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Boeing's 787 delays scarcely affect Spirit

BY JERRY SIEBENMARK

The Wichita Eagle

Stock price beats first-quarter estimates

Boeing's problems with the 787 did not have a big effect on Spirit AeroSystems' first quarter in 2008, as the Wichita-based manufacturer turned in higher-than-expected financial results Tuesday.

Spirit's stock closed at $28.64 a share Tuesday, up 3.9 percent for the day and 36 percent since the stock hit its 52-week low March 17.

Spirit officials said the company so far had been successful adjusting to Boeing's delays in 787 first flight and delivery schedules, minimizing the impact to Spirit.

It helped, too, that Spirit got a $124 million payment for 787 work from Boeing in the quarter that ended March 31.

"We are off to a strong 2008 and expect to maintain the momentum going forward," Spirit chief executive Jeff Turner said in a conference call with analysts.

Spirit said that revenues increased 9 percent to $1.04 billion and net income rose 22 percent to $85 million compared to the same quarter a year ago.

Those results led to diluted earnings per share of 61 cents, 6 cents a share higher than the expectations of Wall Street analysts polled by Thomson First Call.

While the company did beat quarterly estimates, not all of the news it had to share was as upbeat.

The company said it expects 2008 revenue to be $4.4 billion, down from an earlier estimate of $4.7 billion.

That's because of changes to Boeing's 787 schedule that pushes the start of customer deliveries to the third quarter of 2009.

Not surprisingly, a lot of the questions that Turner and chief financial officer Rick Schmidt fielded during the call were about the effects of the 787 program.

Spirit is building the airplane's nose section and pylons, or engine coverings.

Some questions centered around the amount and timing of payments Boeing was making to Spirit for 787 ship sets.

That was part of a revised agreement between the companies in the first quarter that eliminated a delayed payment schedule to Spirit for ship sets delivered to Boeing before the aircraft was certified.

Turner and Schmidt said the company will receive additional cash payments this year, on a quarterly basis, from Boeing for the ship sets, though they did not say how much those payments would be.

Others wanted to know how much 787 inventory the company had on hand -- $600 million at the end of the quarter, Turner said -- and whether Spirit was ready to timely produce 787 parts once production hits its stride.

"We have floor space for seven (787s) a month," Turner said. "I don't think we have all the tooling in place for seven a month.... Clearly we're gearing for the requirement of seven a month."

Turner also spent some time talking about the company's other prospects, such as its forthcoming work on Cessna's new Citation Columbus, Gulfstream's new G650 business jet and a 777 thrust reverser repair contract with Cathay Pacific Airways.

Turner also said Spirit remains interested in working on Airbus' new A350 airliner.

"We're continuing to work with them and feel there will be a decision point by mid-year," he said.

For the rest of 2008 and into 2009, Turner said, the key for Spirit will be to grow and win new business from a host of planemakers.

"Growing and diversifying our business... remains our cornerstone strategy," he said.

Reach Jerry Siebenmark at 316-268-6576 or jsiebenmark@wichitaeagle.com.