Good morning, ladies and gentlemen, and welcome to Spirit AeroSystems Holdings, Inc. First Quarter 2023 earnings conference call. My name is Jason, and I'll be the coordinator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I would now like to turn the presentation over to Ryan Avey, Senior Director of Investor Relations in FP&A. Please proceed. Thank you, Jason, and good morning, everyone. I'm Ryan Avey, and with me today are Spirit's President and Chief Executive Officer, Tom Gentile, and Senior Vice President and Chief Financial Officer, Mark Suchinski. Before we begin, I need to remind you that any projections or goals we may include in our discussion today are likely to involve risks, including those detailed in our earnings release and our SEC filings and in the forward-looking statement at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures we use when discussing our results. With that, I'd like to turn the call over to our Chief Executive Officer, Tom Gentile. Thank you, Ryan, and good morning, everyone. Welcome to Spirit's First Quarter Results call. I want to begin today by providing an update to the quality issue with the vertical fin attach fittings of certain models of the 737 fuselages that Spirit builds. After identifying the issue, our top priority was to work with Boeing and the FAA for their confirmation that it was not an immediate safety of flight issue. Once we confirmed this, we turned our attention to ensuring our ongoing production meets manufacturing standards. We have revised our assembly process in production, have restarted production, and have resumed shipments of conforming fuselages to Boeing. We have identified the affected units located in Wichita, including units in Spirit work in process, as well as Boeing-owned inventory units in Wichita and have developed a repair. Excluding units for China and other customers with no current delivery dates, this issue impacts 35-40 units in Wichita, about 60% of the total. We have completed repair on four units, and our current assessment is that the repair work will be complete for units in Wichita by the end of July. The total impact for these repairs and the factory disruption it caused is $31 million, of which we booked $17 million in Q1. For your information, the repairs in Wichita are expected to average approximately $100,000-$150,000 per unit. There will be some near-term impacts to our 737 deliveries in the second quarter due to rework and disruption in our factories. We are still targeting two production rate increases later this year to 38 airplanes per month in August and to 42 airplanes per month in October for the 737 program. With the associated disruption, we now expect to deliver between 390 and 420, 737 fuselages in 2023. We are closely coordinating with Boeing to help minimize production schedule and delivery impacts, leveraging stored fuselages and new production. We appreciate the support Boeing has provided in working through this issue with us, reinforcing the strong partnership that we have. We have worked with some of our customers to receive $280 million of cash advances to help support Spirit's near-term liquidity. As Dave Calhoun, Boeing's CEO, mentioned in Boeing's earnings report, Boeing has agreed to provide Spirit with a cash advance of $180 million to help cover the short-term cash impact of fewer 737 deliveries in Q2. The quality and safety of our products are very important to Spirit and our customers. Our employees understand and take great pride that the products we manufacture are enabling flights around the globe every single day. As part of our quality management system, we have processes in place to address issues like the vertical fin attach fittings, which we followed in this case. We also have an extensive root cause corrective action process and are implementing additional protocols to reinforce our quality systems to prevent similar occurrences in the future. We are committed to strengthening and continuously improving our safety and quality culture as a trusted partner to our customers. Mark will address our preliminary assessment of the financial impacts of the vertical fin attach fittings in his remarks. Turning to our commercial business. We are encouraged by the continued strong growth in the return of air travel demand. Based on February results, global traffic is now at 85% of February 2019 levels, with domestic travel at 97% and international reaching 78%. Our backlog stands at $37 billion, which includes work packages on all commercial platforms in the Airbus and Boeing backlog. The recovery of air traffic is progressing well toward the pre-pandemic levels, we continue to face challenges associated with increasing production rates in terms of our supply chain and our factories. Overall, the health of our supply chain remains challenging, and we continue to encounter shortages and one-off supplier issues that we must address as they arise. In the quarter, we recorded an $81 million forward loss on the A220 program, of which $46 million was for non-recurring costs related to a distressed supplier. The remaining $35 million was driven by production schedule changes and foreign currency movements. One of our major focus areas remains execution within our factories and mitigating supply chain challenges to meet the upcoming production rate increases across multiple programs. We've made good progress in hiring and training new employees ahead of the planned 737 production rate increases later this year. We continue to expect ongoing supply chain challenges throughout the year, but do expect gradual improvement going into next year. In terms of expected deliveries on our other commercial programs this year, there is no change from what we discussed on our last earnings call of 40-45 shipsets on the 787 program and 60 shipsets on the A350 program. We continue to expect to deliver about 75-80 A220 units. For A320, we have received an updated production schedule from Airbus and now expect to deliver about 580 ship sets this year, about 85 fewer than we previously discussed last quarter. Now let's move on to our defense and aftermarket businesses. Our defense and space business continues to show strong top-line growth, up 19% this quarter compared to the first quarter of 2022. With the award decision on the Future Long-Range Assault Aircraft, FLRAA, recently upheld, we look forward to supporting Textron and Bell as part of Team Valor on this important program for the U.S. Army. As a reminder, we first began work on the prototype for the FLRAA program nearly a decade ago and are excited to transition to the next phase of this program. This is another demonstration of Spirit's strong value proposition for military customers, including competitive cost manufacturing with the application of commercial best practices and design build capabilities. We also announced an MoU with Skyworks Aeronautics to pursue support for Skyworks defense and commercial platforms in the U.K. and European markets. We will work collaboratively on detailed design activities to support Skyworks, a vertical takeoff and landing, high-speed and long-range aircraft. Our aftermarket business also produced strong revenue growth of 22% this quarter compared to the same period last year, with solid operating margins of 20%. The aftermarket team is executing on our growth strategy, as highlighted by several recent agreements. We announced the signing of an exclusive