Stephen C. Movius - Northrop Grumman Corp. Wesley G. Bush - Northrop Grumman Corp. Kathy J. Warden - Northrop Grumman Corp. Kenneth L. Bedingfield - Northrop Grumman Corp.

Ronald J. Epstein - Bank of America Merrill Lynch Rajeev Lalwani - Morgan Stanley & Co. LLC Peter J. Arment - Robert W. Baird & Co., Inc. Seth M. Seifman - JPMorgan Securities LLC Richard T. Safran - The Buckingham Research Group, Inc. Sheila Kahyaoglu - Jefferies LLC Noah Poponak - Goldman Sachs & Co. LLC Carter Copeland - Melius Research LLC Jon Raviv - Citigroup Global Markets, Inc. Hunter K. Keay - Wolfe Research LLC Robert A. Stallard - Vertical Research Partners LLC Cai von Rumohr - Cowen & Co. LLC David Strauss - Barclays Capital, Inc. Samuel J. Pearlstein - Wells Fargo Securities LLC

Good day, ladies and gentlemen, and welcome to Northrop Grumman's second quarter 2018 conference call. Today's call is being recorded. My name is Jamie, and I will be your operator today. At this time, all participants are in listen-only mode. I would now like to turn the call over to your host, Steve Movius, Treasurer and Vice President, Investor Relations. Mr. Movius, please proceed. Stephen C. Movius - Northrop Grumman Corp.: Thanks, Jamie. And welcome to Northrop Grumman's second quarter 2018 conference call. Before we start, please understand that matters discussed on today's call constitute forward-looking statements pursuant to Safe Harbor provisions of Federal Securities Laws. Forward-looking statements involve risks and uncertainties, which are detailed in today's press release and our SEC filings. These risks and uncertainties may cause actual company results to differ materially. Matters discussed on today's call may also include non-GAAP financial measures that are reconciled in our earnings release. I would also remind everyone that our results reflect the adoption of new accounting standards for revenue recognition and pension accounting. Schedules 4 and 5 of our earnings release present comparable prior-period information, recast to reflect the adoption of these new standards. We have posted a presentation to our Investor Relations website that summarizes updates to our guidance and provides an update to the three years of pension information we provided with our initial 2018 guidance. On the call today are Wes Bush, our Chairman and CEO; Kathy Warden, our President and Chief Operating Officer; and Ken Bedingfield, our CFO. At this time, I'd like to turn the call over to Wes. Wesley G. Bush - Northrop Grumman Corp.: Thanks, Steve. Hello, everyone, and thanks for joining us. I want to start the call by welcoming our new Innovation Systems team to Northrop Grumman. As you know, we completed the transaction with Orbital ATK on June 6, and we've established Innovation Systems as our fourth sector. As you can see from our second quarter results, Innovation Systems is already contributing. We expect this acquisition will be accretive on both a GAAP and a cash basis in 2018. It was another quarter of solid performance across our company, and I want to thank the entire team for their continued focus on execution. Second quarter sales grew 10%, reflecting continued double-digit growth at Aerospace Systems, largely driven by Manned Aircraft sales, higher Sensors and Processing volume at Mission Systems, and the addition of Innovation Systems. Our backlog increased to $52.2 billion, up $9.9 billion, which includes $8.7 billion of Innovation Systems backlog. Net earnings and diluted EPS each increased 24% in the quarter, driven by higher sales and higher segment operating income, as well as improvement in both pension and taxes. These positives more than offset transaction-related expenses. At the midpoint of the year, we're increasing our full-year 2018 earnings per share guidance to a range of $16.60 to $16.85. During the quarter, cash from operations totaled $875 million, an improvement of nearly $400 million over last year, primarily due to improved working capital performance. Year-to-date, cash from operations totaled $638 million, an improvement of nearly $600 million over prior-year results. Regarding capital deployment, the strategy is unchanged. Our first priority is investing for profitable growth, followed by managing the balance sheet, and returning cash to shareholders through dividends and share repurchases. Capital spending during the quarter reflects our continued investment in support of long-term profitable growth and affordability for our customers. We continue investing to expand our workforce, ramp up on large new programs, and pursue and win new business opportunities. In addition to the acquisition, we made capital investments of $199 million in the second quarter and more than $500 million year-to-date. We continue to expect capital expenditures of approximately $1.15 billion in 2018. We're updating our free cash flow projection to a range of $2.4 billion to $2.6 billion. In