Good morning and welcome to Spirit's first quarter 2009 earnings call. I am Phil Anderson and with me today are Jeff Turner, Spirit's President and Chief Executive Officer and Rick Schmidt, Spirit's Chief Financial Officer.

After brief comments by Jeff and Rick regarding our performance and outlook, we will take your questions. In order to allow everyone to participate in the question and answer segment, we ask that you to limit yourself to one or two questions.

Before we begin, I need to remind you that any projections or goals we may include in our discussions today are likely to involve risks which are detailed in our news release, in our SEC filings, and in the forward-looking statement at the end of this web presentation. And as a reminder, as you can follow today's broadcast and slide presentation on our website at spiritaero.com.

With that I will turn the call over to Spirit's Chief Executive Officer, Jeff Turner.

Thank you, Phil and good morning. Let me also welcome you to our first quarter earnings call.

I'll begin on slide two. Overall, we executed our core business well during the first quarter of '09.

Our results reflect solid performance across the company as we return to full rate production on Boeing programs following the machinist's strike at Boeing which occurred late last year. Despite that strike at Boeing we achieved first quarter sales of $887 million, operating margins of 11% and fully diluted earnings per share of $0.45.

Financially, the impact of the strike at Boeing reduced the first quarter earnings by $0.18 per share. During the quarter the primary end market for Spirit's core business continued to soften as demand for commercial air travel declined.

We've been taking the appropriate actions over the past several months as we focus on meeting our customer requirements and managing through the business cycle. I'll discuss several of those actions we have taken in more detail in a few minutes.

During this quarter, we opened our new Spirit Malaysia manufacturing facility as planned. Our Spirit Europe team and Wings segment leadership did an outstanding job of bringing the new facility online and the new Malaysian team is doing a great job.

As you know, Spirit Malaysia's initial focus will be on Airbus products, but over time, we'll provide value to products across the company. The new operation is adding value immediately in 2009.

I continue to be pleased with our performance on 787 program. Our team continues to work well with the customer and our suppliers regarding change management, flight test preparation and production plans.

We look forward to making solid process on the 787 program through the remainder of 2009. As you know, yesterday Textron's Cessna Aircraft unit announced the suspension of the Citation Columbus program.

As a result, we are taking the necessary actions to correspondingly suspend our efforts on the program. We will assess the financial implications to those actions during the weeks ahead and we'll provide you an update when the process is complete.

In the long-term, we remain confident in the viability of this program and anticipate its restart at the appropriate time. Spirit's backlog at the end of the first quarter of 2009 was $29.6 billion.

The backlog is down from year-end 2008, as deliveries for large commercial airplanes outpaced orders during the quarter. Now let's talk about some of the specific accomplishments across the business on slide three.

Machinists' strike at Boeing impacted revenues and operating margins across all three business segments during the quarter. Over the quarter, we delivered 30 dealer Boeing ship sets than we had expected prior to the strike.

Impact from the strike is now behind us as we look forward to the second quarter and full rate production across the company. The Fuselage team continues to execute well across programs.

They delivered 6000 737 Fuselage during the quarter and shipped the third 747-8 Freighter forward fuselage section. The team continues making good progress on the Sikorsky CH-53K program have suspended the development efforts on the Columbus program.

On slide four, you see the Propulsion team's results for the quarter. The Propulsion team's 747-8 pylon made its first flight during the quarter and the Rolls-Royce BR725 in itself (ph) successfully completed a series of tests.

The team continues to make good progress on the Mitsubishi Regional Jet and is seeing nice growth and margin contribution from sales to the after-market. We continue to view the after-market as an attractive long-term growth opportunity mix for Spirit.

On slide five, you see the Wing System segment which is comprised of our Spirit Europe, Malaysia and Oklahoma operations. The core business continues to perform well while working through market and development program challenges.

As noted earlier, Spirit Malaysia is now operational completing its first component for the Airbus A320 product during the quarter. Spirit Europe continues to execute well while adjusting to lower business jet production rates.

And as you know, currency exchange rates provide a headwind for Spirit Europe's revenues and earnings when the dollar strengthens as it did in the first quarter. Our Aerostructures team in Tulsa continues to execute well on core products while focusing on new program executions.

We're working closely with our customers as we move these new programs from design into production. Now let me turn to slide six and give you a brief update on the 787.

We delivered aircraft number six in March, and aircraft number seven, the entry into service airplane is progressing through systems installation process. Overall, product quality remained high and we continue to work with the supply base to enable a smooth production ramp up.

We are continuing to work closely with our customer as we incorporate the necessary engineering changes on the initial end-service airplanes. Our internal efforts remained focused on productivity improvement and increased utilization of the capability we have in place.

We expect to restart Ford Fuselage production later in 2009. Now let me turn to slide seven, and provide you my thoughts on the business environment.

Clearly these are challenging times. The global economy continues to impact air travel across regions of the world.

In the face of these challenges, we are seeing our customers work to match supply with demand. We've seen our customers announce plans to delay development programs, to reduce production rates on certain products, to forego previously planned production rate increases on other products and indicate caution yet continued solid demand for other products.