cooperation agreement with Singapore's ST Engineering's commercial aerospace business to support customers in the Middle East with aircraft engine nacelle and MRO solutions. Additionally, we signed agreements with both Joramco in Jordan and GMR Aero Technic in India to be Spirit's authorized repair center, further expanding our strategy to be available locally for our global customers. I also want to mention our upcoming negotiations with the IAM union here in Wichita. We appreciate our IAM colleagues' dedication and hard work, particularly over the pandemic, as we continue to ramp our production lines as part of the aerospace recovery. Our primary objective is to reward our IAM colleagues with a fair and competitive contract as we meet the increased demands from our customers. I'll now turn the call over to Mark to take you through a few more details on our results. Mark? Thanks, Tom. Good morning, everyone. I want to begin by discussing the financial impacts resulting from the vertical fin attach fitting issue that Tom addressed in his opening comments. We've performed a preliminary financial assessment of our production impacts, and as a result, expect disruptions and rework within Spirit's Wichita factory to negatively impact full-year gross profit by approximately $31 million, of which $17 million is reflected in the first quarter 2023 financial results. The rework costs on available units in Wichita is expected to average between $100,000 and $150,000 per unit, which is approximately $5 million of the total. We expect to incur future additional costs, including those that our customer may assert to repair previously delivered units in their factory and warranty costs related to the affected 737 units in service. However, those remaining costs cannot be reasonably estimated at this time. The disruption and rework that will take place in Wichita will reduce near-term 737 production by about 30-40 units, leading to full-year 737 deliveries of about 390, and with the potential to make up additional units in the back half of the year. We will continue to evaluate the impacts on our financials, and as more information becomes available, we'll keep you updated. Now, let me take you through the details of our first quarter financial results. Let's start on slide three. Revenue for the quarter was $1.4 billion, up 22% from the first quarter of 2022. This improvement was primarily due to higher production on the 737 program and increased aftermarket and defense and space revenue, partially offset by lower production on the A220 program. The Defense and Space segment had a strong quarter with top-line growth of 19%, increasing revenue over the prior quarter by about $30 million. We look at deliveries, overall narrow body deliveries were 7% higher than the same period last year, driven by higher 737 deliveries, partially offset by lower A220 and A320 units. 2022 deliveries increased 8% year over year. Let's turn our attention to EPS. We reported earnings per share of $-2.68, compared to $-0.51 in the first quarter of 2022. Excluding certain items, Adjusted EPS was $-1.69, compared to $0.03 in the prior year. Operating margins was - 7% compared to -4% in the prior period. The lower margin was driven by higher unfavorable changes in estimates and the absence of income related to the Aviation Manufacturing Jobs Protection program that was recognized in the first quarter of 2022, partially offset by higher production on the 737 program. First quarter forward losses totaled $110 million, and unfavorable cumulative catch-up adjustments were $12 million. This is compared to $24 million of forward losses and $26 million of unfavorable cumulative catch-up adjustments in the first quarter of 2022. The current quarter four losses primarily relate to the A220 program and to a lesser extent, the A350 and 787 programs. The A220 loss of $81 million was driven by increased costs resulting from production schedule changes, foreign currency movement, and $46 million of non-recurring supply chain costs. The A350 charge of $18 million was a result of additional costs related to production schedule changes, and the 787 four losses of $8 million resulted from increased labor and supply chain. Additionally, the unfavorable Q catch-up adjustment relate primarily to the 737 vertical fin attach fitting issue. Other expense was $117 million compared to other income of $38 million in the prior period. The higher expense was primarily due to the termination of our frozen U.S. pension plan, which we initiated last year, as well as higher foreign currency losses in this quarter. The pension expense totaled $101 million, including non-cash termination charges of $65 million, as well as associated excise tax of $36 million. This should conclude the majority of the pre-tax charges associated with the termination of the plan. Now let's turn to Free Cash Flow. Free Cash Flow usage for the quarter was $69 million. Cash usage improved by about $230 million compared to the same period of 2022, largely driven by $180 million of surplus cash received related to the termination of our pension plan. The associated excise tax payment of $36 million will be made during the second quarter of 2023. Higher 737 deliveries also provided a lift to cash flows in our first quarter. First quarter 2022 Free Cash Flow included a quarterly repayment of $31 million related to the Boeing 737 advance received in 2019, and $14 million related to the Jobs Program grant. Consistent with prior years, first quarter Free Cash Flow was negatively impacted by the seasonality of cash receipts related to the year-end holiday shutdown, as well as employee-related benefits that we make in the first quarter. Looking ahead, the rework and disruption from the vertical fin attach fittings issue, as well as the risk of lower 737 deliveries, will have a negative impact on Free Cash Flow this year. The forward losses taken during the quarter will also result in additional pressure in our cash flows. Given these headwinds, we now expect our full year Free Cash Flow usage to be in the range of $-100 million-$-150 million. This range does not include the additional items I mentioned earlier related to the vertical fin attach fittings that can't be reasonably estimated at this time. We are in the very early stages of recovering from the 737 vertical fin attach fitting issue, we expect to further refine the impacts to full year Free Cash Flow as we progress through the rework and associated disruptions and return to normal production. The biggest impact to our Free Cash Flow range will be dependent on our full year 737 deliveries. With that, let's now turn to our cash and debt balances on slide four. We ended the first quarter with $568 million of cash and $3.9 billion of debt. After the close of the first quarter, we entered into agreements with our customers to provide cash advances. As a result, we expect to receive approximately $280 million of advances from customers, of which $230 million will be received in the second quarter and $50 million in the fourth quarter. We plan to repay these cash advances, to the tune of about $90 million in 2024 and the balance of $190 million in 2025. We expect these advances will be categorized as debt-like items on the balance sheet and reflected as cash from financing on the statement of cash flows. Receiving these advances will help provide additional cushion, especially as we incur the near-term financial