terms of the balance sheet, we're focused on near-term debt reduction as well as ensuring our pension plans remain well-funded, and we continue to return cash to our shareholders. In 2018, we've increased the dividend 20%. And I'm also happy to report that with the closing of the Orbital ATK transaction, we have resumed share repurchases. Overall, we're pleased with our team's accomplishments during the first half of the year. In terms of our market environment, we continue to see positive trends for defense spending with the U.S. and with our allies. There is clear recognition that we need to invest in both readiness and modernization. As I look at the opportunity set for our company, particularly with the addition of Innovation Systems, I feel very good about our alignment with our customers' current and emerging needs, and our ability to execute on our current portfolio of programs as well as capture important new opportunities going forward. We encourage Congress and the administration to continue making steady progress to reach a timely agreement on FY 2019 appropriations. A couple weeks ago, I announced that I'll be stepping down as CEO on January 1. I suspect some of you may be asking why now and wondering if there's some reason you should understand regarding my timing. So I want to be very transparent about my reasons with all of you, as I have been about the other decisions in our company over the years. It starts with a strongly held personal belief that healthy organizations use the dynamic of change to continuously improve themselves and to support a culture of excellence. Over the course of my tenure in my current role, we've made many changes in our portfolio, in our approach to taking on new business and how we drive performance and I believe, most importantly, in our culture. I feel these changes have been key to the value that we've created for all of our stakeholders. Healthy change requires new leadership perspectives from time-to-time, and this includes new perspectives at the CEO level. This is my ninth year as CEO and, as you should expect, getting succession right is very important to me. I'm proud that we have a disciplined and thoughtful approach to succession planning at all levels in our company. And with a long tenured CEO, good succession planning also means having the successor take on the role in a timely manner when they are ready to take the company to the next level. We are so fortunate to have a leader who is now ready to become our next CEO and to lead us forward. Many of you already know Kathy. So I don't have to tell you that she is an outstanding executive, but I will anyway. Kathy is absolutely the right person to take this on. She is a great leader. She has a wonderful depth and breadth of knowledge about our company and our industry, and her leadership approach is based on the core values of our company. As I've said in my message to our team announcing this transition, I have high expectations for what this company will accomplish during Kathy's tenure as our CEO. As a part of our transition process, Kathy, Ken, Steve and I will have several opportunities to meet with many of you over the coming months. Kathy and I will be very focused on ensuring we execute a seamless transition through the end of the year. And I've also committed to our board that I will remain as Chairman through July of 2019, about a year from now. So let me turn the call over to Kathy to give us an update on our company's operations in the second quarter. Kathy? Kathy J. Warden - Northrop Grumman Corp.: Thanks, Wes, and good afternoon, everyone. Before I review operations and provide an update on Innovation Systems integration, I want to take this opportunity to thank the board of directors for electing me to succeed Wes as Northrop Grumman's next CEO. Since joining Northrop Grumman in 2008, Wes's mentorship and example have been invaluable to my growth as a leader. As I assumed increasingly larger P&L responsibilities within our company, I was fortunate to work with Wes. Our values, decision-making, and focus on performance are well aligned. So thank you, Wes. I look forward to working alongside of you for another year to ensure a smooth transition for all of our stakeholders. I am very excited about where Northrop Grumman is today and, more importantly, where our team can take the company going forward. Our value-creation opportunity is as robust as ever. Now let me touch on integration of Innovation Systems. With the close of the transaction, 15,000 new employees joined Northrop Grumman, and I want to welcome them to our company. We stood up Innovation Systems as our new fourth sector on June 7 with their existing operations management team in place. When we announced the transaction, we said that we expected to achieve $150 million of annual cost synergies by 2020, and we estimated it would cost about $75 million to achieve those