robotics. We're changing workflows, moving workaround between different facilities to make things

more efficient. And so, when we go back up in rates, we can do so a lot more efficiently than we could in the past.

And on the MAX side of things, one other big changes that we have already converted everything to the MAX.

The last time we went up in rate, we were doing that at the same time we were converting from the NG to the

MAX. This time we've already made that conversion.

So we expect this time around, it will be a lot more efficient. We will fill up the factories with defense work to offset

some of the fixed charges, and we'll align our variable cost to the level of production.

So when will we get to the 7% to 9%? It'll take some time. A big part of it will, obviously, be dependent on MAX

production rate. But our goal is to get back to that level and to get back to sustainable margin levels as well. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Hey, Rob, the only thing I would add is if there was some semi-permanent pain as it relates to long-term

production rates for extended periods of time, obviously we'd be looking at all of our facilities and evaluating

facility consolidation, etcetera, to really resize and restructure the entirety of the business. So, we have a few

more what I would say opportunities for us to not only pull hard on our variable costs structure. People aligning

our production rates on the supply chain side, but if there was a long-term permanent impairment in the

commercial aerospace industry, we have some other cost actions that we can evaluate to better align our overall

cost structure with the long term production rates. .....................................................................................................................................................................................................................................................................

Robert Spingarn Analyst, Credit Suisse Securities (USA) LLC Q Okay. So, what you're saying is you don't have to return to a, let's say, $7 billion, $8 billion top line to get that 7%

to 9% necessarily? .....................................................................................................................................................................................................................................................................





Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A I would say that, that goal is out there and I think we have a variety of opportunities to make sure that we can

focus on achieving those projected goals that we've put out over the last couple of years. .....................................................................................................................................................................................................................................................................

Robert Spingarn Analyst, Credit Suisse Securities (USA) LLC Q Okay. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Hunter Keay of Wolfe Research. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Hunter Keay Analyst, Wolfe Research LLC Q Good morning. Thanks for getting me on. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Hey, good morning. .....................................................................................................................................................................................................................................................................

Hunter Keay Analyst, Wolfe Research LLC Q Good morning, everybody. So Tom, you mentioned the CARES Act for your suppliers, but I'm curious about

government financial aid for Spirit and any potential terms or conditions that might be attached or the nature of it,

and how and when it might be administered? Thanks. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Right. Well, when we were looking to raise capital earlier this year, we were looking at all the different options, so

public markets, government programs, private placements. The public market did open up. Several other

companies were able to access it. So working with our advisors, we went to the market and got a great reception.

We started off with $1 billion and it was 6 times oversubscribed. We actually raised – upsized it to $1.2 billion.

So we were able to really meet our objectives in terms of capital raising through that offering. And so right now,

we've evaluated all the government programs, but we don't see the need to access those directly, the ones that

are in place. Now, that said, we had been in discussions with our trade associations, as well as talking with lots of

people in Washington, there are some programs being proposed that would provide more specific targeted

support to aerospace companies. And those are very interesting to us.

We've been evaluating those and we could access them in the future, if they take the shape that we expect them

to do. But right now, we don't expect to access the CARES program, because we were able to raise money that

$1.2 billion of high-yield bonds on second lien. .....................................................................................................................................................................................................................................................................

Hunter Keay Analyst, Wolfe Research LLC Q Okay. So some of the other non-CARES relief is still potentially on the table?





Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A We will evaluate it. It's nothing that's been announced yet, but just some things that are being proposed and

talked about for future packages. And they're more specific, they're more targeted and they would work better for

a company like Spirit. So those are the kinds of things that we would consider, if they actually come into effect. .....................................................................................................................................................................................................................................................................

Hunter Keay Analyst, Wolfe Research LLC Q Thank you, Tom. .....................................................................................................................................................................................................................................................................

Operator: Our next question will come from Peter Arment with Baird. Please proceed with your question. .....................................................................................................................................................................................................................................................................

Peter J. Arment Analyst, Robert W. Baird & Co., Inc. Q Hi. Yeah, thanks. Good morning, Tom and Mark. Tom, just quickly on the 125 units that you've kind of reset from

the 216 with Boeing. I assume it all skews more to the fourth quarter. And how are you thinking also about when

you think about your unit that you have in storage? Are you still planning to use that as buffer or are you going to

skew more to deliver some of those units? Thanks. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Right. Well, it does skew more, as Mark said, toward the back half of the year, probably 60%, 70% is in the back

half of the year. We do grow the storage somewhat. So it kind of peaks out in July and August. But it gets back

down to the levels that we started the year at, low 120s, by the end of the year. So that's what the shape is.