impacts from the disruption and rework of the affected 737 fuselages, potentially lower 737 deliveries while continuing to receive materials and inventory to support our own supply chain. Let's discuss our segment performance, starting with the commercial segment on slide five. In the first quarter of 2023, commercial revenues increased 22% compared to 2022, primarily due to higher production volumes on the 737 and 777 programs, partially offset by lower production on the A220. Operating margins was - 4% compared to break even in the same quarter of 2022, driven by higher unfavorable changes in estimates in the current period, including the vertical fin attach fittings issue, as well as the absence of income related to the Jobs Protection Program that was recognized in the first quarter of 2022, and partially offset by higher volumes on the 737. As I previously mentioned, the change in estimates during the first quarter included forward losses of $110 million and unfavorable cumulative catch-up adjustments of $11 million. In comparison, during the first quarter of 2022, the segment recorded charges of $26 million for both forward losses and unfavorable cumulative catch-up adjustments. Additionally, the segment recognized $28 million of income related to the Jobs Protection Program in the same period of 2022. Let's turn to Defense and Space on slide six. Defense and Space revenue grew to $188 million in the quarter, or 19% higher than the same period last year due to higher development program activity and increased P-8A production. Operating margin for the year decreased to 10% compared to 13% in 2022, primarily due to higher unfavorable changes in estimates in the current period and absence of income related to the Jobs Protection Program received in the first quarter of 2022. The segment recorded excess capacity costs of $2 million and unfavorable cumulative catch-up adjustments of $1 million compared to excess capacity costs of $3 million and favorable for loss reversals of $2 million in the first quarter of 2022. Our aftermarket segments are shown on slide seven. Aftermarket revenues were $95 million, up 22% compared to the first quarter of 2022, primarily due to higher spare part sales. Aftermarket growth continues to be strongly supported by the global recovery in air travel. Operating margin for the year or for the quarter decreased to 20% compared to 23% in 2022, primarily due to the absence of income related to the Jobs Protection Program of $1.9 million that was recognized in the first quarter of 2022. Going forward, we were working very closely with Boeing to rework the affected 737 units. This will drive some near-term disruptions, but we've identified the process to rework the units in Wichita and have started producing and delivering conforming units to Boeing. As a very important tier one supplier supporting a large supply chain underneath us, we've been able to work with our customers to obtain some near-term liquidity relief, and as we ramp back up towards our increased production rates in the back half of the year. Our primary focus in the second quarter is to complete the rework and stabilize the 737 production line in order to position ourselves for higher deliveries in the back half of the year, as well as prepare for higher production rates in 2024 and 2025. Now, let me turn it back over to Tom for some closing comments. Thanks, Mark. In summary, the recently identified 737 quality issue will drive near-term disruptions. We have identified an inspection and repair process, and we know what we need to do to support our customer. Boeing has provided a lot of support during this time, and we appreciate the strong partnership that we have with them as we work through this issue. As part of our recovery, we will continue to strengthen our safety and quality processes so that we can support all of our customers as a trusted partner. It's also important to note that as we look over the next couple of years, we are feeling more confident in the increasing production rates driving revenue growth in commercial aerospace, as well as our 2025 revenue targets in both defense and aftermarket. We have a lot of embedded growth in front of us. Our primary focus is simply execute on that growth day in and day out in our factories and our supply chain. There will no doubt continue to be ongoing challenges as we've experienced over the last few years, returning to those higher rates of production. We are working hard to mitigate those challenges. We are supporting our supply chain when issues arise and increasing active in-field support throughout our supply base. We are making increased investments in our employees by proactively hiring and training much earlier for production rate increases compared to previous years. These are important actions to enable higher rates of production in the future and help drive increased Free Cash Flow generation over the next several years. With that, we will be happy to take your questions. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star one. We ask that you limit yourself to asking one question. Our first question is from Seth Seifman with J.P. Morgan. Your line is now open. Hey, thanks very much, and good morning. I wonder if I could. Morning. I wonder if I could dive into the new cash flow target a little bit. The outflow, I think you mentioned of $100-$150. Does that include the $280 million of advances? No, Seth, it doesn't. You know what In my opening comments, the advances are gonna be treated as debt-like, and they will be reflected in the financing section of our cash flow statement. They will not be treated as cash flow from operations. From an accounting perspective, since those are not tied to any performance obligations, they won't be treated as in the cash flow statement. They will be treated as financing, and will be paid back in the same manner in 2024 and 2025. Right. Okay. Okay. Got it. Then maybe just something a little more, more substantive. Tom, can you talk a little bit about how you can address contracts on the defense side of the business to make sure that, you know, you have significant opportunities on B-21 and on FLRAA, but just to make sure that the company winds up with contracts that are profitable and you know, not kind of in a place like where you are with 220 and the 87 and 350. Well, the contracts that we have with our defense programs are typical defense contracts. In many cases, for example, on the B-21, they're currently cost plus contracts. They'll convert in the future when we get into low rate initial production to fixed price contracts, but by then we'll have a lot of experience so that we can make sure that those contracts will be profitable as we go forward. It'll be a similar situation on the FLRAA contract with Textron and Bell, starting off as a cost-plus and then converting over time to fixed rate. You're absolutely right, we need to ensure that when we do get to the fixed contract portion, that we understand what the total costs are and price it accordingly. Thanks. Our next question is from Ken Herbert with RBC Capital Markets. Your line is now open. Yes. Hi, good morning, Tom and Mark. Thanks for all the detail regarding the costs associated with the rework of the aircraft in Wichita on the MAX. Can you talk at least maybe qualitatively how the work differs for the aircraft, either at your customer or out in service? If you don't have a good understanding