RTX Corporation

Good day, ladies and gentlemen, and welcome to the Raytheon Technologies second quarter 2020 earnings conference call. My name is Ursula, and I will be your operator for today. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Ms. Kelsey DeBrien, Vice President of Investor Relations. Please proceed.

Good morning, and welcome to the Raytheon Technologies second quarter 2020 earnings conference call. With me on the call today are Greg Hayes, our Chief Executive Officer, Toby O'Brien, our Chief Financial Officer, and Neil Mitchell, our Corporate Vice President of Financial Planning and Analysis and Investor Relations. This call is being carried live on the Internet, and there is a presentation available for download from the Raytheon Technologies website at www.rtx.com. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding net non-recurring and or significant items and acquisition accounting adjustments, often referred to by management as other significant items. The company also reminds listeners that the earnings and cash flow expectations and any other forward-looking statements provided in this call are subject to risks and uncertainties. RTC's SEC filings, including its Forms 8K, 10Q and 10K provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statement. Once the call becomes open for questions, we ask that you limit your first round to one question per caller to give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue as time permits. With that, I will turn the call over to Greg.

Thanks, Kelsey, and good morning, everyone. I'm on slide two of the webcast here. Let me just begin by providing an update on some of the current priorities and highlights from Q2. As everyone knows, these last several months have been incredibly challenging. However, we remain focused on supporting our key stakeholders, and that starts with ensuring the health and safety of all of our employees. That is our number one priority. We also remain committed to delivering for our customers across commercial aerospace and defense. On the defense side, that means providing our customers with mission-critical products and services in the U.S. and internationally. On the commercial aero side, that means supporting our customers during this very difficult time to make sure that planes fly safely, especially as airlines begin to ramp up capacity again. We also continue to engage with our suppliers, ensuring that they have the support needed to maintain stability, while also working with them to make their processes more efficient. Just a word on the merger. We're just about 100 days into this, and I would tell you that we remain focused on the integration across the organization and on delivering our cost and revenue synergies. While we created Raytheon Technologies during the pandemic that is causing every company to work in new ways, I would tell you that the integration is progressing remarkably well. There was, of course, significant planning underway before the pandemic, and the two teams have come together seamlessly. to figure out how we can operate more productively as an organization and how to better serve our customers. I'm encouraged by what we've accomplished to date, and I remain confident in our ability to deliver on our Synergy targets, which is over a billion dollars in gross savings. Also, it's important to note that our liquidity position and balance sheet remain very strong. And, of course, we remain committed to the dividend. At the end of the second quarter, we had over $7 billion in cash and ample financial flexibility. And that's before the approximately $2 billion in net proceeds from the previously announced divestitures, the remaining two of which are expected to close before the end of the third quarter. At the same time, of course, we remain laser focused on those things that we can control. That is cost and that is cash. And we're on track to achieve $2 billion in cost savings this year and $4 billion in cash conservation actions by the end of the year. This, of course, is focused on our commercial aero businesses. The good news is we've already completed nearly 30% or seen about $600 million in savings in Q2 of our cost actions and about a billion dollars of cash conservation or 25% of our target there. That's, of course, better than we expected. And Tilby will give you more color on the expected cadence of these actions for the rest of the year. Really a kudos to the team on the commercial aero side for their decisive actions in getting after all this. Overall, while the pandemic continues to deeply impact our commercial aero business, our balanced portfolio includes a resilient defense business that will help us offset near-term commercial aero headwinds. However, the effects of the pandemic on the economy and commercial aerospace has proven to be a lot worse than what we originally projected even a few months ago. And for that reason, we now would expect it will take at least until 2023 for commercial air traffic to recover to 2019 levels. As a result, we're evaluating what further actions and structural changes we need to make to our business to adjust for a prolonged recovery timeline. And we'll be back later this year with some more details on that. These are difficult actions, but ones that are necessary to preserve our financial strength. And so we're focused on what we can control and proactively manage And we're going to wait for the upside to come, and it will. Moving to the right side of the page, Raytheon Technologies has several notable highlights in the quarter. It was previously announced our missiles and defense business was selected by the U.S. Air Force to develop the Long Range Standoff Weapon, or LRSO. It's a new franchise that has a lifetime value of over $10 billion. And in June, the missiles and defense business also booked a $2.3 billion award for the Tippy-2 radars for the Kingdom of Saudi Arabia. These are significant franchises that will fuel our defense growth over the next several years and beyond. On the commercial aero side, the demand environment was weak as expected, but we did achieve some milestones in the quarter. We continue to support airlines and the industry in efforts to promote safe and healthy flying. At Collins, which is a innovative company in their DNA. They're working with airline customers and across industry forums to develop solutions for enhanced aircraft and airport sanitation. They're looking at ways to enhance contactless travel with biometrics and health monitoring. And we filed nearly 100 ideas for provisional patents associated with these technologies. We expect these solutions to start entering service in the back half of the year, and they highlight how Collins Aerospace is poised to help the industry move forward well into the future. At Pratt, we announced that China Express Airlines has taken delivery of its first GTF-powered A320neo aircraft. That brings their total fleet to a milestone of 50 aircraft, with 28 more A320 aircraft on order. As I said before, we're on track to deliver on over a billion dollars of gross run rate synergies by 2024. We've already completed the consolidation of the legacy Raytheon segments from four into two. And the corporate restructuring is well underway. We have more than 500 synergy projects that we've identified and are being matured. And remember, this is on top of the Rockwell Collins synergies. You'll recall we had $600 million of synergies targeted. We've achieved $300 million already. We've got another $30 million in this quarter and $90 million year-to-date. So we're well on our way to achieving that goal. I think importantly, though, we've also booked about $350 million of revenue synergies at Collins since the acquisition in late 2018. Toby will take you through the second quarter results, but given the uncertainties which still exist surrounding the pandemics and its effects, we will not provide a traditional outlook today. But Toby, I'll give you some color on how we're thinking about the rest of the year. So with that, let me turn it over to Toby.