synergies. We are on track to meet or exceed the cost synergy estimate. We expect to spend about $25 million this year to achieve cost synergies and $50 million in 2019. While IS has only been a part of Northrop Grumman for a few weeks, we're very excited about the opportunity our combination gives us to broaden our capabilities and offerings and provide innovative solutions to meet our customers' emerging requirements, while also creating value for shareholders and providing expanded opportunities for our combined workforce. This is a combination that is compelling financially and strategically, and truly strengthens our foundation for long-term profitable growth. Turning to our sector highlights for the quarter, each of our sectors captured business and achieved program milestones that position us well for the long-term. At Aerospace Systems, in Manned Aircraft, we continue to ramp up on restricted activities and the F-35. Sales increased by more than 40% on the F-35 program. And during the quarter, we achieved a 1.5-day production interval, or said another way, we're now producing one center fuselage unit every day-and-a-half. We delivered 32 center fuselages during the quarter, compared to 20 last quarter and 18 in the second quarter of 2017. We've completed delivery of all 94 units under LRIP 10, we've delivered 31 under LRIP 11, and we delivered our first unit under LRIP 12. We expect to deliver 116 F-35 center fuselages in 2018. I would also note that we reached an agreement with Lockheed Martin on LRIP 11 that supports continued affordability for the customer and incentivizes continued strong performance for our teams. In Autonomous Systems, the Prime Minister of Australia formally announced the initiation of the Australian Triton acquisition and the successful passage through their Gate 2 milestone. The initial authorization is for one air vehicle, with infrastructure to support the full fleet of six air vehicles. And in Space, the Air Force awarded Northrop Grumman a sole source contract for the initial phase of the Polar System for our nation's next-generation Overhead Persistent Infrared program. Next-gen OPIR will provide improved missile warning capabilities that are more survivable against emerging threats than the current generation SBIR system. We also plan to compete for the payload portions of the OPIR programs. Most of you are aware that NASA, based on an Independent Review Board recommendation, announced a new 2021 launch date for the James Webb Space Telescope. The IRB also reaffirmed the mission value of the world's premier science observatory. All the telescope's major elements are now at our Redondo Beach facility, where we have begun final integration and testing of this space telescope that will explore the origins of the universe and search for life beyond our solar system. In the second quarter, the spacecraft bus underwent a successful mechanical shock test, and the JWS team also separately powered up the two halves of the telescope, the Optical Telescope Element Integrated Science Instrument Module, or OTIS, and the spacecraft bus. These are critical steps in this phase of the program. Now turning to Innovation Systems. They launched an Antares rocket carrying a company-built Cygnus spacecraft to the International Space Station. Cygnus subsequently rendezvoused and berthed with the station to deliver 7,400 pounds of vital supplies and scientific experiments to support the on-board astronaut crew. Cygnus departed the Space Station on July 15 and it will conclude its mission on July 30. IS also conducted a successful motor case first test, an important milestone in the development of our new OmegA large-class space launch vehicle. And finally, we shipped the company-built ICESat-2 Earth science spacecraft to its launch site at Vandenberg Air Force Base. The satellite was designed, built, and tested at our manufacturing facility in Arizona and is scheduled to be launched this September. At Mission Systems, we continue to ramp up on the F-35 and SABR radar programs in the Sensors and Processing business area. The F-35 program plans to deliver 140 radars this year versus 90 in 2017. Our SABR team has secured its fifth production customer and now has orders for more than 400 systems, of which 56 have been delivered through the end of the second quarter. The F-16 Air National Guard upgrade program is progressing on schedule, with flight testing for Phase 1 to be complete this year and initial production deliveries to begin March of 2019. Our teaming agreement with Lockheed Martin positions us to support additional new F-16 buys and capability upgrades of existing F-16 fleets worldwide, highlighting SABR's superb capability, reliability, interoperability and long-term affordability. During the quarter, MS won an Air Force competition to sustain and modify critical-mission warning radars. The $866 million seven-year single-award IDIQ SMORS contract calls for sustainment and modification of our nation's worldwide network of ground-based radars. Our work on SMORS will uphold and enhance the Air Force's ability to detect missile attacks early, while also providing forces with critical situational awareness of objects in space. Through SMORS, Northrop Grumman will ensure the high availability of ground-based radar systems for Air Force Space Command. At Technology Services, the State Department awarded us a 10-year $850 million contract for its Consular Systems Modernization program. Our team will support the digital transformation of the systems supporting passport and visa application, and other Department of State Consular Affairs services. This is an important win for TS, and it reflects our strategy to build a TS portfolio focused on higher-end value-enhanced activities. We've taken numerous steps to position TS for profitable growth over the long-term, and we continue that process as we work with the Commonwealth of Virginia to support the transition of VITA to new service providers. We are addressing numerous new opportunities in the U.S. and with our allies around the globe. And we are excited about the long-term growth prospects enabled by our portfolio, including the revenue synergy opportunities offered by the addition of Innovation Systems. So, now, I'll turn the call over to Ken for a more detailed discussion of our financials. Kenneth L. Bedingfield - Northrop Grumman Corp.: Thanks, Kathy, and good afternoon, everyone. I'll add my thanks to our team for their efforts through the first half of the year. Today I'll briefly review our second quarter results and update our 2018 guidance. As you're all aware, in June, we updated our guidance for the addition of Innovation Systems but did not provide sector-level detail. I'll provide both company- and sector-level updated guidance today. Regarding the quarter, I'd note that we had strong awards, solid sales and earnings growth, including a partial month of IS results, offset somewhat by deal costs and a full quarter of net interest expense on the debt associated with the acquisition. Turning to sector results. Aerospace Systems had another quarter of double-digit sales growth. Sales for both the second quarter and year-to-date were up 11%. Higher volume in Manned Aircraft was the major growth driver for both periods, with restricted activities and the F-35 ramp-up accounting for most of the higher volume. Autonomous Systems and Space were also higher for both periods. Growth in Autonomous Systems reflects higher volume across a number of programs, and higher Space sales reflects growth in restricted activities and the Ground Based Strategic Deterrent program, partially offset by lower volume in unrestricted space. Operating income for Aerospace Systems is also up for both the quarter and year-to-date, with operating margin rates up 10.7% and 10.5% respectively. While AS margin rates continue to reflect a higher level of early-phase development work, the second quarter rate of 10.7% matches last year's second quarter margin rate and includes positive performance adjustments of $69 million from multiple restricted programs. These positives more than offset a negative adjustment on the James Webb Space Telescope program. Based on results of the first half, we are increasing our sales guidance for AS to approximately $13 billion. We now expect AS will have an operating margin rate of approximately 10.5%. Turning to Innovation Systems. For the period since close, sales totaled $400 million with a margin rate of 9.8%. For the 2018 post-acquisition period, we expect IS will have revenue of approximately $3 billion with a mid-10% operating margin rate. Turning to Mission Systems. Sales rose 1% in the quarter and 2% year-to-date. Sensors and Processing is the principal driver, with double-digit growth year-to-date due to higher volume for restricted, F-35, SABR and communications programs. Advanced Capabilities is also higher in both periods due to higher volume for several programs, including IBCS, partially offset by lower volume for JRDC and follow-on activity. Cyber and ISR volume declined in both periods due to program completions in the restricted ISR area. Mission Systems operating income decreased 8% and 3% respectively for the second quarter and year-to-date. Operating margin rate for the quarter was 12.2% and includes a forward loss provision on a program in Advanced Capabilities. In addition, last year's second quarter results included a Cost Claim benefit. Year-to-date, MS segment operating margin rate is 12.6%. For 2018, we continue to expect sales in the mid-to-high $11 billion range with an operating margin rate of approximately 13%. No change to prior guidance. Turning to Technology Services. Sales declined 10% and 7% respectively for the second quarter and year-to-date. Declines in both periods reflect our portfolios shaping