today of the costs associated with that, how maybe just does the physical work or timing around that work vary compared to what you're doing, obviously, in Wichita? Right. Well, Ken, the work for the repair is similar in terms of the approach and how it gets done. What's different is that when we do the rework, we're working on a fuselage, and Boeing will be working on an aircraft that's further in the production system or even a completed aircraft, 'cause they do have completed aircraft. The rework for them involves removing some structures to get access to the area where the fitting ultimately will need to be replaced, and also potentially moving around some systems. That's the difference. The repair itself is the exact same. It's just that they'll have to remove a few more structures and also some systems before they get access to the area where they need to replace the fitting, and then to replace those after the replacement is done. Is that something you have to do in Wichita, or can that be done where the aircraft is? It can be done where the aircraft is. We'll do the units that are in Wichita, we will repair those in Wichita. The units that are in Boeing's factory, they'll repair. The units that they have in storage, they will repair. It's important to note, though, that the units that are out in the fleet will be treated differently. Right now, the FAA and Boeing have determined it's not immediate safety of flight issue. What'll happen is there'll be a disposition to determine what the inspection frequency needs to be, and when you do the inspection, if a defect is observed, then there'll be a replacement. It really is determined by what the inspection frequency is, and that disposition has not yet been made. Great. Thanks, Tom. Thanks, Ken. Our next question comes from Sheila Kahyaoglu with Jefferies. Your line is now open. Thank you. Good morning, guys. Thank you lots to begin to this quarter. Good morning. Maybe I want to focus on the A220, if that's okay, given the forward losses of $81 million on the quarter and not much of a real production schedule change there. Can you maybe talk to us about, you know, any of the non-recurring supply chain costs there? How does this shift expectations on when this program starts to generate cash? Right. Well, the majority of the forward losses we mentioned was due to a distressed supplier. We stepped in and had to resolve the situation, and it involved a lot of non-recurring costs. That was the primary driver. There were some schedule changes as we looked in the out years to compare to what we had in the plan. That helped drive some of the additional forward loss, and then there were some foreign exchange issues as well. That's what drove it. In terms of the go forward, what we've seen on the 220 program, it's a great program. Ultimately, it's gonna be very profitable for Spirit, but we have seen the schedule slide to the right. Right now, the way it works out is we're seeing, you know, fewer units, coming out right now and in the period of time that we had through our forward loss, calculation that we initially made when we completed the purchase accounting. That's what's creating the forward loss. Yeah, hey, Sheila, let me just jump in real quick because I think, you know, the $46 million is a large component of this, but the A220 program is in a forward loss, and that forward loss is projected out through 2025. Maybe to help you understand this a little better, there's a big component of kind of one-time payments that we're making to this supplier in 2023, 2024, and 2025. The real cash impact and cost impact is spread out over the next several years. Because we're in a forward loss program, we've got to book 100% of that forward loss right now. Got it. No, that's great color. I wanted to follow up on Seth's question, if that's okay, just to understand contracts such as B-21 and V-280 on FLRAA. How do we think about you guys mitigating risk? Do you currently have contracts signed with the OEM there, are they cost plus, when do they kind of go into fixed price phases? Right. Well, with B-21, yes, we do have a contract, and currently it's cost plus, and it will shift into fixed price when it gets into low rate initial production, and that will be some point in the future. Right now, we're still in the engineering manufacturing development phase. With Textron and Bell on the FLRAA program, the final contracts are in development right now, and all of those considerations of course, are going to be taken into account. It'll start off more as a cost plus and then shift into a fixed price as we get into low rate initial production. Got it. Thank you. Our next question is from David Strauss with Barclays. Your line is now open. Great. Thanks for taking the question. Tom, when you say that you are now delivering clean MAX units to Boeing, can you define what that means? Does that mean you're actually shipping to Boeing, or are you just, you know, effectively delivering to Boeing by completing a unit and then sticking it in your own WIP and then will ship to Boeing? I was under the impression that you would have to fix your WIP units before you would start shipping to Boeing directly again off the line. Yeah. Well, David, we're doing both. We're shipping units to Boeing, and we're completing units, conforming units, and putting them into ship in place. In fact, I would say the ship in place that we have here in Wichita, the Boeing-owned inventory in Wichita, has been helping us deliver units to Boeing while the factory recovers. For example, right now we have about 65 units in Wichita. 35 of those are not available for current delivery because they're destined for customers that aren't taking delivery right now, like China, for example. But 30 of the units are available. Of those, 19 do require repairs, but 11 were available to deliver. We are producing new units which are supplementing that. That's how we've been supplementing Boeing deliveries to Boeing in the short term, is taking units that are not with no defects out of the stored units and also producing new conforming units. Those 19 units that do require repair that are in ship in place here in Wichita, we expect the repairs for those to be done by the end of July. Okay. Thanks. David, we're producing, we're now producing good units, conforming units. At the same time, we're repairing or reworking units that were in our WIP, work in process, when this issue happened. We're also working to rework the ship in place units, and we're doing all three items within our factory. We set up a separate, call it a rework factory within our factory so that we can restart production and start producing new units. We're really attempting here in the second quarter to do all three of those to support our customer. Just to give you the information in our work in process, there were 19 units that needed to be repaired. We've already completed three of those. We have 16 to go. As I just mentioned, we had 19 units that were in the stored inventory that needed to repair. We have started repair on four of those, and the first two we'll complete today. Great. That's great color. As, as a quick follow-up on A320, you know, pretty significant reduction there. I mean, that implies that you're delivering at below 50 a month, you know, kind of stated rate out of Airbus. I know, I know you know, you're typically ahead by probably three to 6 months. Can you give any color around that, you know, that reduction? We're just aligning to the schedule that Airbus has given us. I would say last year, if you looked at the numbers, we over-delivered to them relative to their deliveries, so they built up a buffer. You know, this year they do not require as many aircraft. As it turned out, it was a fairly significant reduction since last quarter of about 85 units. That could still be subject to change as market conditions change. We remain flexible and agile, and we'll be responsive to their schedule requests. Thanks very much. You're welcome. Our next question is from Doug Harned with Bernstein. Your line is now open. Good morning. Thank you. You know. Hi, Doug. ... when you look at the, when you look at some of the challenges that you've had here. We've seen challenges on the 787, the A350, and the MAX, even before this current issue. In last quarter, you made some organizational changes, but we've still got new charges coming through now. What I'm trying to understand is, the steps you're taking now that can give us confidence that you can really get these operational issues behind you and start to deliver with the performance levels that I think you would hope for. Yes, Doug. Last quarter, we did make some organizational changes, and we've continued to strengthen our teams in all of the different programs. We've brought in, for example, several external hires on the Airbus side that will help us with the A350 and the A220. People in quality and operations and engineering that will bring significant expertise in those areas that will help us on execution. Here in Wichita, on the 737, this was obviously an unexpected issue related to a quality issue, but we have a strong quality team, operations team, engineering team. They've all been working in close association with Boeing to address the issue and get execution back on track to get production flowing again and also to recover some of the units that we lost. I would say one of the big things in terms of the 737 line is having those strong teams, but also really the strong coordination with Boeing. In challenging times like this, you know, our two companies have really come together in terms of program, operations, supply chain, engineering, to help address the issue. We've shared a lot of information, for example, on how to do the repair and shared best practices to accelerate and come down the learning curve. So I think that level of cooperation also gives us confidence that we can recover from this issue and get back to meeting the production rate increases as we go throughout the year. Specifically on the A350, the rate that you're delivering at, which is, I think four a month in the quarter, it's below what their goals are, but they've been delivering at lower rates as well. I know you had a supplier issue there. Can you describe, is your rate constrained by your supply chain and your situation, or is it constrained by basically the response to the signals, demand signals from Airbus at this point? Yeah, you're talking about the A350. Yeah ... we're aligned with Airbus's schedule, and we're delivering to that. We are on track to hit our deliveries for the year. We do have some behind schedule as normal based on supply shortages and things like that. We are on track to hit their delivery schedule for the year. The factory is in recovery mode, but is executing to the recovery plan and is on track for the full number of deliveries for this year. It's about 60. Okay. Okay, very good. All right. Thank you. Thank you. Our next question is from Cai von Rumohr with Cowen. Your line is now open. Thank you very much for taking our call. I can appreciate the difficulty in estimating the cost of the 737 fittings. Can you give us some help in terms of how many planes are involved? I would have calculated, you know, 250 that are in inventory at Boeing, plus some 800 or so out in the fleet. Somewhat over about 1,000 planes. Is that a relatively accurate range? Well, I think you mentioned the airplanes that Boeing has in its factory and in storage. I think on the earnings call, Dave Calhoun said about 75% of those are affected. That's in the realm of. Mm-hmm of right. In terms of the units out in the field, yeah, I think 800 is a little bit high compared to the current bounding that we understand. It's probably. Mm-hmm ... closer to 500. Again, this could change because there's still work going on in terms of the bounding. About 500 in the field. As I said, the disposition hasn't been determined yet. It's likely to involve inspections in the field and the frequency is not known yet. Then in the inspection, if there is a defect observed, then there would be a replacement. That's how that process will work. Got it. That's very helpful. You've got $688 million of forward losses on your balance sheet, and you've been burning through those at about $95 million a quarter the last couple of quarters. Can you give us some help in terms of understanding, you know, if those numbers are right, how they burn off? You know, given you now have these advances to pay back when you get out to 2025, in addition to the $1.2 billion in debt due, what's your thinking in terms of how you're gonna refinance all of that? Well, Cai, let me just jump in here. If you look at our balance sheet, you know, we're pretty transparent as it relates to the forward losses that we have on our books. I think you're right, at the end of the first quarter, we're sitting at short-term forward losses of $324 million. Essentially what that means is over the next 12 months, we'll burn those losses off, which will reduce the forward loss liability balance. You know, not 100% of that is cash because there's some, as we book costs, some, you know, non-cash costs are embedded like depreciation, etc. You know, that's what, you know, that's what we're facing. That's what's in our cash flows, and that's what's been having an impact on our quarterly cash flows. You're right, you know, the advances, you know, we've pushed them out to get us some relief. Higher production rates in 2025. As we move into 2024 and 2025, we expect to be positive from a Free Cash Flow standpoint. Then, you know, we do have a $1.2 billion worth of bonds that come due in, call it April of 2025. We've got a little bit of time to address those. You know, there will definitely, based on where our cash position is today, we will be looking to refinance some portion of those, probably a large portion of those as we move into 2024. That's how we're trying to balance all these puts and takes. Excellent. Thank you very much. Sure thing. Our next question is from Myles Walton with Wolfe Research. Your line is now open. Thanks. Good morning. You've taken in about $280 million of cash advances you're treating as a liability, and you've talked about $125 million of lower Free Cash Flow. I'm just curious, Mark, the difference. Should we interpret that as being sort of the upper boundary of the risk of costs yet to be determined? Myles, don't try to correlate the cash advances as support to help us with the costs of this issue. You know, we haven't been able to determine that. You know, there. You know, It's been two weeks into this process. We've, you know, reworked a few. Boeing's starting to work a few of those units. I think the final fleet disposition is out there. It's really more as you think about, you know, not delivering 30 - 40 units in the second quarter, that's gonna reduce the cash