Spirit records $448 million pre-tax charge
08/12/2013 3:14 PM
08/13/2013 8:36 AM
Spirit AeroSystems’ announcement that it would take a $448 million pre-tax charge didn’t dominate the conversation between its top executives and equity analysts on a conference call Monday afternoon, following the release of the company’s second quarter 2013 financial results.
“We’re not happy about this,” said CEO Larry Lawson in his introductory remarks to analysts.
The Wichita-based supplier of commercial airplane fuselages and other parts said the charge contributed to a loss of $209 million for the three-month period that ended June 30. Spirit said its revenue for the quarter was $1.52 billion, a 13 percent increase from the same quarter a year ago.
Last week, the company warned analysts and investors that it expected to take a second-quarter charge of between $350 million and $400 million – and delayed the release of its quarterly earnings report – largely because of expected cost increases in its Gulfstream business jet programs.
“We have made progress,” Lawson said Monday to analysts. “There is much more to do.”
That announcement was in addition to another that Spirit was seeking a buyer for its facilities in Tulsa and McAlester, Okla. The Tulsa plant produces wing structures and other components for Boeing jetliners and builds the wings for the Gulfstream G280 and G250 business jets. Its McAlester plant builds parts and subassemblies.
Lawson emphasized to analysts on the call Monday that the planned divestiture is “for sure ... not a fire sale.”
“There has been a lot of interest expressed” in the Oklahoma operations since the announcement last week, he said. “There’s just a lot of great programs in there. We’ll see what the interest is and what materializes and we’ll make our decision.”
Lawson reiterated to analysts that what they were seeing was the result of the company’s strategic and financial review that he put in place since joining Spirit in April. Lawson replaced Jeff Turner, who retired.
The review focused on several programs including two where it took its biggest charges in the second quarter: $234 million on the Gulfstream G650 wing and $191 million on the Gulfstream G280 wing. Spirit also took charges of $22 million on the wing portion of its Boeing 787 program, as well as a net charge of $9 million on the Boeing 747-8 and 767 programs.
Lawson noted the company has taken a number of actions to trim its costs and improve performance, including selling the Oklahoma operations and reducing its workforce.
In July, the company said it was laying off 360 salaried support and management employees in Wichita and Oklahoma.
He said the focus at Spirit includes “disciplined decision-making ... focus on performance (and) cash flow.
“With a healthy mix of commercial and mature programs ... we’re very well positioned to participate in the commercial aerospace up-cycle.”
The $448 million charge is in addition to a $590 million charge the company took in the third quarter of 2012 on its new development programs.
Spirit’s backlog at the end of the second quarter was $38 billion, which Lawson said was a record for the company.
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