as well as the program headwinds we've previously discussed. Declines in programs like VITA, KC-10 and JRDC are being partially offset by ramp-ups on new programs like SEMA as well as international activity. Technology Services operating margin rate was 9.1% for the quarter and 9.9% year-to-date. Second quarter operating income includes a negative adjustment on the VITA program. We received a notice of termination from the Commonwealth, which reduced the program's expected period of performance with the resulting impact on earnings. I would also note that last year's second quarter included a benefit for the Cost Claim. Based on year-to-date results, we now expect Technology Services sales will be in the low-to-mid $4 billion range with an operating margin rate of approximately 10%. As we roll all that up, we continue to expect sales of approximately $30 billion and a segment operating margin rate in the low-to-mid 11% range. We also continue to expect a high-11% total operating margin rate, reflecting $425 million for unallocated corporate expense, which includes a preliminary estimate of $175 million for amortization of purchased intangibles for the acquisition of Innovation Systems as well as approximately $55 million in full-year deal costs. Moving to pension, no change to prior guidance for total net FAS/CAS pension adjustment of $1.08 billion and no change to net interest expense of $520 million. Further, we now expect our effective tax rate will be in the mid-16% range. As Wes noted, we are increasing our 2018 EPS guidance to a range of $16.60 to $16.85, which assumes no change to our weighted average diluted share count. Regarding capital deployment, debt reduction is one of our near-term priorities. And during the quarter, we retired $850 million of Northrop Grumman notes, we redeemed $700 million of outstanding Orbital ATK debt on July 19, and we have another $500 million of Northrop Grumman notes we expect to retire in 2019. In the second quarter, we initiated a commercial paper program to enhance short-term liquidity as we deploy capital for value creation. Cash generation in the second quarter and year-to-date was much stronger than last year due to improved trade working capital performance. We continue to expect healthy cash flow from the enterprise this year, and we have raised the bottom end of our free cash flow guidance range by $100 million. We now expect free cash flow of $2.4 billion to $2.6 billion after capital spending of approximately $1.15 billion and a planned $250 million discretionary pension contribution. We look forward to continued strong performance from our team in the second half of the year. With that, I think we're ready for Q&A. Steve? Stephen C. Movius - Northrop Grumman Corp.: Thanks, Ken. Our formal remarks ran a little bit long today. So we're going to extend the Q&A session a bit past 1 o'clock. With that, I would ask each participant to limit themselves to a single question, so we can get through the queue. And with that, Jamie, would you open up the line for Q&A?

Your first question comes from the line of Ronald Epstein with Bank of America. Ronald J. Epstein - Bank of America Merrill Lynch: Hey. Good morning – actually, good afternoon, guys. Wesley G. Bush - Northrop Grumman Corp.: Hey, Ron. Kenneth L. Bedingfield - Northrop Grumman Corp.: Hey, Ron. Ronald J. Epstein - Bank of America Merrill Lynch: On the new segment there, the Innovation Systems business, clearly I mean there's a play there on GBSD. But how do we think about the broader business implications? There's been a lot of discussion lately about hypersonics. What does it bring to Northrop Grumman in terms of hypersonics? And then there's been a lot of discussion on classified space. So how does that segment, the acquisition, strengthen Northrop Grumman in those businesses? Kathy J. Warden - Northrop Grumman Corp.: Thanks, Ron. I will take that question. We are very excited about the portfolio of Innovation Systems because of a number of the areas you noted. Certainly, for GBSD, they will be a key partner for us on that program, as they also continue to partner with Boeing. But we also look beyond GBSD. And some of the areas you mentioned, hypersonics, this expands Northrop's portfolio, which has traditionally been more in the counter-hypersonics part of the market, to now also be able to add value in the weapon systems themselves. We also look at classified space, and we have traditionally worked with large, complex systems. This expands our portfolio to smaller systems and allows us to have a much more expanded offering to the national security space community. So, across the broad spectrum of things that Northrop Grumman has traditionally done, Orbital and ATK coming together expanded their portfolio, and now as part of Northrop Grumman, significantly expands our portfolio of offerings to our customers across a wide variety of the community.