receipts. Because we wanna make sure that we continue to be prepared for the rate break at 38, we continue to receive parts from our supply base at 31 and a half a month. It's a combination here in the near term, the impacts of lower deliveries, which is lower cash receipts, and us continuing to receive parts at the current production schedules that we have to make sure that when we break rate, we have the correct parts to build. There's definitely pressure on lower cash receipts, and there's pressure as it relates to inventory that's coming in. As well as, you know, we're making a lot of investment out in the supply chain to make sure that we have the right buffers. Due to the fact that we continue to have challenges from a supply chain standpoint, and, you know, our big OEMs have big plans of going up, you know, from a rate standpoint at the end of this year and into 2024. Some of that cash is just the near-term relief to help us with the fact that deliveries are going to be lower, and that we're going to be carrying extra inventory as a result of that. Really that's how I would size that up, Myles. As we said. Okay The delivery impact will likely be in Q2, and it'll be 30 or 40 units. What we said for the full year in terms of 737, our target is 390 - 420. That 30 units of pressure, that's why we said there's $100 million-$150 million of cash flow pressure for the year. It's mostly related to the potential shortage of deliveries on the 737. Yeah. It's deliveries and inventory. Okay. One quick high-level question for you, Tom. Last summer you had a supplier bankruptcy on the A220 you had to take in-house. In the fourth quarter of 2022 you had an A350 supplier that sort of you had to take on their work scope. You've got another supplier here in the quarter on the A220. Can you give us like a state of affairs of your supply chain and where the risks are and aren't? Yeah. As we've said, the supply chain is fragile. you know, Like us, they've been through very challenging crises, the MAX grounding and the pandemic. you know, as we came into the recovery, a lot of the suppliers already had fragile balance sheets because of those issues. you know, massive decreases in production, had to lay off a lot of people. Now, faced with production rate increases, the suppliers have had to go out and hire new staff, try to train them, buy advanced materials, and the cash conversion cycle is such that they're not getting cash coming in right away. So it's creating tremendous pressure on the supply chain, and a lot of the smaller suppliers haven't been able to cope with it. You mentioned three examples, and they happen to be big ones, where we had to step in and resolve the issue. I can assure you there have been smaller ones too that we're dealing with every day. I think it is just part of the supply chain challenge that we've been talking about and that's why the supply chain is not completely stable yet, and we expect some more disruptions as we go through this year and into next year. It's getting better, but the supply base is fragile. We're working every day. We probably got 75 or 80 people out in the field every day working with our most distressed suppliers, helping them fix their plan, helping them buy material, or in some cases offloading some work to give them pressure. We can either unload it or move it to other suppliers. We've got a variety of different strategies that we employ, but I think it's all part of just this fragility that exists in the supply chain because they've been through a very challenging time. They're coming out of it. Now, the good news is that the production rates are going up, and there is opportunity. There's light at the end of the tunnel, but it's still fragile, and we're still working it every day. Thank you. Our next question is from Rob Spingarn with Melius Research. Your line is now open. Hi. Good morning. I don't know if you've covered this already. Are any of these costs on this issue recoverable from the supply chain, from the supplier that originated this issue? No, we don't believe so. The issues are really contained within Spirit. Oh, yeah. I was talking about the beginning- If you're talking about the A220 supplier. Yeah. Rob, this particular supplier one, there's not much we can do from a recovery, but some of the others that we had mentioned in previous quarters, we are in the process of working through potential recoveries from these suppliers that have caused us disruption. Those typically happen after the fact. In order for us to make sure that we keep production stable, you know, we're incurring these costs and then working with those suppliers to try to get some recovery after the fact. Yeah. My mistake. I thought you were talking about the vertical fin attach fitting. For the supplier issues, for example- No, I was. OkayYeah. The, for the vertical fin attachment... And, and- It's not a supplier issue. Yeah. It's not a supplier issue. Okay. The other thing I wanted to ask around this, and it's still on the supply chain, was, you know, and based on your prior answer, is there a point at which you need to maybe bring work in-house? This applies, you know, on any program. It sounds like... I understand it's fragile because of the pandemic and the grounding, but maybe some of these suppliers aren't going to recover, and certain things you need to bring in. We have heard such things from some of the other suppliers in the industry. The answer is yes. We have a very large fabrication unit in Spirit, one of the largest in the world. We have unloaded quite a bit of work from our supply chain for suppliers that were distressed and not able to perform. We're always balancing it. Sometimes we bring in work, we push out other work. This year for certain, the net flow has been inward. We have unloaded a lot of work from suppliers in various programs in order to basically resolve issues with distressed suppliers. The good news is that we have a very capable fabrication operation that we're able to do that. It's one of the strategic advantages that we have, is that we do have a strong fabrication business. Thank you. Our next question is from George Shapiro with Shapiro Research. Your line is now open. Good morning. Yeah, I wanted to ask, I think Tom earlier you said in a response to Cai's question is, like, 500 in the field that we require rework, and Boeing's got an inventory of 250 maybe that. No, no. George, let me just say, I didn't say 500 would require rework. I said there's 500 in the field that we would have to inspect. Not all of them will require rework, just to be clear. That's what, part of what I was gonna ask. Roughly you said about half of what you had, 19 out of 30 or so required rework. If we assume that half of everything out there requires rework, and I would imagine the rework is more than the $100,000-$150,000 that you're doing because you got to disassemble part of it to get there, is Boeing gonna then come back to you with the bill for that total amount that would be due? How would you negotiate that? Well, first of all, let me just say that we don't know how many units will require rework. That will be part of the disposition, and it'll also be a result of an inspection in the field to determine if there is a defect, and only where there is an identifiable defect where there'll be rework required. That's why Mark said we can't estimate it at this time because we haven't gone through that whole process. I