This tailored response by our customers due to current market conditions from my view is a direct result of the more measured increase in production rates undertaken since 2006. The more measured and tailored response is to market demand with the goal of reducing the magnitude of cyclical swings to the extent possible benefits stakeholders across the industry.

We know that the airplanes business go through cycles. And we've learned much from the past that positions us well for the future.

We've structured business arrangements to share upfront development costs for new programs. We've maintained a continuous focus on cost and inventory management as well as productivity improvement.

We've been prudently conservative in estimating future demand for products, and we've taken aggressive proactive action freezing executive management and some non-management salaries, and are hiring only to revised (ph) critical skills. At Spirit we've shown that our team can respond effectively to changing business requirements in difficult situations, and do so in innovative ways that keep our company positioned to support our customers and to create long-term value.

We believe we are well positioned to accomplish this at Spirit. Now let me turn it over to Rick who will provide more details on our financial results and outlook.

Rick.

Thanks Jeff, and good morning everyone. Slide nine, summarizes our financial results for the first quarter which continue to be influenced by the residual impact of the strike at Boeing.

Revenues were down 14% over the prior year period driven largely by fewer unit deliveries to Boeing as a result of the strike and the impact of the strengthening dollar on our U.K results. We estimate the strike impacted Q1 deliveries by approximately 30 units or about 256 million of revenues.

Operating profit at 98 million for the quarter was down 25%, as margins were impacted by lower revenues from the strike and a small negative cum-catch adjustment in the quarter. Strike impacted operating cost of an estimated $38 million.

Fully diluted earnings per share of $0.45 for the quarter were down 26% from earnings of $0.61 per share in the prior year period largely due to the strike impact of an estimated $0.18 per share. Cash flow from operations was a negative $149 million and capital expenditures of 54 million for the quarter reflect our continuing investment in the 787 program and other new programs.

Growth and accounts receivable in the beginning of the transition in 787 customer advances from cash inflows to cash outflows, as the advances are liquidated. Slide 10 highlights our progression on key P&L metrics over the trailing four quarters.

First quarter revenues were up 37% sequentially from fourth quarter, but down 14% over the prior year period as the strike impact began to unwind in the second half of the quarter versus the full impact in the fourth quarter. Strengthening dollar lowered first quarter revenues by approximately $40 million versus the prior year period and approximately $11 million versus the fourth quarter.

Operating income margins were 11% in the quarter, about a 160 basis points below the prior year period largely due to the lower revenues from the strike and the small negative cum-catch adjustment. Sequentially margins were up significantly from the fourth quarter due to higher sales volume in the absence of a $27 million negative cum-catch adjustment booked in the prior quarter.

Lastly, first quarter fully diluted EPS of $0.45 was down 26% from the prior year period for the same reasons, but up significantly on a sequential basis. Our effective tax rate of 32.5% in the current quarter was slightly lower than the prior year period.

On slide 11, R&D expense in the first quarter was 14 million up $4 million from the prior year period due to modest increases in spending for new program development in our propulsion and wing systems segment. Sequentially R&D expense was about flat for the fourth quarter.

SG&A expense for the quarter was $38 million, about 3% below the prior year period due primarily to lower non-cash stock compensation expense. Sequentially SG&A was up modestly from the fourth quarter.

We continue to be very focused on expense control in this uncertain environment. Revenue decline caused by the strike resulted in SG&A and R&D in total increasing from 4.7% of sales in the first quarter of '08, the 5.9% in the current quarter, 120 basis points decline in operating margins.

When sales return to pre-strike levels in the second quarter, these metrics should also resume their historical relationship. Slide 12 summarizes the P&L for the first quarter versus the same period in the prior year.

During the quarter, Spirit realized approximately $3 million of net unfavorable changes in contract estimates versus a net $2 million favorable adjustment in the prior year period. Majority as a negative cum-catch adjustment was recorded in our Spirit Europe business which is included in the wing system segment.

A negative adjustment was driven by the recognition of a small forward loss on our Hawker Beechcraft 850 XP business jet contract and the impact of the strengthening dollar versus the pound on our A320 contract. The impact of the Boeing IAM strike was largely reflected in our third and fourth quarter of 2008 results based on our initial estimates for its duration and the pace of the subsequent ramp up.

These estimates were trued up again in Q1 with immaterial adjustments to what had been booked previously. As Jeff said, we now believe that the impact of the strike is now fully behind us.

Slide 13 summarizes the trailing four quarter changes in our cash and debt balances. Cash balance is at the end of the first quarter of a $116 million decreased a $101 million from the prior quarter end, largely due to negative cash flow from operations, which I'll explain in more detail on the next slide.

Total debt balances increased $75 million in the quarter entirely due to a drawing our $650 million revolver driven by negative free cash flow in the quarter. Despite the decrease in cash and the increase in debt at the end of the first quarter our net debt to capital ratio was approximately 29%, versus 22% at year end 2008.

And our net debt to 2008 EBITDA ratio was around 1.0. Both indicators of the strong balance sheet and a well capitalized company.