Your next question is from Rajeev Lalwani with Morgan Stanley. Rajeev Lalwani - Morgan Stanley & Co. LLC: Hi. Thanks for the time. I guess, Wes and Kathy, congrats on your new role. Kathy, just more of an obvious question for you. As you go through the transition, what are your key priorities going to be for Northrop? Maybe what'll change versus what we've been seeing over the last few years? Kathy J. Warden - Northrop Grumman Corp.: Well, thanks for that question. Wes will be in place as CEO through the remainder of the year, and in exercising a smooth transition, I'll continue to focus on the successful integration of Orbital ATK, standing that team up as our new fourth sector. We also are working the capture of significant opportunities, both domestically and internationally, and we're focused on solid-segment operating performance as we ramp up on critical development and production program. But as I look to the future, there are a number of areas that I believe have served us well. First, our performance-driven culture, also our approach to capital deployment, and the way we have aligned our team's incentives to drive performance for all of our stakeholders. So these are areas I certainly look to continue. I'm also confident we have a portfolio that's well-aligned to our customers' needs for today and well into the future, but of course, I'm going to continue to assess the portfolio, the structure, our strategies of the organization to make sure that we do incorporate change to enhance value for our customers, our shareholders and our employees.

Your next question is from Peter Arment with Baird. Peter J. Arment - Robert W. Baird & Co., Inc.: Thanks. Good afternoon. Congrats, Kathy and Wes. Hey, just Kathy, on the Innovation Systems particularly, this has got a higher percentage of fixed-price contract mix. It's also got a higher percentage mix of international customers. And just thinking about just the long-term margin profile of this segment, can this rival Mission Systems, excluding some of the amortization costs from the deal? Thanks. Kathy J. Warden - Northrop Grumman Corp.: Thanks, Peter. When we look at targets for our segments, we're looking at Innovation Systems in that 10% to 11% range. It has the features you noted, with strong fixed-price component as well as international that tend to drive margins up. So it's a very broad portfolio of capability as well and they have tended to focus on very innovative capabilities. So, when we set benchmark, that would be the 10% to 11% that I talked about. Taking their portfolio, looking at other companies' similar portfolios, that's the range that we would see them in. And we, of course, will drive to achieve better in that benchmark performance.

Your next question is from Seth Seifman with JPMorgan. Seth M. Seifman - JPMorgan Securities LLC: Thanks very much. Good morning, everyone. And congratulations, Kathy and Wes. Ken, I wonder if you could talk a little bit about Technology Services. The segment was generating about $130 million or so of EBIT on a quarterly basis fairly consistently. We had the step-down in this quarter. The guidance implies it's going to step-up again a little bit in the back half. But as some of the contracts wind down here, how do we think about where this business bottoms out and where you could start growing again in Technology Services? Kenneth L. Bedingfield - Northrop Grumman Corp.: Sure, Seth. Thanks for the question. I'll start, and Kathy may have some color she wants to add as well. So I think a little bit of a multi-part question on both the margin as well as the sales profile. And from a margin perspective, we've seen that TS has been one of the strongest, if not the industry-leading, margin performer in its segment. And I would say that we saw a little bit of a challenge this quarter in terms of dealing with the early termination impact of the VITA program, which had some impact on margin. We are holding the full-year margin rate estimate that we started out the year with, which does indicate that we have the ability to perform in the second half of the year to get to our 10% approximate margin rate for TS. And we feel pretty good about the team's ability to do that. From a sales perspective, I would say that we're seeing the continued impact of those headwinds, KC-10, JRDC. TS did a lot of the work on an inter-company basis for MS on the JRDC program, as well as now the headwind from VITA as that is expected to terminate earlier than we had previously considered. That being said, they have had some wins in the sector. We've talked previously about contract messaging as well as the SEMA program, and now starting to see some of the international starting to take off. So I wouldn't want to necessarily declare when that growth will start to come again, but we certainly look that as we get some of these headwinds through the system, TS should have the ability to grow its business in line with the market as we look forward over the longer-term. Kathy J. Warden - Northrop Grumman Corp.: And I'll just add that we've been on the journey of reshaping the TS portfolio for a couple of years. We are seeing VITA with the completion as our last large IT outsourcing contract. And so as we look forward to the areas where we've been growing the portfolio, like that modernization of both our own platforms and the platforms of others, as well as some of the higher value activities that I mentioned with the win with the Department of State this quarter, we really are at a place where the growth is now coming from areas that we feel TS is both very competitive and adds significant value to our customers' needs. So we are encouraged about what this team is going to be able to accomplish in these areas of focus.

