Spirit AeroSystems’ top executive could have kicked off a conference call with analysts Thursday by talking about the company’s 21 percent revenue increase in the third quarter of 2012.
Instead, his opening remarks were about the company’s third-quarter operating loss.
“I am extremely disappointed we have not better managed the complexity surrounding our new programs,” Spirit president and CEO Jeff Turner said on the hour-long call.
The Wichita-based company said its revenue was $1.36 billion in the quarter that ended Sept. 30, compared with $1.13 billion in the third quarter of 2011.
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But the supplier of aircraft fuselages and other components to aircraft manufacturers said it recorded a $211 million operating loss in the third quarter of 2012, compared with operating income of $121 million in the same quarter a year ago.
Turner said the losses were the result of higher than expected costs of producing the Boeing 787 wing and on new business jet programs: specifically the wings for the new Gulfstream G650 and G280 business jets and the nacelle package for the G650. Nacelles encase jet engines and are used to attach them to airplanes.
Turner stressed that even before the company’s announcement last week that it would be hit with a third-quarter loss, improvements in the processes used to produce its components were in place or being implemented.
“Frankly, we were making substantial improvement but not to the level we forecast,” Turner said in response to an analyst’s question about the loss.
Turner and chief financial officer Phil Anderson also said during the call that they think as the company progresses with the programs with which it’s been wrestling – as well as implementation of new management processes on those programs – costs will be brought under control.
“Costs are improving,” Turner said. “Clearly the sooner we can pull that in the better.”
The company said last week that the total loss would be a $590 million pre-tax charge. The operating loss it reported Thursday reflects most of that loss, which was partially offset by a $235 million insurance settlement from an April 14 tornado that struck its plant in Wichita.
The remainder of the loss will be carried forward to future quarters, a Spirit spokesman said after the conference call, because of the requirements of contract block accounting.
The operational loss translated to a loss of $134 million in net income compared with net income of $67 million in the third quarter of 2011.
Commercial aerospace analysts from Cowen and Co. said in a note to clients Thursday that the quarterly earnings release “is somewhat encouraging.” But Cowen analysts said “the key issue … will be management’s ability to convince investors that things are coming under control and that they can deliver potential improvement in results.”
Spirit’s stock closed Thursday at $15.99 a share, up 36 cents from its close of $15.63 on Wednesday.
Turner noted that a strong market demand for Spirit products pushed revenue higher for the quarter, especially in its fuselage systems business, which saw a 22 percent revenue increase from the same period a year ago – to $660 million.
“There is strong performance in other parts of the business and that offset some of the issues that we tackled,” Turner said during the call. “The solid performance of the core (business) was a little bit masked this quarter.”
The company expects its full-year 2012 revenue to be between $5.2 billion and $5.3 billion. In 2011, it reported revenue of $4.86 billion.
Spirit’s backlog is $34 billion, which it said was a record.