Additionally, at the end of the first quarter, the company had about 675 million of short-term liquidity available through our unutilized revolving credit agreements and available cash balances. We continue to believe this level of liquidity is fully adequate to more than fund projected cash flow needs.

As we'll discuss in our guidance section coming out, Spirit believes that free cash flow for the year will be a net positive and the first quarter revolver draw of 75 million. Plus additional borrowings projected for the second quarter will be fully repaid by the end of the year.

Slide 14 details our cash flow for the first quarter of 2009 versus 2008. Cash flow from operations was a negative 149 million as lower profitability related to the strike, growth in working capital, primarily for accounts receivable and inventory and the liquidation of the customer advances for the 787 negatively impacted cash flows.

Accounts receivable balance has typically increased significantly in the first quarter due to balances being at their low point in the year-end financial statements, based on the timing of year end shipments and scheduled Boeing payments. Year-end 2008 was abnormally low versus other years, due to the extended Christmas shut down at Spirit related to the residual impact of the Boeing IAM strike which resulted in lower December sales.

Spirit returned to normal shipment levels towards the end of the quarter, account receivable balances were replenished accordingly. Inventory grew 236 million in the first quarter due to continuing investments in new programs primarily our two Gulf Stream programs in the 787.

I'll provide additional color on inventory growth in the next several slides. Advanced payments were a negative 24 million in the first quarter, as we begin to liquidate 787 customer advances as units are shipped.

In the first quarter of 2008, we received a 124 million in cash inflows from 787 customer advance payments. The difference in cash flows for account receivable and advance payments largely explains the total variance in cash flow from operations between the first quarter of 2009 and 2008.

Capital expenditures were 54 million in the first quarter versus 66 million in the prior year period as the installation of production capacity for the 787-8 program continues to wind down. Slide 15 details the growth in Spirit inventory by major category during the calendar year 2008.

In total, Spirit's inventory grew by 539 million during the year, driven largely by two factors the 787 and our new Gulfstream programs. Starting with the 787, inventory for this program grew about 240 million in 2008 or about 45% of total growth.

This growth was due to the anticipated ramp up in full rate production which is yet to be which has yet to be realized, related production and efficiencies and further engineering changes. Gulfstream inventory growth was 206 million or another 38% of the total growth.

Here the growth was largely for capitalized pre-production engineering which will be amortized over the life of the programs. But this also includes the ramp up of initial purchases for the physical component parts and work in process for these start-up programs.

Together, the 787 in the Gulfstream programs accounted for 83% of total inventory growth during 2008. Remainder of the growth is attributable to spending for non-recurring engineering activities, again primarily on new programs.

Much of which is billable in 2009 and 2010. Overall inventory for legacy programs was largely flat in 2008.

Slide 16 provides the same level of detail for inventory growth in the first quarter of 2009. Total inventory grew by 236 million with 787 in Gulfstream accounting for about half of this growth.

Increases in engineering costs for other new programs accounted for other 24% of the total increase. As mentioned earlier these costs will be billable in 2009 and in early 2010 should not repeat in future periods.

We expect further inventory growth in the second quarter with declining balances in the second half of 2009 as 787 deliveries begin, residual inventory from the Boeing IAM strike has burned off, development spending for the Gulfstream programs nears completion and engineering costs are built and collected. Slide 17 summarizes our guidance for 2009 compared with 2008 actual results.

Overall our 2009 guidance is unchanged from what we provided in our year-end 2008 earnings report. 2009 revenues should be in a range of 4.25 to 4.35 billion, a 12 to 14% growth over 2008.

This growth will partially result from the resumption of pre-strike level of unit deliveries to Boeing. Ramp up of 787 deliveries and growth in revenues from non-Boeing customers will also contribute in 2009.

Offsetting some of this growth is currency headwind for our UK operation. At the present dollar-pound exchange rate, negative currency headwind for 2009 revenues will exceed a $120 million.

On this projected revenue base, Spirit expects earnings per full diluted share of $2.15 to $2.35, an 18% growth over 2008 using the mid-point of the range. Earnings growth should exceed revenue growth due to the non-recurrence of negative cum catch adjustments booked in 2008, and contributions from new programs.

SG&A and R&D expense were projected to remain at 5 to 5.5% of sales, consistent with what we saw in 2008. Offsetting some of our margin expansion opportunities will be earnings headwind created by foreign exchange that I mentioned earlier, higher projected net interest expense, and a slightly higher effective tax rate in 2009.

The recent announcement by Boeing of a production rate cuts for the 777 program starting in mid-2010 would have a minimal impact on our 2009 results, and is fully included in our 2009 guidance ranges. Also as explained in more detail in the press release, specifically excluded from our earnings guidance, is any potential P&L impact associated with the suspension of the Cessna Columbus program.

We expect cash flow from operations to be significantly stronger in the second half of 2009, largely as a result of inventory growth peaking in mid year. For the total year, we expect free cash flow to be a net positive, with approximately 250 million of capital expenditures.