Your next question comes from the line of Richard Safran with Buckingham Research. Richard T. Safran - The Buckingham Research Group, Inc.: Wes, Kathy, Ken, and Steve, good afternoon. Wes, just want to say best of everything. For whatever it's worth, I think you did an absolutely terrific job. Kathy, I wish you all the best. And I have a... Wesley G. Bush - Northrop Grumman Corp.: Thank you. Kathy J. Warden - Northrop Grumman Corp.: Thank you. Richard T. Safran - The Buckingham Research Group, Inc.: Well, you're welcome. I have a question on Mission Systems. Ken, I want to know if you can talk a bit more about what was happening there. What was the reason that costs rose so much on the Advanced Capability program that you took a forward loss on? And could you quantify the amount of what the forward loss was? Just trying to get the margin impact. Now, I may have missed this in your opening remarks, but was the reason that cyber and ISR volumes were down in the quarter just reflects some timing? Or was this all just cyber and ISR programs just winding down? Thanks. Kenneth L. Bedingfield - Northrop Grumman Corp.: Sure. Let me take maybe the second part of the question first, Rich. And we have a business area that we refer to as cyber and ISR. But largely the impact that we're seeing is in the restricted ISR area of that business. And so we're really seeing that there were some program completions, as expected, I would say, that have created a little bit of a headwind on the sales side. But we are seeing that Sensors and Processing is certainly more than offsetting that as those programs are working their way through the life cycle. And as we look forward for MS over the long-term, we should see a nice and robust growth profile. With respect to your question on the Advanced Capabilities program, I would say that clearly the amount of the forward loss was not material, otherwise we would have disclosed it in the 10-Q as we did the amount of the pickup on the multiple restricted programs at Aerospace. So not going to put a number on it today, but certainly had an impact on the trend from a margin rate perspective, which is why we noted it in the document, both the 10-Q and the ER. But certainly not of a materiality level that we saw on the other. From your question on what drove the loss, I would say we have seen some technical challenges that we are working our way through. Those challenges are on a cost-type program, but we are seeing that it's had some impact on a fixed-price option that we have related to that program. And this is driving a bit of a cost growth on that fixed-price option, which we think is likely to be exercised by the customer, and therefore we have recorded that as a forward loss. Kathy, I don't know if you want to add any... Kathy J. Warden - Northrop Grumman Corp.: I'll just note that we've maintained our guide for Mission Systems as we look at the headwinds on the top line, about $225 million for two programs that, as Ken said, completed. We see great growth in Sensors and Processing. I talked about some of that earlier in the call. And the fixed-price mix is up in Mission Systems in these areas where we are growing in production. So I'm confident that, as we look forward, both top line and operating margin will continue to be healthy in Mission Systems.

Your next question comes from the line of Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu - Jefferies LLC: Good morning, and congratulations, everyone. Wesley G. Bush - Northrop Grumman Corp.: Thank you. Sheila Kahyaoglu - Jefferies LLC: I was wondering if you could maybe talk about the moving pieces within working capital and, now with the inclusion of OA, how we should think about those and maybe the opportunities? Kenneth L. Bedingfield - Northrop Grumman Corp.: Sure, Sheila. I appreciate that. And I would say that we've seen some improvement in working capital this year, and we are happy to see that starting to turn to the positive for us. We have been building working capital for a couple of years, as we saw some long-term production programs that had some liquidations that were tied to deliveries. Those deliveries are starting to occur. We're also very focused on thinking about how we get the right cash terms for the type of contracts that we are taking on. We had seen the change in the DFARS have an impact on that looking back a couple of years as well. So I would say some favorable working capital performance for us. From an Innovation Systems perspective, I would say that there are some programs in the backlog that have had some higher unbilled balances. CRS is one that comes to mind. There are some significant milestone events that will drive some payments. The A350 program is one that also had some cash headwinds reflected with it, and we expect that that is starting to turn here as we look forward. So we're excited about working capital performance so far year-to-date. Obviously, a lot of work to do in the second half of the year, but we're working hard on it, on the entire portfolio including Innovation Systems. And we look forward to strong cash generation for the second half of the year as well as, as we look out into the future, this is a business that should be growing, managing working capital and generating strong cash.

