Spirit AeroSystems (NYSE: SPR) reported Q1 EPS of ($1.69), $1.40 worse than the analyst estimate of ($0.29). Revenue for the quarter came in at $1.43 billion versus the consensus estimate of $1.51 billion.

737 Program - Vertical Fin Attach Fittings Update

“Spirit notified Boeing of a quality issue identified on the vertical fin attach fittings of certain models of the 737 fuselage that Spirit builds. After identifying the quality 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 confirmed, we turned our attention to ensuring that our ongoing production meets manufacturing standards. We are also implementing additional protocols to reinforce our quality systems to prevent similar occurrences in the future,” said Tom Gentile, President and Chief Executive Officer, Spirit AeroSystems.

The Company has identified the affected units located in Wichita and has begun implementing repairs to those units. The current assessment is that the repair work will be completed on available units in Wichita by the end of July. Spirit has also started to build and deliver new units with the revised process.

Spirit has performed a preliminary financial assessment of the potential impacts. As a result, the Company expects disruptions and rework within Spirit’s Wichita factory to negatively impact full-year gross profit by $31 million, of which $17 million is reflected in the first quarter 2023 financial results. Additional costs are expected, including costs Boeing may assert to repair certain models of previously delivered units in their factory and warranty costs related to affected 737 units in service. The impact will be based on a unit-by-unit analysis. However, the Company cannot reasonably estimate the remaining potential costs at this time. Spirit will continue to evaluate the situation and coordinate closely with Boeing to minimize the impacts.

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