would not say that it will be half or any number. It will be, we'll inspect it. If there's a defect, then there will be a repair. With regard to units that Boeing repairs, I think what you're asking is there any potential that they could come back to us with a claim? That's a possibility. We have normal processes for these sort of things that we work through with Boeing. Right now, our primary focus is working with Boeing to make sure that we've addressed the safety of flight issues, which we are doing and have done. There's no immediate safety of flight issue. The next thing is to make sure that we can identify a repair, which we have done and are collaborating very well on it. Then next is to get the production system flowing again to address any impacts and to recover the schedule. That's really where the focus is right now. The other issues, we will address in the normal processes that we have with Boeing, in the future. Right now the focus is focusing on the repairs and the production schedule and getting the disposition and the fleet finalized. Okay. One follow-up for Mark. If I looked at the underlying margin, Mark, in the quarter, you know, take out excess costs and the charges and everything, it's about 10%, a little less than the fourth quarter, I'm sure because of the negative QM adjustments on the Max. Is that 10% a decent run rate going forward? Will it get better or I guess it could deteriorate more if you got more negative QM catches? Just your kind of thought process on that. Well, George, you're exactly right. You know, we continue to be in the first quarter, have certain levels of disruption within our factories. I think on our last call had told you that we had added some additional costs to support the factory to achieve our delivery commitments in the first quarter, which was roughly 100 units. If you strip those things out, the one-time items like the forward losses and the impact of the vertical fin, I think you're right if you wanna kind of think about it as a normalized, what would the company look like without those disruptions. That's a good starting point as we move, you know, after the second quarter, we deal with the impacts of the vertical fin. You know, as we move up in rate, you'll see those margins start to expand. You know, it's the higher production rates, seven or eight more units per month. It's the fixed cost absorption benefits. It's the reduction in our excess costs. Both of those things will help lift up the margin and create some uplift as we move into the back half of the year, and that's what the plans are. As Tom said, you know, first things first. We've got to work really hard to rework the units, get the production system back going, deliver units to Boeing so Boeing can support their customers. As part of this, you know, a big portion of Of the cost that we're booking associated with the vertical fin is to stabilize our factory, because we shut down production. We didn't do anything for several weeks as we worked through the fix. We've got further behind schedule, so the focus is do the rework, start producing, stabilize the factory, burn this, the back, the behind schedule down, and then put ourselves in a really good position to do a really good job increasing our to the next production rate break in August, which is 38. All of that, you know, from an operational standpoint, we execute on that, we'll see a margin lift. Yeah. George, I'll just reiterate, 'cause Mark made an important point there, is we are still planning to do the production rate increase in August to 38 and October to 42 aircraft per month. We have the headcount in place for 42 aircraft per month. A lot of them are getting trained and on-the-job experience so that we can hit those production rates throughout the rest of this year. That's part of our recovery plan. Okay. Thanks very much for all the color. Thanks, George. Our next question is from Kristine Liwag with Morgan Stanley. Your line is now open. Hey, Tom, Mark, you know, following up on your comments regarding the fragility of the supply chain, how much incremental working capital is embedded in your updated Free Cash Flow guide that's earmarked to provide cash support for suppliers? What's your confidence level that you've captured the risks? Great. Well, I mean, we've taken into account known items in terms of our Free Cash Flow guidance. There could always be unknown things that surface, we would deal with those at the time. You know, as I said, the supply chain is fragile, we're taking a lot of actions, as I described, to help shore it up. The good news is that we have a very strong fabrication operation so that we can onload work when it's required. We also have gained a lot of experience over the last several years of transferring work between suppliers. That capability is paying off now because we are able to transfer work when needed between suppliers. I think we can mitigate the risks, and any known issues in terms of cash are incorporated into our current forecast. Thanks for the color. If I could do a follow-up on your upcoming labor agreement expiration that ends in June. Can you give us any color on how negotiations are going? Also, second, when you think about your full year outlook, how much labor increase is embedded in your guide? Right. Well, the negotiations have just started. The main table negotiations started on May 1st, and the teams are now engaged in dialogue. It's very constructive and positive relationship, and the initial dialogue is going well. Our primary objective, as I said before, is to make sure we reward our employees with a competitive contract, as we go forward. Our employees have been through a lot, and they have performed very well, and we certainly want to recognize that. It's really in both of our interests that we reach an agreement. That is the objective and that's the discussion that is already underway. In terms of the impact, we obviously know what other labor agreements in the market have been with other industrial companies, and specifically with the IAM at places like Lockheed or United Launch Alliance or Pratt & Whitney or Boeing St. Louis. We've taken all those into account, and our future guidance and forecasts are based on estimates of where we think we will end up. Now, of course, that can change, but we do have benchmarks in terms of what has already happened and we are using those in terms of developing a competitive contract offer for our employees. Great. Thank you very much. Our next question is from Michael Ciarmoli with Truist. Your line is now open. Hey, good morning, guys. Thanks for taking the questions. I guess just on the. You've got basically $570 million of cash on the balance sheet. If you're gonna burn $150, that leaves you with $418. Help me understand why you exactly need the $280 million cash advance. I mean, what do we not know here that could be a big risk to cash? It really is just to have some additional surplus and cushion. 