Spirit AeroSystems to restart 737 Max production in March
Spirit AeroSystems will resume production on the 737 MAX in March. The information was announced Friday morning during a conference call detailing the aviation manufacturer's fourth-quarter earnings report.
Senior Vice President and Chief Financial Officer Mark J. Suchinski said the company expects to slowly restart production "and then gradually ramp throughout the year.
"There is still a lot of uncertainty surrounding the timing of the MAX's return to service," said Suchiniski. "And as a result, we will not be providing full-year 2020 guidance at this time."
In the report, the company said Boeing's decision to decrease the 737 MAX production rate to 10 aircraft per month resulted in $34 million forward loss due to fixed cost absorption.
The report shows that revenue in the fourth quarter was $2 billion, up from the same period of 2018. This increase was primarily driven by higher production volumes on the Boeing 737, 787 and Airbus A350 programs, higher revenue recognized on the Boeing 787 program, and increased Global Customer Support and Services (GCS&S) activity, partially offset by lower revenue recognized on the Airbus A350 program in accordance with pricing terms.
For the full year, Spirit said revenue increased to $7.9 billion.
"The grounding of the 737 MAX was a significant issue for Spirit in 2019, particularly after Boeing suspended production on December 16, 2019," said Spirit AeroSystems President and Chief Executive Officer Tom Gentile. "After Boeing directed Spirit to suspend deliveries on December 19th, we took several actions to lower costs and preserve liquidity. We implemented a workforce reduction of 2,800 employees in Wichita and 400 employees in Oklahoma. We also negotiated an amendment to our credit facility providing for covenant relief into 2021 and secured a $375 million short-term delayed draw term loan facility. With these actions, we believe our liquidity position remains sufficient. In 2019, we generated $723 million in adjusted free cash flow for the year and ended the year in a strong cash position of $2.4 billion. Spirit remains a proud partner on the MAX program and we look forward to working with Boeing to ensure the long-term success of the program."
Spirit said operating income for the fourth quarter of 2019 was $96 million, down compared to $244 million in the same period of 2018. The loss is due to the decrease in the production of the 737 Max, lower margin recognized on the Airbus A350 program in accordance with pricing terms and higher acquisition-related expenses.
Operating income for the full-year was $761 million, down compared to $843 million in 2018, primarily due to higher acquisition-related expenses, reduced profitability on the Boeing 737 program largely resulting from the 737 MAX grounding, and the forward losses recognized in the third and fourth quarter driven by Boeing's announcements to decrease the 787 production rate, partially offset by higher production volume on the Boeing 737 and 777 programs.
Fourth-quarter EPS was $0.65, compared to $1.68 in the same period of 2018. Fourth-quarter 2019 adjusted EPS* was $0.79, excluding the impacts of planned acquisitions and the voluntary retirement program (VRP) offered during the second quarter of 2019, compared to $1.85 in the same period of 2018, adjusted to exclude the impact of the planned Asco acquisition.
Full-year EPS was $5.06, down compared to $5.65 in 2018. Full-year adjusted EPS* was $5.54, excluding the impacts of planned acquisitions and the VRP offered during the second quarter of 2019, down compared to $6.26 in 2018, adjusted to exclude the impact of the planned Asco acquisition and debt financing costs.
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While some jobs could return to Spirit next month, Kansas Lieutenant Governor Lynn Rogers says the secretary of labor continues working hard to address layoff concerns at the company.
Rogers spoke about those efforts Friday in Hutchinson. He says he understands the concerns many still face and that it's important to make sure "all hands on deck" are responsible.
"Commerce department has been working with the laid off workers. We're also working with the supply chain of the people that are providing product to the 737 MAX. We're also starting to find folks that supply the supply chain."