The suspensions of the Cessna Columbus program may actually improve 2009 cash flows, as we had expected additional engineering development expenses in the remainder of the year. I now like to turn it back over to Jeff for some closing comments.

Thank you, Rick. And I will wrap up on slide 18, with just a few brief comments.

Our core business is performing well. We are conservatively capitalized, and remain financially strong.

While are passed the challenges posed by the strike, we are taking the necessary steps to successfully manage through this cycle, and our core businesses, and meet customer requirements on new programs. There is no question these are challenging times across the commercial aviation and aerospace industry.

And we are well-positioned to manage through them. I believe that the current difficult economic time will pass, and when it does, Spirit is well-positioned to take advantage of future growth opportunities and to create value.

We'll now be glad to take your questions.

Thank you. Good morning, gentlemen.

Good morning, Howard.

Good morning, Howard.

I want to talk about gross margin a little bit. I mean, it's significantly better than the fourth, but not quite as good as you've done.

Could you put it in context of what you'd like to see for the balance of the year. And I mean, there are a number of offsetting items you have at some point of 320 rate change of 737, you might want to be preparing for some change there.

And then, the 787 obviously becomes a greater part of the mix. So how should we think about what you're going to do with them, what you can do with gross margin to improve it from where it is and deal with some of the challenges?

Well I think Howard. First of all clearly margins do come under pressure in reducing volume environment.

Also I'd remind you of the difference in margins as we shift to newer products, specifically the 787, we've talked about that in the past. Clearly, we remained focused on working margins and productivity in our processes and so on.

But I do think we're in a period of time where margin expansion is going to be difficult, and managing it to the right balance is appropriate for us, as we look to manage effectively through whatever downturn happens to be here, and prepare our self for the upside. Rick, you have anything to add to that?

Yeah, I would add to that Jeff. If you just look at margins for the remainder of 2009, and I got you saw from the margin percentage standpoint in the first quarter is pretty much what you'll see for the rest of the year.

Now right now, all of our current contract locks largely extend through the end of this year. So, we're approaching to end of these locks and usually at the end of the blocks you don't have a lot in away of the prices or adjustments in your contract profitability, because most of it is driven by actual costs it's behind you.

So, pretty consistent margins in the second half, Jeff mentioned mix, certainly, 787 as we've talked about in prior calls has lower margin on a base business. So that picks up, that will generate some downward pressure on margins.

But offsetting that is some revenue recognition and profit recognition on some of our newer programs, which have somewhat better margins than our legacy programs, and also our aftermarket business continues to do well. And it has somewhat better margins than our legacy business.

Well, for the near term, we those largely offsetting margins and being fairly consistent over the next three quarters.

Thank you Rick and Jeff.

Thank you, Howard.

Good morning.

Good morning, Doug.

I am interested and wondering on the 787. And when you look at the design changes that you've tried, and seems like there have been a pretty consistent flow of design changes.

How are you looking at now the sort of scale and the timing of when you might get reimbursed from Boeing on this?

Well again I think we've talked about that in previous calls. There is a long term program, and a number of, the number of pieces to that puzzle.

I think it's sufficient for us to say that we're making process with our conversations with Boeing and we continue to work through the issues.

But you can't -- you don't know whether this will be something that is likely part of the pricing that you have when you deliver as opposed to something that you will receive in advance?

Well, we've had some advances and Rick talked about that from the impact on the finance of this quarter. And those will continue in the future.

But, I don't have anything to announce there in what we have -- other than the fact that we continue to make progress. And we continue to have discussions on a number of fronts.

Rick, you want to add anything to that?

No I would just -- I think Doug, you'll probably see a combination of both, as these issues get resolved. Although I would say, given the kind of the current state of discussions.

It would gravitate much more towards future price changes on products.

Okay.

Would be reflected over our contract lock and influence of the margins that we've recognized in that lock.

Okay. And than second question on labor, as you look to the miscellaneous (ph) contract ending in 2010, how are you approaching that today in terms of the way you are thinking about discussions in advance, any kind of a timeline you may have for looking at those?

Sure. Let me just say, we've been approaching that for three and half years now.

So, we see the relationship with our employees, and their representatives as a partnership that we have to work all the time. And clearly, we have a contract point mid-next year.

But, you can rest assure that conversations are underway, have been. Clearly, we expect to reach agreements that are meet to needs our employees that are market based that clearly support the long-term viability of our company and achieve goals.

It's in certainly, in the interest of the company and clearly in the interest of the employees that have a viable, vibrant spirit. So, I think we've approached that whole partnership from day one, as something that we need to keep in front of us all the time.

Okay. Very good thank you.

Yeah, thank you.

Good morning.

Good morning.

Good morning David.

Rick could you just talk about the mechanics and the program accounting and why the 777 rate changes are effecting now. I know you're close to the end of the block on the 777 but I would think, given the rate change that's going to extend out the length of time that's going to take for you to get through the block and obviously thereby increase your cost?

Yeah, actually I mean you're absolutely right David. But the way the our current 777 contract lock ends in the first quarter of 2010, Boeing has said that they're not going to make these rate changes until a mid 2010.

