Curtiss-Wright Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Curtis Wright Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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. Please be advised that today's conference is being recorded. If you require any further assistance, please press star and zero. I would now like to hand the conference over to your speaker today, Jim Ryan, Senior Director of Investor Relations. Thank you, and please go ahead, sir.

Thank you, Dede, and good morning, everyone. Welcome to Curtis Wright's second quarter 2020 earnings conference call. Joining me on the call today are Dave Adams, our Chairman and Chief Executive Officer, and Chris Farkas, our Vice President and 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.curtisright.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 the forward-looking statements in our public filing for 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, restructuring costs in 2020, and a non-cash foreign currency translation loss associated with the substantial liquidation of a foreign legal entity. Reconciliations for current and prior year periods are available in the earnings release at the end of this presentation and on our website. Any references to organic growth exclude the effects of restructuring, foreign currency translation, acquisitions, and divestitures, unless otherwise noted. Now I'd like to turn the call over to Dave to get things started.

Dave? Thanks, Jim. Good morning, everyone. I'll begin today with an update of how the COVID-19 pandemic is impacting our business and then provide some highlights of our second quarter results. Chris will then provide a more detailed review of our second quarter financial performance as well as our reinstated full-year guidance. Finally, I'll return to wrap up our prepared remarks before we head into Q&A. Curtis Wright, like so many other companies, has been greatly affected by the pandemic. Throughout this challenging environment, we've maintained an unwavering commitment to keep our employees safe. We continue to follow comprehensive health and safety protocols across all of our facilities, including the necessary investments in equipment and resources to minimize disruption to our business. I'm pleased to report that all of our manufacturing sites are operational today. Further, I'm proud of our team's agility in responding to this dynamic situation. The acceleration of our initial restructuring plans and incremental austerity measures have been and will continue to be highly effective in mitigating the sharp reduction in commercial revenues. These actions, along with the strength of our defense markets, provide us the confidence to reinitiate our full year 2020 guidance. Turning to the second quarter 2020 adjusted results. Although our overall sales were down 14%, growth in our defense markets remained strong, where both customer demand and our operations were generally uninterrupted by the pandemic. However, within our commercial markets, we experienced significantly lower customer demand, as well as government-mandated factory closings, which negatively impacted our results. Overall, the commercial sales decline drove adjusted operating income and margin down 27% and 250 basis points, respectively. Adjusted diluted EPS of $1.31 was in line with our expectations, and it's expected to be the lowest quarter in 2020, followed by sequential quarterly improvement for the remainder of the year. Regarding our orders, we experienced solid growth of 3% overall, and backlog is up 1% year-to-date, providing further stability to our reinitiated guidance. Last week, we issued a press release announcing that we secured more than $220 million in new naval defense orders, 175 million of which were received in the second quarter. The growth in defense orders drove a strong book to bill of 1.4 times in defense and 1.1 times for Curtis Wright overall. Although our commercial markets were significantly challenged, we experienced some sequential improvements in both coding activities and orders as we progress deeper into the second quarter. Our guidance anticipates a slow recovery from the pandemic, and recent order patterns between April and July provide optimism for modest growth in our commercial businesses in the second half of 2020. Turning to our free cash flow. Adjusted free cash flow of $136 million increased 70% year over year due to an intense focus on working capital and reduced spending on non-essential capital expenditures. This performance drove robust adjusted free cash flow conversion of 247% and keeps us on track for a strong finish in 2020. Now I'd like to turn the call over to Chris to provide a more thorough review of our second quarter performance and outlook for 2020. Chris?