Lockheed Martin Corporation

Good day and welcome everyone to the Lockheed Martin third quarter 2020 earnings results conference call. Today's call has been recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Greg Gardner, Vice President of Investor Relations. Please go ahead, sir.

Thank you, John, and good morning. I'd like to welcome everyone to our third quarter 2020 earnings conference call. Joining me today on the call are Jim Taklett, our President and Chief Executive Officer, and Ken Posenreid, our Chief Financial Officer. 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 materially from those projected in the forward-looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements. We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non-GAAP measures that may be used in today's call. Please access our website at www.lockeedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I'd like to turn the call over to Jim.

Thanks, Greg. Good morning, everyone, and thank you for joining us today on our third quarter 2020 earnings call as we review our financial and operational results, highlight some of our key accomplishments, and discuss our updated outlook for 2020 and trend information for 2021. I do hope this call finds you and your family safe and healthy. The coronavirus outbreak remains an ongoing global pandemic, and we're all working to mitigate its impact. Our priorities at Lockheed Martin remain, ensuring the health and welfare of our employees and their families, continuing to perform and deliver for our customers and our national security, and using our resources and leadership as a company to assist our communities, our country, and our allies. We are continuing to take actions to address issues brought on by this virus, maintaining robust health and safety protocols in the workplace, delivering personal protective equipment to frontline workers and donating over $20 million to COVID-19 charities. We have continued expediting payments to our supply chain and have hired over 12,000 employees since the pandemic began. I thank all of the men and women of Lockheed Martin for their dedication and commitment during these trying times as they perform with excellence for our customers and their important missions. I'd also like to take a moment to express my sincere sympathies to those across our nation affected by the recent hurricane and wildfire disasters. We hope that our employees and other citizens of the affected communities recover quickly from the devastation caused by these events. Moving to Lockheed Martin's results, as our press release illustrates, we delivered another strong quarter across the board, financially, strategically, and operationally. Ken will discuss our financial results in more detail and provide preliminary trending data for 2021, but I'd like to begin by providing a few financial highlights from the quarter. Sales this quarter were a record and exceeded last year's third quarter by 9%. Year-to-date, we are 10% over our 2019 results. Our business areas grew segment profit by 6% over the 2019 third quarter, and year to date, we're 7% over 2019. We had a strong quarter of cash generation, achieving $1.9 billion of cash from operations. We now have brought in nearly $6.4 billion of operating cash year to date, keeping us on pace to deliver at least $8 billion in cash from operations in 2020. We won approximately $17 billion in orders, resulting in another high watermark for our backlog and our ninth consecutive quarter of backlog growth. And in cash deployment actions during the quarter, our Board of Directors approved a dividend increase of over 8% to $2.60 per share and $10.40 annually. Providing outstanding returns to shareholders through a strong dividend remains our cash deployment priority. And this action marks the 19th consecutive year that we have increased our quarterly dividend. Our outstanding year-to-date results and record backlog enabled us to, again, increase our full-year 2020 outlook for sales, operating profit, and earnings per share. Our team continues to deliver exceptional performance and operating results with a portfolio that is well aligned to our customers' priorities. Turning briefly to budgets, you'll recall that the Bipartisan Budget Act of 2019 was enacted into law last year and established spending levels for discretionary defense budgets with a total fiscal year 2021 national defense spending target of approximately $740 billion. Lawmakers continue to work on authorization and appropriations bills. And in the interim, the federal government is operating under a continuing resolution for fiscal year 2021 through December 11th. While we do not expect impacts to our 2020 financials, should the continuing resolution be extended beyond December 11th, 2020, we could experience some level of impact to our 2021 trending data, depending on the duration of the CR. Similarly, Section 3610 of the CARES Act, which was passed in March to provide authorization for federal contractors continue to support government initiatives despite COVID-19 disruption was also extended through December 11th. To date, no additional funding has been provided for issues introduced by the coronavirus. As with the DoD appropriations bill, we do not anticipate a material impact toward 2020 financial results should a delay in CARES Act funding continue, and we remain engaged in discussions with the Defense Department regarding a macro settlement for issues caused by the virus. Turning to our portfolio, I'd like to highlight a few of our notable strategic achievements that demonstrate the solid demand for our signature platforms and their relevancy to next-generation warfighting capabilities. In our aeronautics business area, the Department of Defense announced a foreign military sale for a total of 90 new F-16 fighter aircraft to the countries of Taiwan and Morocco. Arrow received an award of nearly $5 billion, adding to recent orders from Bahrain, Slovakia, and Bulgaria, and bringing the F-16 backlog to nearly 130 jets. This 90-airplane award is part of a new $62 billion indefinite delivery, indefinite quantity contract vehicle put in place to facilitate F-16 FMS sales to international customers, taking advantage of standardized contracting to expedite the process for future awards. And I can tell you I flew a Block 70 last year, and it is an awesome airplane. Our space business area was awarded a new contract that represents an opportunity to bring together an array of high-tech platforms into one cohesive network that spans every domain for unmatched situational awareness powered with 5G technology. Last month, the Space Development Agency awarded our team one of two contracts for approximately $200 million to develop initial data transport capabilities for the first generation of the National Defense Space Architecture. The award represents an important step toward building an interoperable, connected, and secure mesh network of satellites that links ground, sea, and air capabilities to sensors in space. The space transport layer contract initiates the design and development of the system the launch of a constellation of 10 small low-Earth orbiting satellites, and this network will be capable of sending and receiving secure wideband data directly to the warfighter and to weapons systems. This interoperability and inter-service networking will communicate and analyze data seamlessly to enable a force multiplier that's flexible and formidable so that those in battle can effectively perform joint all-domain operations. Future sensors, data collectors, and communication payloads can be incrementally added to this constellation to create a web that will link the most time-critical intelligence and tracking data. We are very pleased to be part of this opportunity and look forward to the launch of the satellites and the demonstration of the initial mesh network in just two years. In our missiles and fire control group, our integrated air and missile defense team achieved two important mission success events. These demonstrated our commitment to innovation and a network-centric focus at Lockheed Martin. Most recently, we successfully conducted a test at White Sands, just after the close of the quarter, where a PAC-3 MSC missile intercepted an incoming target using location data provided by the Terminal High Altitude Area Defense Network, or THAAD weapon system. This demonstrated a critical capability to expand the defended area through integration of existing systems. In July, the US Army, US Air Force, and Lockheed Martin together demonstrated the ability to integrate F-35 intelligence, surveillance, and reconnaissance track data with the US Army's integrated battle command system during an orange flag evaluation near Edwards Air Force Base, California. This evaluation just demonstrated the value of utilizing data from the F-35 enable enhanced integrated air and missile defense such as pac-3 engagements this accomplishment is one of the first instances of demonstrating our 5g.mil concept with the f-35's compute and data storage capabilities enabling that f-35 to serve as an edge node of a network-centric operational architecture this concept and the ability to share data across platforms is another example of our commitment to adopting a joint all domain operations mindset to maximize the collective value and power of our customers' highly capable assets and our platforms. Networking every sensor with every shooter across the services and across domains will provide real-time data to maximize the effectiveness of our total force. These few strategic highlights represent just a few of how we will pursue a strategy to help our customers meet emerging threats with 21st century capabilities, as well as create a powerful deterrent to future military conflicts. We continue to engage industry as well as technology leaders from the commercial sector to explore collaboration and align technology roadmaps for transformational solutions for our men and women in uniform. With that, I'll turn it over to Ken.