Spirit Aerosystems Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to Spirit Aerial Systems Holding Incorporated second quarter 2022 earnings conference call. My name is Matt, and I'll be your 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 would like to ask a question, please press star one on your telephone keypad. I would now like to turn the presentation over to Aaron Hunt, Director of Investor Relations. Please proceed.

Thank you, Matt. And hello, everyone. Welcome to SPIRIT's second quarter 2022 results call. I'm Aaron Hunt, Director of Investor Relations. And with me today are SPIRIT's President and Chief Executive Officer Tom Gentile, SPIRIT's Senior Vice President and Chief Financial Officer Mark Szczesinski, and SPIRIT's Executive Vice President, Chief Operating Officer and President of Commercial Division Sam Marnick. After opening comments by Tom and Mark regarding our performance and outlook, we will take your questions. 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, in our SEC filings, in the forward looking statement at the end of this web presentation, and referenced in our call today. 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. And as a reminder, you can follow today's broadcast and slide presentation on our website at investor.spiritarrow.com. With that, I would like to turn the call over to our Chief Executive Officer, Tom Gentile. Tom.

Thank you, Aaron, and good morning, everyone. Welcome to Spirit's second quarter earnings call. We continue to navigate a dynamic environment driven by challenges in supply chain, staffing, and inflation. OAN schedule changes as they respond to this dynamic environment also disrupt operations and drive the need for rescheduling and replanning efforts. Despite these near-term pressures, the long-term outlook for air traffic and the global aviation industry remains strong. Domestic air traffic has recovered to close to 2019 levels, and over the July 4th holiday weekend, air traffic even exceeded 2019 levels. Aircraft backlogs remain healthy. Spirits backlog is $34 billion, of which 85% is narrow-body aircraft. Along with the rest of the industry, we were happy to be back at the Farnborough Air Show in July, which was the first major gathering of the entire global industry since the 2019 Paris Air Show. The return of the event was welcomed for us to reconnect with many of our customers, suppliers, and other stakeholders. At the air show, we saw continued narrow-bodied demand improvement with Boeing securing multiple 737 MAX orders, including 100 737 MAX-10s from Delta Airlines. Prior to the show in early July, Airbus also secured a large narrowbody order for nearly 300 A320s. Those orders reinforced the improved long-term outlook for narrowbody aircraft that support future production rate increases. While the long-term outlook remains favorable, this quarter we did experience economic pressures like the rest of the industry. As we ramped 737 MAX production to 31 airplanes per month in May, we saw additional challenges surface in our supply chain. These challenges at some suppliers resulted in part shortages in our factories. As a result, we are taking longer to stabilize at rate 31 aircraft per month on the max and have taken the opportunity to burn down the fuselage buffer we have in Wichita, which was reduced by 19 shipsets during the quarter and now sits at 66 shipsets. Overall, we now expect to deliver about 300 737 MAX units in 2022. We also saw a number of schedule changes this past quarter, particularly on the A350, 767, and 787 programs. These schedule changes contributed to the forward loss this quarter. The 787 program also required some additional engineering analysis to support Boeing's efforts to resume deliveries. We continue to respond to all of Boeing's questions on the 787 so they can complete their work with the FAA. In addition, we saw several supplier bankruptcies that created challenges this quarter. On the A220 program, one supplier bankruptcy drove a forward loss of $25 million related to schedule recovery efforts and transfer of work. Through the efforts of our supply chain team, we have been able to ensure supply continuity to our customers. Also, we are experiencing challenges with inflation on purchase services, logistics and transportation that have created some headwinds to our results. Finally, in light of the Russian invasion of Ukraine, our customers stopped shipping parts for an aircraft program. Due to the uncertainty of that program, we have taken a net charge of $28 million related to adjustments of certain assets and liabilities associated with U.S. sanctions on Russia. Our defense segment continues to show solid growth. Recently, we had three big wins in defense. First, Spirit was selected to provide the pylons and nacelles for the B-52 re-engine program. Second, Sierra Space also awarded Spirit the Shooting Star cargo module for their Dream Chaser program. Third, in mid-July, we joined Airbus Helicopters as a strategic partner to support the British-produced H-175M for the UK's new medium helicopter requirement. These wins demonstrate the momentum of our defense business in its core markets. Our defense and space growth strategy is moving us into new markets and expanding our relationship with the OEMs and primes. The aftermarket business also had a very good second quarter, growing revenue by 42% over the second quarter of last year and delivering 15% margins. Without losses on Russia-related programs, margins would have been about 20%. We also expect to see the business and aftermarket benefit from new opportunities like the recently announced deal with Boeing Global Services on the MAX and the Gamico partnership in China. I also want to highlight that we released our second annual sustainability report in July. We shed our progress toward our sustainability targets, including key accomplishments of transitioning to 100% wind power at both our Wichita and Tulsa facilities. In addition, we completed an agreement to install a large solar panel array on the roof of our Malaysia facility. We continue to leverage our research and technology investments to assist in the development of newer, more fuel-efficient aircraft. I'm now turning the call over to Mark to take you through a few more details on the financials of our second quarter results. Mark?