So, our current block is relatively unaffected at that -- there is some impact going back through our fabrication manufacturing operations as we start to manufacture component parts prior to final assembly. We did factor that to some degree into our first quarter of contract profitability reviews.

But by and large the primary impact is going to be reflected in our next contract blocks when they start towards the end of the first quarter.

Okay and any color around how you are thinking about setting the size of your future contract blocks as they come up in 2010?

Yeah, we've said that we fully expect that the next blocks would be somewhat shorter than what we've had initially. All of our contract blocks that we started in mid 2005, they all roughly end around the end of 2009.

So, roughly a four and half year period that we believe the next blocks would -- ought to be a little bit shorter. I would think they will be in a range of two to three years on average.

But we typically set them based on a number of units rather than a point in time.

And last question, on the inventory side could you quantify how much you're expecting from here (ph) inventory to come down and maybe break that out in terms of three category that you detailed here today?

I think over all David as I mentioned in my comments, we do expect that we'll have some additional inventory growth in the second quarter. A lot of that will be driven by the same factors that you've seen impact our numbers in 2008 in the first quarter; that is 787 program.

As it now starts to ramp up again as Jeff mentioned, and certainly the Gulfstream programs will complete largely complete their development program in the second quarter, or early part of the third quarter. So we will see both of those influences starting to wane by mid year and then actually as we start to ship 787 units more towards the second half of the year, you'll actually start to see and we're not replenishing those inventories because in this case we've had a lot of that inventory on hand.

Now just to remind you that as we entered 2008, we were expecting to ship 45 units in 2008. We ended up shipping three.

So that ended up with us carrying a fair bit of inventory and it's going to take sometime to burn that up. But obviously, we're not replenishing that inventory.

I think what you'll see is you'll see some growth in the second quarter, peaking by the end of the second quarter and then starting to gradually decline in the second half. You saw our inventory growth, grew by about 236 million in the first quarter.

I think for the total year we'll be in a growth total year growth of probably 250 to 300. So we'll see a little bit more growth than the in the second nine months -- in the next nine months, but again more growth in the second quarter than starting to have declines in the second half.

And that will be a big driver of why we believe that our cash flow will be stronger in the second half of year than it was in the first half. It's going to follow a pattern very similar to what we saw in 2008.

In 2008 we generated over 80% of our annual cash flow in the second half of the year.

Thanks Rick, great color.

Thanks. When you talked about margins throughout the year kind of being similar about that -- that was your comment.

Is that kind of after adjusting kind of backing out some of these contract adjustments and how should we think about wing systems going -- wing system's margins going forward now that you're on a forward loss on hawker program. Is that meaningful?

Well. That by itself just represents the -- what we've booked in the first quarter would represent the loss that we expect for the entire contract.

So if -- including both backward -- looking backward and looking forward. Those line as we continue to hit our cost targets that we've established now, there should be no additional forward losses.

So the provision that we established in the first quarter will basically burn off as we ship the remaining units in the contract. To your first point about margins, I was talking about basically reported book margins.

Now we had a small negative cum-catch in the first quarter, $3 million in total. Assuming again that we don't have big changes in volumes for the rest of the year which we really don't expect at this point, that would represent fairly consistent margins on a reported basis.

Okay, so I mean just so I'm clear then, I mean we should be looking at Fuselage kind of in the 18% range, I think kind of excluding the profit adjustments. Is that kind of what we what you should expect because -- pretty good number.

Yeah, I think what you'll see is obviously the link systems margins were negatively impacted by the large negative cum-catch. So their margins -- absent an event like that their margins won't recover in the second half of the year.

But Fuselage and Propulsion margins should be along the lines of what your seeing in the first quarter.

Okay. And then just lastly on the 787, I think you said you are going to start back up later on in the year.

Has that kind of pushed out a little bit or is that originally what your planning, what you originally think and may be a little sooner than that?

Its pretty close to the -- I mean clearly it pushed out from where we had it planned last year, but its pretty much inline with what our plan for '09 has been.

Okay. And do you know how many that's going to be, or can you tell us?

Our guidance assumes that we'll ship 10 to 12 units for the total year.

Okay, thanks.

Hey good morning guys.

Good morning Ron.

If we think about this quarter with a number of deliveries you had in the quarter. Is this what we could expect the business to deliver, if this was kind of the Boeing run rate?

So just what I'm trying to say is, what you are in this quarter if Boeing was to take their deliveries down by 20% could you continue to earn at this level?

Well that would largely depend -- again the nuance here is our contract locks. The fact that starting in 2010 we're going to be entering new contract locks that have that are going to reflect the volumes that we expect for the next two to three years.

Obviously volume then will be -- you'll have to compare that volume to the volume that we've had in our current locks, and then that will really be the largest driver of what happens to the overall production activity in the shop. But if you look at that math, that would suggest that for the 777 -- if 777 rates which is the one where we've seen the rate cuts so far.

If you look at the 777 rates and you assume that the next couple of years those rates are going to stay at five a month. That would be a little bit below what our average rate was for our current lock.

