Spirit revenue up, profit down

Since Spirit AeroSystems became a company in 2005, it has always planned to bid on and win a lot of new work.

But it never expected to have 10 programs in development at the same time, Spirit CEO Jeff Turner told analysts in a conference call Thursday about the company's first-quarter financial results.

Instead, it had planned for them to run consecutively.

"That was clearly not the plan, but that's how things worked out," Turner said.

That has added challenges and pressures to the company's financial performance. But Spirit is working through them, Turner said.

"Development programs are inherently risky," Turner said. "But my view is we have to do them" and do them in a cost-effective manner.

During the first quarter, the company had growing costs on the Sikorsky CH-53K helicopter program, higher research and development costs on the Boeing 787-9 Dreamliner program and challenges with the wing of the Airbus A350 jetliner.

At the same time, Spirit is working to boost production of Boeing's 737 and 777 work as Boeing increases production rates.

Spirit is working with suppliers to make sure they are "strong and ready" for additional work, Turner said.

The company's first-quarter revenue rose slightly from a year ago, although net income declined by 38 percent.

First-quarter revenue totaled $1.05 billion, up 1 percent from $1.04 billion a year ago. Net income totaled $35 million, down from $56 million in the same time a year ago.

"Our core businesses continue to perform well, and the market for large commercial airplanes remains strong," Turner said.

Its financial performance for the quarter, however, missed analyst expectations.

RBC Capital Markets analyst Robert Stallard called Spirit's lower-than-expected results a "deja vu given (Spirit's) history of negative surprises in prior quarters. Inconsistent execution and the lack of cash flow will likely remain headwinds for the company as the 787 program moves into production and other aerospace platforms ramp up in the current upcycle."

Spirit took a $28 million pre-tax charge on the CH-53K helicopter program, which moved the program into a loss position, the company said.

Spirit tried to adapt some of its commercial manufacturing practices into the military product, an attempt that was unsuccessful, Turner said.

"While the additional cost growth on the CH-53K program is disappointing, getting it right for the future is our focus," Turner said. "Our approach was to adapt some of our commercial manufacturing practices to this military product, and to date, we have been unsuccessful."

The company had to redo tooling and some parts it had in the pipeline, Turner said.

Still, he said, "I'm not ashamed of having tried it."

The company's revenue guidance for 2011 remains unchanged at between $4.5 billion and $4.7 billion.

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