The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: John, I just wanted to start off. The up 28% in Aviation in the quarter, can you just talk about the relative performance of MRO relative to the parts
businesses?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. That's helpful. And if I could, on the aerospace side. Can you just dig a little bit deeper into the potential risk to the business and the recovery
from higher crude prices or fuel prices for your airline customers? I know on the one hand, it would obviously support usage of newer assets, which
might create more USM feedstock. But obviously, on the other hand, there's clearly just a risk to sort of the balance sheet and the operating model.
So can you talk through your expectations of how that could impact your business over the next few quarters?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. That's helpful. Just finally, if I could, maybe for Sean. I mean the balance sheet, you could argue, is significantly underutilized now as we
continue to see some recovery on the commercial side. How are you thinking about capital allocation and other opportunities? Or do you feel like
you should maybe put a little bit more onto the balance sheet as you think about accelerating growth in any areas?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: John, just a quick question. It sounds like the commentary, you're pretty confident and optimistic about a positive inflection in '23 Aerospace sales,
if I heard you correctly. Is that correlated with maybe an inflection you're expecting to see on the parts side and surplus material in particular? Or
can you provide any more sort of commentary as to what's behind that expected step-up in '23?
Question: Kenneth George Herbert - RBC Capital Markets, Research Division - Analyst
: Okay. And then given the mix shift, it sounds like in '23, potentially with greater growth on the parts side relative to MRO, how should we think
about incremental margins? It sounds clearly like your sort of the cost story near term has run its course, and we need to see volume to really drive
margins. But what kind of incrementals should we think about for models as you see that mix benefit in '23?
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