Huntington Ingalls Industries, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Huntington Ingalls Industries, Inc. earnings 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'll 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 0. I would now like to hand the conference over to your speaker today, Mr. Mike Petters, Chief Executive Officer. Thank you. Please go ahead, sir.

Thanks, Misty. This is Dwayne Blake, Vice President of Investor Relations. Good morning and welcome to the Huntington Ingalls Industries first quarter 2020 earnings conference call. With us today are Mike Petters, our President and Chief Executive Officer, and Chris Kastner, our Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in their remarks today, Mike and Chris will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that's posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at huntiesandengels.com and click on the investor relations link to view the presentation as well as our earnings release. With that, I'll turn the call over to our president and CEO, Mike Petters. Mike?

Thanks, Wayne. Well, good morning, everyone, and thanks for joining us today on the call. So before getting into my remarks on the quarter, let me first provide a COVID-19 update. As this national emergency began, we established three very important objectives. Our first objective was to minimize the impact to our workforce and to provide a work environment that is as safe as possible. Now, this resulted in some benefit changes and some actions designed to give each individual employee as much flexibility as possible to help them navigate through these uncharted waters and make arrangements that they needed to make. In doing this, we assured them that their job was safe. We also made adjustments to shift schedules to facilitate social distancing, and we enhanced cleaning activities in our shipyards. Since taking these actions, we have approximately 25 percent of our employees working remotely and are experiencing about a 70 to 75 percent attendance rate at both shipyards. Our second objective was to protect the national asset that is Huntington Ingalls Industries. We have been identified as critical and mission essential by the Department of Homeland Security, by the Department of Defense, and by the U.S. Navy. So we took action during the quarter to enhance liquidity and strengthen our balance sheet, and Chris will discuss those actions in more detail during his remarks. And importantly, our supply chain is a critical part of the industrial base, and our ability to help our suppliers, especially those small businesses, will reap benefits as we come through this pandemic. To this end, we have accelerated more than $50 million of payments to our critical supply chain partners. This not only helps them, but it also helps their communities as our supply base resides in nearly every state in the union. Now, our third objective was to be the reliable source of information for our employees. And to that end, we have kept a very frequent and steady drumbeat of communications to our employees and to our communities through multiple vehicles, including social media. We've kept them informed. We've answered many of their questions and provided them the resources and guidance they need to help keep them and their families safe. Now, additionally, I have been personally engaged in multiple strategic efforts centered around this pandemic, and I participate in weekly calls along with the other defense industry CEOs with the Assistant Secretary of the Navy for Research Development Acquisition, James Hondo Gertz. I would be remiss if I did not add that the U.S. Navy has really leaned forward during this crisis, ensuring uninterrupted contractual payments and the continuation and even acceleration of contract awards such as LPD 31 that was awarded in early April. These efforts are a great help to our industry and provide stability, liquidity, and business continuity, and I credit Assistant Secretary Gertz for his immediate action to these kinds of issues. As a nation, I believe we need to focus and adapt to what is being rightly called the new normal. We knew early on that this crisis was not going to be over in a few weeks or even months, so we have worked to change our business to effectively operate in that new environment. For example, we have now over 11,000 people working remotely. That's a tenfold increase from where we were just eight weeks ago. Fortunately, we had already started transforming our business. So this crisis has provided us a catalyst to accelerate this transformation and we believe we will be able to weather this storm and continue to provide our critical products and services to our customers around the nation. Now let me share some highlights from the quarter starting on slide four of the presentation. Sales of $2.3 billion for the quarter were 8.8% higher than 2019 and represent record highs for the company. and diluted EPS was $4.23 for the quarter. New contract awards during the quarter were approximately $900 million, resulting in a backlog of approximately $45 billion at the end of the quarter, of which approximately $21 billion is funded. Regarding activities in Washington, our actions in early February supported Congress's consideration of the budget in regular order. But our focus rapidly shifted mid-quarter to mitigating the impact of COVID-19 on our workforce and supply chain. And we will continue to work with Congress and the administration to support authorities and investment that will enable our nation's economic recovery through the entire defense industrial base, which is uniquely postured through tens of thousands of suppliers across all 50 states to be the engine for that recovery. We also look forward to congressional consideration of the fiscal year 2021 budget request in the coming months. Now let me share a few business segment highlights from the quarter. At Ingalls, the team delivered LHA-7 Tripoli in February and launched two ships in the quarter, DDG-123 Lena H. Sutcliffe Higbee in January and LPD-28 Fort Lauderdale at the end of March. DDG 119, Delbert D. Black, completed acceptance trials during the quarter and then delivered on April 24th. NSC 9, Stone, is progressing through final assembly and test activities and is expected to deliver later this year. And finally, DDG 62, USS Fitzgerald, completed C trials and planned production work during the quarter and is scheduled for sale away this summer. At Newport News, CBN 79 Kennedy is approximately 72% complete, and the team remains focused on compartment completion and preparation for primary system testing. Newport News is working closely with the Navy to pursue a single-phase delivery approach on CBN 79. Now, this change from a two-phase delivery would extend the Newport News performance duration while supporting the Navy's plan for efficiently delivering a completed ship in 2024. Initial indications are that incorporating a single-phase delivery will increase the scope of work under the contract and stretch the construction schedule and the test program to the right. However, the ultimate financial and schedule implications will not be clear until we definitize the change with the Navy. CDN 73 USS George Washington is progressing through its final outfitting and test phase and is approximately 74 percent complete. On the submarine program, SSN 794 Montana is expected to launch in the second half of the year and remains on track to deliver in the first half of 2021. And we anticipate SSN 796 New Jersey achieving the pressure hull complete milestone in late 2020. In our technical solutions segment, We received several contract awards across the Department of Defense for manned and unmanned airborne intelligence and ISR support and secured re-compete business with the U.S. Postal Service for enterprise IT operations. In January, we announced our largest award of the quarter, a task order to support the U.S. Air Force Europe's ISR operations with a total potential value of $954 million over five years. In addition, we closed the Hydroid acquisition at the end of the quarter, which significantly expanded our capabilities in the important and rapidly growing autonomous and unmanned maritime systems market. So in summary, I am encouraged by what we have been able to accomplish during these unprecedented times. Our leadership team has demonstrated flexibility and agility to respond to new developments while continuing to achieve a number of key milestones. And finally, our $45 billion backlog, unprecedented program visibility, strong balance sheet, and thoughtful leadership through the COVID-19 crisis allow us to remain confident in the long-term financial targets and value creation strategy we provided at our investor day in February. Now I will turn the call over to Chris Kastner for some remarks on the financials. Chris?