Curtiss-Wright Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Curtis Wright First Quarter 2020 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, press star zero. I would now like to hand the conference over to your speaker today, Jim Ryan, Senior Director, Investor Relations. Thank you, sir. Please go ahead.

Thank you, DeSondra, and good morning, everyone. Welcome to Curtis Wright's first quarter 2020 earnings conference call. Joining me on the call today are Dave Adams, our chairman and chief executive officer, Glenn Tynan, our vice president of finance, and Chris Farkas, our newly named chief financial officer. Our call today is being webcast, and the press release, as well as a copy of today's financial presentation, is available for download through the investor relations section of our company website, at www.curtiswright.com. A replay of this webcast also can be found on the website. Please note, today's discussion will include certain projections and statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements including the impact of a pandemic such as COVID-19 and our public filings with the SEC. As a reminder, the company's results include an adjusted non-GAAP view that excludes first-year purchase accounting costs associated with acquisitions, one-time transition costs associated with the relocation of the DRG business, and the restructuring costs in 2020. Reconciliations for current and prior year periods are available in the earnings released, at the end of this presentation and on our website. Any references to organic growth exclude the effects of foreign currency translation, acquisitions, and divestitures unless otherwise noted. Now we'd like to turn the call over to Dave to get things started. Dave?

Thanks, Jim. Good morning, everyone. I'll begin today with a review of the operational impacts of COVID-19 on our business, highlighting some of the critical actions we've taken in response to this pandemic. Then I'll provide some highlights of our first quarter and lastly introduce our latest succession planning success story. Chris will then provide a detailed review of our first quarter performance and outlook, as well as our strong balance sheet and liquidity position. Finally, I'll return to wrap up our prepared remarks as we head into Q&A. On behalf of Curtis Wright, our thoughts and prayers go out to all who have been affected by the COVID-19 pandemic. Since this crisis began, Our number one focus has been taking the necessary steps to ensure the health and safety of our global workforce. On behalf of our entire organization, I want to thank our employees for their perseverance and willingness to adapt in these challenging times. As an organization, we have been closely following the CDC guidelines, practicing social distancing and working from home where appropriate across all of our facilities. While the majority of our manufacturing sites worldwide are operational today, several have been impacted over the past two months due primarily to customer-driven delays as well as government-mandated closures. As we discussed on our February earnings call, our operations in China were experiencing a minor disruption from COVID-19, and I'm happy to report that those operations are currently up and running at 100% capacity. Currently, the majority of Kurdish rights operations around the world have been granted essential business status, which will help us navigate through this downturn. A bright spot within our portfolio is the continued defense business, which provides significant insulation to our overall sales and profitability from the impact of this pandemic. Together, our team is focused on how we preserve our profitability and cash as the world emerges from this crisis, while not losing sight of our long-term strategy. Upon identification of the quickly spreading virus, our leadership team immediately established a cross-functional response team to identify risk to our business and develop and coordinate appropriate action plans. We developed a real-time reporting system to track potential COVID-19 impacts, which covers every site across the globe. You may recall from prior earnings calls the emphasis we were placing upon developing a recession playbook as fears of a recession were emerging. As it turns out, that process, including stress testing of each of our businesses, has provided a jumpstart to our efforts to proactively address the potential impacts to our business resulting from COVID-19. Later in our prepared remarks, I'll provide a more thorough review of the cost containment and mitigation plans, which we began to implement in the first quarter. Our recession playbook activities, combined with a robust and growing defense market, positions us well through this challenging period. Additionally, Curtis Wright has a very strong balance sheet with ample liquidity, as Chris will review in a few minutes. As we navigate through this period of substantial uncertainty, And in keeping with our conservative nature, we've elected to suspend our full year 2020 guidance. We'll take the next few months to evaluate the performance of our markets, customers, and supply chain with the expectation of developing improved clarity on our performance for the remainder of 2020 as well as 2021. We'll provide an update at the appropriate time. Turning to slide five, I'll review the highlights of our first quarter 2020 adjusted results. Curtiss-Wright delivered a solid performance, which was slightly ahead of our expectations, despite the challenging environment that we are currently facing. Adjusted operating income rose 10% on a 4% increase in sales, generating an 80 basis point improvement in adjusted operating margin to 13.3%. These results principally reflect strong sales and improved profitability in the defense segment, led by strong aerospace and naval defense sales. Adjusted diluted EPS of $1.34 increased 3% year over year. Next, I wanted to address the press release issued earlier this morning where we announced that Glenn Tynan will be retiring later this year. On behalf of the board of the directors and the entire Curtis Wright team, I want to thank Glenn for his tremendous leadership and dedication. It has been a pleasure working with you over the past 20 years as our company has reached new heights and delivered remarkable results. I wish you the best in your well-deserved retirement. As part of the transition, the board and I are pleased to announce the appointment of Chris Farkas as CFO. His leadership and operational experience have provided him a solid foundation that will serve our corporation well into the future. I have the utmost confidence in Chris as the new CFO of Curtis Wright. His promotion is a prime example of the longstanding succession planning process that we employ at Curtis Wright. and I'd like to be the first to publicly congratulate Chris on his new role. Glenn, would you like to say a few words?