'Cause you're right, that's about the, those are the right numbers. We just felt it was prudent to make sure we had some additional cushion. We've always said we want between $300 million and $500 million to run the business, and the $280 gave us some cushion to put us above that threshold. That's really the reason. I don't think there's any other underlying reason other than, we felt it prudent to have that cushion. We were fortunate that. what's the- Our customers were able to support us, particularly Boeing. Okay. Is there an interest rate attached to that, or is this an interest-free cash advance? The Boeing cash advance is interest free. Okay. Perfect. Thanks, guys. Our next question is from Noah Poponak with Goldman Sachs. Your line is now open. Hey, everyone. Morning. Mark, could you maybe spend a minute on the shape and pacing of the quarterly Free Cash Flow through the rest of the year? Especially just given in 2Q here, you've got the lower deliveries while you're taking on the inventory to go higher. Sure, Noah. You know, it kind of relates to the discussion around the cash advances and Michael Ciarmoli's commentary about, hey, you know, we know what your full year cash update is -$100 million to -$150 million. You know what your cash balance is. There is, you know, nuances to our cash flow by quarter, right? We just talked about the fact that we'll be looking at 30 -40 lower 737 fuselage deliveries in the second quarter, while continuing to take in 30 or 40 units of inventory that we're not gonna deliver. You know, that obviously is a short-term impact to Free Cash Flow in the second quarter. You know, we with the support of our customers, it's like, "Hey, you know, we're not gonna run out of cash, but why don't we help you out as you guys focus on production, make sure you keep your supply chain healthy, because we need you guys to go up in rate." The second quarter, just operationally as a result of that, is gonna be quite a bit challenging, okay? It's obviously gonna we're gonna consume more cash than we consumed in the first quarter. When we think about the third and fourth quarter as it relates to our overall plan, you know, the viewpoint was always the first half of the year was gonna be the most challenging from a margin and a cash flow standpoint. As we recovered the factory, we got on a steady drum rate on delivering units, and we hit the 38 production rate in the back half of the year. That would help us stabilize the inventory, improve the deliveries, the throughput through the factory, improve cash receipts, burnoffs in inventory, and the back half of the year was always going to move into a positive cash flow range, right. If we do our jobs well, right, and we're very, very focused on supporting our customer and recovering our factories in the second quarter, that type of trajectory should occur, right. We should. I think there'll continue to be some trickle impacts in the third quarter because there's still some rework that will take place into July. You know, we're still expecting a nice improvement in our cash situation, Free Cash Flow situation in the back half of the year, and still focused on getting to a quarter positive cash flow. All of that will be highly dependent on how we execute the second quarter and deal with the rework and restart to production. You know, we've got costs here that will have to be dealt with at some point in time in the future. That's the game plan. From a true production standpoint, second quarter will be tougher than the first, as we move into the back half of the year, we continue to expect to be cash flow positive. Is 2Q a larger usage than the $69 reported or the $249 if I strip out the pension payment? larger than the 69. Is it larger than the $249 if I strip out the pension payment? We're not ready to disclose this at this point, right? Again, Okay I'm not trying to be tongue in cheek here, but we're just a couple weeks into this, and I don't wanna give you guys a number that you're gonna depend on. You know. Yeah ... let's hold with what we have here. Give us some time to work through this, and we'll give you another report out, after the second quarter. Fair enough. Just, you know, trying to get as calibrated as possible, plus also answer. I understand. ...Michael's question there. The cost to rework what's in Boeing's built but not delivered and then what's in the active fleet, can you speak to the timing of that? When will all of that? When will those two categories of rework occur? Let's just take the fleet first. That will be over a very long period of time as the inspections take place and whether there's a determination if any rework is required. But that takes place over a long time based on the flight and the cycles of each individual aircraft. With Boeing, in terms of their repairs, again, that will take place over a period of time as well. We don't know yet what Boeing's schedule will be. They're obviously working quickly to do it. As I mentioned before is we'll sit down like we do through our normal processes and understand how we allocate the cost for that. Okay. Is your best estimate that that cost to rework what's not yours or what's not your fuselages, will be a multiple of the $100,000-$150,000, or it's just too early to tell? It's too early. You know, we know that for us to repair a unit, it's $100,000-$150,000. As I said, with Boeing, they have aircraft that are more complete, all the way to completed aircraft, and they have more structure to remove in some systems, so their cost will be higher than ours. Okay. Okay. it's Thanks for the detail. ... it's essentially the same, the same type of rework. It's gonna take them a little bit longer to complete that. Gotcha. The cost of the parts are no different whether we do it or Boeing does it. That sounds... Mark, that sounds like, you know, just little bit of a lack of visibility. It's going to be a higher number likely, but not a multiple, not, you know, not 2x-3x higher. Again, I don't, you know. It's a little bit early to say, but you're. We wouldn't have those discussions. I think you're thinking about it right. Yeah. The repair is the exact same type of repair. It's just that they have more structures and systems to remove and replace. Right. Right. Okay. Thank you. Our next question is from Peter Arment with Baird. Your line is now open. Yeah, thanks. Good morning, Tom and Mark. Mark, thanks for all those Free Cash Flow details just with Noah. I think we're all trying to figure that out. Just a quick one, Tom. Just on the 787 program production, you know, your plans around, do we expect you'll be at the kind of the five-a-month rate as you get into the fourth quarter, or are you gonna be leading that? Maybe you're gonna be doing that before. Just how long you kinda hold that rate. Appreciate it. Well, the plan for 787 this year is to deliver 40-45. you know, we are currently getting up to rate five, and so we will be there probably before the end of the year. The schedule then we'll go up to seven later in the year. Again, right in conformance with Boeing's schedule. We have the rate ramps lined up, and we will meet the Boeing schedule. The current deliveries for the 787 for this year are 40-45. Appreciate that. Thanks. Our next question is from Ron Epstein with Bank of America. Your line is now open. Hi, everyone. This is actually, Andre Madrid on for Ron today. Kind of a broader question going back to what everybody was asking on supply chain. I guess going up the supply chain even further, how would you guys respond to an approach by Boeing to buy back operations at Wichita? Is that something that you'd be receptive to, given how it might streamline things up and down the supply chain? Well, I will have to leave that to Boeing to respond to. We're a public company. People can make offers for public companies, and we would respond to those things. I have no idea what Boeing's plans are regarding that.