So that would indicate that we would have some margin headwinds on the 777 program driven by nothing other than volume. If you look at 777 for instance in our average monthly rate on 777 and our first locks was about 26 units a month.

Obviously it was lower at beginning the block, higher today but an average of about 37 I'm sorry. So, If you think rates are going to from 31 back down to the low 20s then volume would largely be a push, between the current lock and the next bloc.

And yes, if you kind a go down a list of each one of our programs you could look at volumes being relatively stable between the current block and next block. Obviously, which there are number of other instruments is it coming to play there.

But, volume is certainly one of key drivers, and volume will not be that big of a driver from current blocks there were into the next blocks.

Okay. And then, can you give us anymore color on how we should think about the Cessna Columbus.

I mean, what you guys have to consider, and what are the contract considerations?

Sure. Let me, first of all, I think it's important for me to reiterate that we believe strongly in the viability of this long-terms viability of this market space, this airplane and this customer.

So, it's important for us to be resume work on the Columbus when the timing is right for it. We have around somewhere in the low $20 million in terms of inventory at the end of the quarter, associated mainly with our initial design work on the program.

And like I said in my remarks over the ensuring weeks we'll work with our customers and our suppliers and our team, and sort out the financial implications if any. So, the way I think about it is long-term good program, short-term market issue that caused it suspension.

And we'll work through what those short-term implications are and look forward to start and that begins.

Okay. And then I guess just maybe one last question.

On the C Series, is there any more opportunity for you guys there?

We have nothing to announce on the C Series. One way or the other.

Okay thanks Jeff.

Actually, its Carter Copeland. Good morning, gentlemen.

Good morning, Carter.

I wondered if we could just address some of the specifics again on Columbus. And did you have any launch assisted payments or anything that you may have recoverable?

Well we did get some state incentive, state and local incentives associated with the Columbus program.

But do those need to be repaid or how will that work?

That's uncertain at this point Carter. We really don't know.

And it's a fairly long time horizon. So, god knows.

Okay. And on the R&D front, presumably there is no R&D detail when since you were already in that sort of capitalized preproduction phase of that program and relative to your prior R&D plans.

That's correct.

Okay. And one more on the 787, the inventory build in the quarter, how much of that was related to excess over average, relative to other?

I don't have that in front of me Carter. But certainly, continuing to complete the units that are here, attracts costs.

So, I would say the deferred costs certainly is a large component of the increase in the quarter.

I mean so, if there were two units and we have 35 million. I mean so if there was 25 million of kind of 12 million a unit.

How would you imagine that trending over the remainder of the year for the unit you shift? Will it be down substantially or --

Well certainly, as we start to get a more normal drumbeat of production, starting back up here on the 787 program, you're going to see the average cost per unit is going to come down dramatically. And then the units that we have in inventory today, both those that are nearing completion and those that are further back behind in our manufacturing process is been these units have been there now for a couple of years.

Things continues to be build up, they continue to attract costs which makes the early units much more expensive than what we'll see going forward.

But presumably, the benefits come from the units that are produced once you restart production, because all of the ones that are sitting there now are shouldering a lot of that cost over the past couple of years. So, you'll need to get through those units before you start seeing better excess over average performance.

That that's absolutely right. But as you look at that graph though, the breakpoint, happens probably quicker than those people realize is.

Again, this program has been in the stop and start mode for an extended period of time now. Now, once we really get going, I think you'll see that the play at which we hit the average.

So right now, obviously our actual costs are over the average. But, the play that which we hit the average and start in effect eating into that deferred, I think will happen fairly quickly.

It will happen within the first, 100 to 125 units.

Great, that's very helpful. Thanks guys.

Thank you Carter.

Good morning, guys.

Good morning, Rob.

Rick, your guidance range is $0.20. Could you talk about some of the major swing variables that are in there?

Well I'm sure. Probably one big one that we've talked about in the past is in the R&D area that the one variable that we still have in R&D are the 787 derivatives.

We have factored into our guidance some spending, R&D spending for the derivatives. Now, how much we actually spend this year is going to be based on the schedule for Boeing schedule basically, for us supporting them and bringing those derivatives to markets.

So, that is somewhat of an unknown yet, as to how much will fall into this calendar year. I think at this point, we have been probably on the conservative side for how much we think we'll spend this year.

So, I think that's a variable yeah certainly, revenues are always a variable. Right now I think we have got a pretty good line of sight on what we think revenues are going to be the rest of the year.

And there is, the big variables would be how many 787 units do we actually ship this year, how much revenue do we generate from some of our new programs. And some of those aren't based on shipping units.

They are based on completing engineering work and on milestones. So, I would say those are the big ones.

Gross profit obviously follows the revenue. So, I think the gross profit absent some surprise that we can't foresee at this point, gross profit will be in the range that we saw in the first quarter.

SG&A tends to be fairly predictable. We seen a fairly constant level of SG&A over the course of the last year, year and a half.

So, I don't expect that to change much. But I think its revenues R&D expense maybe a little bit in interest expense, obviously, with the draws on our revolver that we've experienced in the first quarter, it carries some interest expense with it.