And so we have plenty of capacity, obviously, to store the units. And the goal is to burn that inventory off

effectively by the end of next year to – we're going to always keep some level of buffer just to help improve the

production process stability. But over the next two years, we would burn that down. And as I said, we'll end the

year at about the same level we started the year with a peak in the middle of the year this year. .....................................................................................................................................................................................................................................................................

Peter J. Arment Analyst, Robert W. Baird & Co., Inc. Q Appreciate the color. Thanks, Tom. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Thanks. .....................................................................................................................................................................................................................................................................

Operator: Our final question today will come from Noah Poponak of Goldman Sachs. Please proceed with your

question. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Hello, everyone. .....................................................................................................................................................................................................................................................................





Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Hey, Noah. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Hey, Noah. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q I know there's abnormal costs and CapEx on the front-end with the acquired businesses. So forgetting about the

next year or two, in kind of a 2023 timeframe with whatever revised lower revenue assumptions you would have

to make, given the end market. What are you thinking now for the P&L margin and free cash flow margin profile

from the acquired revenue in a normal period of time? .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. So we're – and if you're specifically talking about the M&A opportunities that we have as it relates to ASCO

and Bombardier, obviously, we know what those revenue volumes are. Our bid prices or the acquisition price was

based on some assumptions around revenue and profitability that we [ph] drove out (01:01:17) of there.

Obviously, with the new market conditions, at least here in the near-term, production volumes will be lower

therefore, revenues will be lower and the margins that we'll be achieving will be a little bit lower.

At this point in time, we're just focusing on closing those acquisitions. They're very strategic to us. They diversify

our Airbus business, more than doubled the revenues there, and that allows us to be more diversified. It gives us

some access to additional aftermarket. And so at this point in time, I'm not too much focused on what it can

contribute in 2023. I'm more focused on how do we get to close right now, and really focus on driving out the

synergies and the integration into our business, because I think that there's a lot of inherent values from both of

those business that complements our current structure. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Great. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A But what I would say is FMI is, clearly, going to be accretive. By 2023, I think the Bombardier deal will look much

better because the aftermarket would have recovered. They'll be deeper into production on the A220 and the

A320 thrust reverser. So, that will be at least at the same level as the rest of the business. And then ASCO is

probably going to be a bit accretive as well based on their historic margins. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Yeah. .....................................................................................................................................................................................................................................................................





Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A So, that's probably the best way we can describe it. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q And Tom, your answer – I just want to make sure I'm clear on your answer previously to the question of

normalized margins, but on – so a few years out. But if production rates just stay where Boeing and Airbus have

announced, they'll be in the immediate term, that your point is with a few more years to get more efficient, a few

more years to take out more cost if you have to do it, maybe it's not quite 7% to 9%, but you can sort of be still in

the zone of that 7% to 9% a few years down the road, even at – even if we just hold the production rates that

have been announced. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Yeah. There's no doubt, we will be much more productive and efficient even at lower levels of production in the

future where we've taken a lot of fixed costs out. We've adjusted our variable cost. We're streamlining our

factories. We're adding in a lot more automation. So, absolutely, we will be more productive at lower levels of

production going forward. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. But, Noah, let me be specific. If we're talking about delivering 125 737s forever, per year... .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A We don't expect that. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Exactly, right? .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Yeah. No, no, no. I don't mean that. I mean the 31 I'm on. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Yeah. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Yeah. .....................................................................................................................................................................................................................................................................





Noah Poponak Analyst, Goldman Sachs & Co. LLC Q And I guess ultimately, where I'm going is, like, if you're at the lower production rates forever, you're obviously not

back to 2019 revenues. But then the acquisitions get you back to – in the zone of 2019 revenues. If the

acquisitions are at or better than the free cash flow margin, you actually, even in a sustained permanent

depressed aerospace environment, actually get back to the type of EBITDA and free cash flow that you've had

previously. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A That's a great way to describe it. Thank you. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Just want to make sure, I'm not missing something because the stock or... .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A No, you did not miss anything. You're right-on, Noah. .....................................................................................................................................................................................................................................................................

Noah Poponak Analyst, Goldman Sachs & Co. LLC Q Okay. Thank you for the time. I appreciate it. .....................................................................................................................................................................................................................................................................

Thomas C. Gentile President, Chief Executive Officer & Director, Spirit AeroSystems Holdings, Inc. A Thank you. .....................................................................................................................................................................................................................................................................

Mark J. Suchinski Senior Vice President and Chief Financial Officer, Spirit AeroSystems Holdings, Inc. A Sure. .....................................................................................................................................................................................................................................................................

Operator: Thank you. That will now conclude the question-and-answer session, and the conference has now

concluded. Thank you, everybody, very much for attending today's presentation. You may now disconnect.





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