Spirit AeroSystems posted a pessimistic third quarter result after market close on November 5, 2024.
“Substantial doubt about the company's ability to continue as a going concern exists,” the company read in its third quarter filing.
The company incurred a net loss of $1.5bn in the quarter. Last year's third quarter net losses totalled $691 million for the company. Spirit also noted its consecutive annual losses since 2021 as well as the cash used in operating activities throughout those periods.
As of September 26, 2024, its debt balance was $4.4bn, including $426.2 million short-term debt. Cash and cash equivalents at the end of the period was $217.6 million, down from $823.5 million at the end of December last year.
“The company will require additional liquidity to continue its operations over the next 12 months," Spirit added. The filing added it expects to use around $450-550 million of cash over the next three quarters - including the fourth quarter of this year. It said a plan had been developed as of November 5, 2024, but was dependent upon “many factors” including the outcome of the merger agreement between Spirit and Boeing.
“We would assume that Boeing will likely have to inject capital to Spirit,” said Bank of America Securities analyst Ronald Epstein.
The filing said that in April 2024, after signing a memorandum of association, Boeing advanced $425 million to Spirit in order to support its liquidity.
“We would not be surprised to see another such arrangement be announced,” continued Epstein. He added that the information was filed “amidst ongoing discussions between Boeing and Spirit” and that the “full scope of the filing on the acquisition has yet to be revealed”.
Spirit added that Boeing's changes made to production and delivery process implemented by Boeing have had an immediate impact to its results of operations and cash flows. In March, Boeing said it would no longer accept deliveries of product that required out of sequence assembly or incremental quality re-work.
“As a result, the company has experienced higher levels of inventory and contract assets and lower operational cash flows due to the inability to physically ship and invoice end items to Boeing in a timeframe aligned with production activities,” explained Spirit.
The company also noted the strikes at Boeing as well as the regulatory oversight and limitations imposed on its soon-to-be-acquirer had had an impact on production and delivery rates. Spirit added that it had furloughed around 700 employees working on the 767 and 777 programmes in response to the Boeing strike for 21 days. It also added that changes in pricing adjustment discussions with Airbus, related to the A220 and A350 programmes, had proven another challenge.
Boeing had maintained in its third quarter earnings call that it would continue with the acquisition of Spirit. The transaction is expected to close sometime mid-2025.