So, the timing when we are going to be able repay those will have some influence. But I'd say those are the big factors.

And it sounds like revenues really are the greatest visibility on at least with regard to the legacy programs you are on a Boeing and Airbus. You know what those productions rates are going to be at least for the rest of this year?

We do, you are right.

Another couple of small things when will you actually have your last seven unit 777 month?

It's going to have to be somewhere in the next year.

Somewhere in '10 or late '09?

It would be '10 first quarter of '10.

So, you are about three months ahead of them.

In terms of final assembly deliveries, yeah, final unit delivery, that's about right.

Okay. And then the other thing I wanted to ask about you may have touched on this earlier, but how should we think about 787 cash flow, as you start to ramp up deliveries.

And I am asking this in context of the advances that you've gotten from Boeing. So, can you walk us through how those dynamics will evolve and then ultimately change?

Well, what will happen is you might recall, we signed an MoA last year, first quarter of last year. That provided additional advances in 2008.

And the repayment obligations for those units were that for those advances, were that -- they basically, those advances basically covered the first 45 to 50 units that we would deliver. So, in effect, Boeing has already paid us for the first 45 to 50 units that we will deliver.

So, as we deliver those units, that will -- that value of that delivery will apply a 100% to liquidate the advanced payment. So, the 396 million that we got in 2008 that will be repaid fairly quickly over the rest of 2009.

And then we'll start to ramp up in 2010 and 2011. But once we have that behind us then we're back to the old schedule which was the original 700 million that we got, that was repaid 1.4 million a unit.

So, once we get past this initial block of units, then we'll kind of revert to the schedule that we have before.

But that could carry as well into 2010. It sounds like depending what Boeing requires of you next year?

That's correct.

Okay. Thank you very much.

Thank you, Rob.

Good morning, gentlemen. I'd like to go the revenue guidance.

If I use the assumptions on average shifts that's in load into pre-strike levels. I'm coming up around 200 million short.

You mentioned some reasons. Other non-legacy programs that could drive that.

But, is there any reason to suspect that we could see a better mix on legacy platforms pricing on say, 737 platforms?

I'm not sure in the near-term, but mix is going to have a lot to do with other than 787s. Because as we've said in prior calls, our margins on our legacy programs are fairly consistent from program-to-program.

Again 787, is an anomaly, because its initial block has lower margins because it carries the amortization of all of our development costs. But absent that I don't think margin is a or mix is going to be a big driver.

I think the piece that maybe in your chip set and content calculation, the piece that is, that would cause some additional revenues in the second half would be contributions from your programs and the fact that we'll have higher 787 deliveries. Yeah we shipped two in the first quarter.

And we indicated earlier, our guidance was 10 to 12 for the year. So that wouldn't indicate, we've got to ship kind of 8 to 10 in the second half of the year.

So, that will create some revenue upside. And again, the rest of it will come from new programs.

And then any update on North Carolina facility. Is that still as far as timing, is that still on track as you mentioned on the last call?

Yeah, it is still on track. Progress being made if you stop by Kingston, you will facility come in up out of the ground as it should, as you would expect and appreciate, we are being very prudent.

It's frankly a good time in the environment to build. So, we are watching those contracts closely.

And clearly being prudent as we know how to be the timing of those expenditures. That project is coming along very well.

Thank you.

Yeah, thank you.

Thanks. Good morning, Jeffrey.

And Rick I just want to say after thanks for the detail in the inventory. It's very helpful and preemptive.

First question is on Hawker (ph), just wondering if you could get us a little more color on what's left on the contract. And what assumptions are really key, now that you're at a zero margin there, if the volume there is of the risk that volume could come off much more dramatically than what you've assumed if that could give another more material forward loss?

I would say Joe that we that was part of the forward loss, was the recognition of lower ship set quantities. And the fact that would extend the duration of the block, which obviously the longer the block goes, the more fixed cost it attracts.

So that was part of that. But, I think at this point, we've got a pretty good view of where we did think deliveries for that platform are going to go.

And I think we've been appropriately conservative. But that said it couldn't go any lower I know it certainly doesn't.

These are volatile times for the business jet manufacturers. So, we have given that are best estimate.

How many more units are on the contract, can you tell us approximately?

Joe, I don't have that data with me. I am sorry.

It's not a large program force.

Right. Okay.

And then on the 787, can you update us on where you are in terms of your margin accruals there? And you noted in your slides mentioned that you are trying to get the perspective profits up there, what exactly are you doing?

Well right now Joe, we are doing is preparing to speed up production. We have done a lot of work, if you will, analyzing the processes, and looking for a list of improvement options and opportunities, ones we get it running.

The real key here for us to make improvements is get some production momentum. Once we do that then it comes off the drawing board to the reality of what's happening in the processes.

And that's when we can really go to work, make any real improvements. So the most important thing for us is to get too drumbeat on that program and then make the in place improvements.

And so we're still in a positive margin situation here in sort of a low single-digits, is that accurate?

We are. We're in a small positive net margin for the three packages that we have on the 787.

Okay, just one final, why were there are no seven or A380 deliveries in the quarter? Was that just timing?

It's strictly timing.

Okay. Thank you.

Thank you. Operator: Our next question will come from the line of Cai Von Rumohr of Cowen and Company.

You my proceed.

Yes, thank you gentlemen. On its call, Boeing described the pressures they're having from lower inflation escalations which they are unable to pass on to their suppliers and intimated they might make efforts to pass some of that pressure on.

How are you positioned regarding inflation escalation and how far do your contracts are your contracts priced looking out on the legacy Boeing programs?

Legacy Boeing programs are priced through 2012. And I would just say parenthetically that all customers have price pressure on suppliers all the time.

Okay. And then, Rick, you'd mentioned as we look toward the second half, we have the adverse margin impact to gross margin of more 787.

But you also I think your inventory analysis showed some 747-8 engineering costs that are going to get rebated and kind of they get to your revenue number. It looks like you're going have some of those types of items.

What do they do to the mix? You mentioned new programs or better margins, but is it better margins if its just engineering rebate or how should we think about that?

No, typically those kinds of billings Cai, so for non-recurring engineering for the 747-8. Yeah, they would have margins that look a lot like our production margins.

There is typically not a big difference between the margins we would recognize on engineering billings versus production.

Okay. And Dave's initial question about the next block, if you're priced out to 2012, you should have some visibility.

I think normally we tend the think lower production rate, lower margin, because of less favorable spread of adverse cost. But Rick you made the comment that volume will not be a driver.

So, does that mean -- things -- unless the oil blows up, doing 777's at five a month, you can have comparable margins in the next block if its -- obviously this goes to 2012, you got most of it priced now?

Well. As you said there are lot of variables that go into determining the profitability of a block.

Volume certainly is an important one and the plan I made that volumes, that again depending on where rates go so if you, I mentioned that in our current block that 37 rate on average is 26 a month. So if you think that rates are going to go to that level, then volumes would be fairly comparable between the current block and the next block.

If your projections indicate that rates are going to go well below that, then obviously that would create volume headwind. But absent to -- I mean other factors; things like we touched on the labor agreement.

So you have things like labor escalation, supplier cost, material costs that enters into it. There is lot of other variables that come into play in determining the overall profitability of your block.

But as you say, pricing is known -- largely known through the duration of our current block and again depending on where you think rates are going go, volume becomes know and those are two pretty big variables.

Excellent, thank you very much.

Thank you Cai.

Good morning.

Good morning Rob.

First on the 787, Jeff is there anything you could tell us in which month you expect to start delivering again and whether the monthly rate will be ramping up for a fairly consistent rate per month?

Well, a couple of volumes Rob, one is that we are delivering, now in fact we delivered unit number six in the first quarter. We have unit number seven in the final installation -- systems installation area and it will soon be ready for it poll.

So, clearly the numbers that Rick gave, we're going to have to speed up production deliveries if you will to meet the demand for the rest of the year. The point that I made is that we have had the winding on the barrels the fabrication process shut down for quiet a while now and we will resume that later this year.

The exact -- I did not mention and don't at this point intend to give the specific time when we start that back up. It will be very much dependant on the post signals that we get for the product.

But we will be ramping up that airplane per the plan later on this year.

So if you look at the forward fuselage, it's still a little bit (inaudible) when exactly it's going to start and just something it sounds like its also a little bit time (ph) for what the exact rate will be per month as well?

Right, okay.

Right. Okay.

But again, we've got a number of units in the process now. We've shipped through line unit six.

I think we've told you before we wound through line unit 22. So, it's just a question of timing of as those pulls start and that pulls us back through our line when we fire up the winding process again.

Okay. And then just secondly, you noted that after-market was up in your propulsion business in the quarter.

And what was driving that. That's kind of seemed to be in contrast to some of the other aerospace companies?

That's primarily an area that we put emphasis on the engine that sells and thrust reversers for the 737 and the 777 as a category are coming into their heavy maintenance cycles and our after-market team has been very active in both spares and repairs for those. So, that's the specific from the propulsion segment.

And in over the last year you've also seen us announce a number of new contracts with specific airlines and what you're starting to see now was parts flow from those contracts.

Right. Okay, thank you.

Operator we have time for one more question please.

Thank you and good morning, just Rick just one more question on the inventory builds. Just in the notes you'd mentioned that there is 67 million relating to the residual impact from Boeing the Boeing strike.

Did you mention that that had been reversed or will be reversed in the second quarter, or...?

Well it will reverse over the remainder of the contract locks.

Okay.

So I mean those are -- we were still on short work week for part of the quarter. Its -- when you have that kind of environment in your manufacturing facilities I mean that always creates certain amounts of inefficiencies which end up showing up in deferred cost.

So, I mean those will be unwound over the remainder of the contract lock.

Okay. And just I just want to make sure I heard this correctly, you are expecting 250 to 300 million cash use this year from inventory?

For the year, that's right. So that would indicate that with most of growth we're going to see for the year we've seen in the first quarter.

That's it, thank you.

Okay, thank you.