Your next question is from Noah Poponak with Goldman Sachs. Noah Poponak - Goldman Sachs & Co. LLC: Hey. Good afternoon, everybody. Kathy, congrats on the appointment. Wes, congrats on the retirement and a fantastic career. Wesley G. Bush - Northrop Grumman Corp.: Thank you, Noah. Kathy J. Warden - Northrop Grumman Corp.: Thank you. Noah Poponak - Goldman Sachs & Co. LLC: Ken, I wanted to try to dig into the margins a little bit. And I know you just kind of passed on the quantification of the item in MS, but I'm getting a lot of questions from your stakeholders on the size of the reach forward at MS and the VITA and at TS. Not sure if – I guess maybe I'm just asking again if you'd quantify those or maybe if you could give us the factual threshold where you have to disclose something like that so we can make an estimate, just because it did impact the margins. And then, looking forward, I guess I'm wondering are you at the low watermark for both contract-type mix and risk retirement potential? Because cost plus as a percentage has been moving higher and EACs as a percentage have been moving lower, both reasonably significantly. I wonder how those trend from here. Kenneth L. Bedingfield - Northrop Grumman Corp.: All right. So, on the first part of the question, I guess what I would say is, again, don't want to put a number on the individual items that we disclosed in order to give a sense of what's going on in the business and understand the trends. I would say, clearly, we think about materiality and, in reality, significance really as a matter of judgment and not any magic number that we put on it. We certainly did disclose the items on the restricted programs in Aerospace Systems, which was $69 million. So I guess that puts a number on the upper-bound for you. And with respect to those items, look, they're largely behind us. We feel pretty good about the fact that we've got the issues related to those programs addressed and had an impact on the quarter. We disclosed it, wanted to make sure you understood what it was. But not a material or even significant impact for putting a number on there. And as we think about it, we held guidance on margin rate for both MS and TS, which should indicate that they've got the ability to perform in the second half to more than cover some of those issues that we experienced in the second quarter. So, from a contract-type mix and risk retirement perspective, I think my view on that, Noah, would be that I don't necessarily think that we have sort of run out of runway on that perspective. I think we have been working hard to try to make sure that we reflect our best estimate of operating earnings as early as possible in the life cycle of a program and making sure that we are taking those increases along the life, and historically, there may have been a little more waiting until a little bit later in the life of the program, but we try to make sure we're always reflecting our best estimates. And so we've seen that our, what I'll call, core margin rate has come up a bit in the last couple of years, and I think that's really what's driving the lower amount of risk retirements is just moving more of the earnings into the core earnings rate, or baseline rate maybe I should call it, than into the earnings adjustments themselves. I would also note a little bit of a quirk this quarter. The forward loss on the fixed-price option at MS is technically not an earnings adjustment because the option hasn't yet been exercised. So the forward loss is reflected in the margin rates, but it's not in the schedule above. So, that can have some impact in the analysis as well. But the bottom line is this business can generate strong margins. I don't see any change in its ability to drive margins. We haven't changed our benchmark, strong performance by AS in the first half of the year and strong expected performance for all the sectors for the full year of 2018.

Your next question comes from Carter Copeland with Melius Research. Carter Copeland - Melius Research LLC: Hey. Good morning, all, and congrats on the transitions. Wesley G. Bush - Northrop Grumman Corp.: Thank you. Kathy J. Warden - Northrop Grumman Corp.: Thank you. Carter Copeland - Melius Research LLC: Wes, if you want to take up golf more seriously, give me a call and I could use an excuse to get out of the office. Wesley G. Bush - Northrop Grumman Corp.: Thanks, Carter. Carter Copeland - Melius Research LLC: Look, at the risk of being overly blunt, I just want to probe a little bit on this whole program performance thing, since clearly the stock is down a lot today and I think that's why. And I guess I'll just go back to what I asked last quarter. The headlines on James Webb point to, I guess, sort of performance that I would characterize as maybe atypical from what Northrop has done over the last decade or so. And I get it that a lot of the technology is first-of-a-kind. But Northrop Grumman's a company where lots of things are being done for the first time with bombers or satellites or autonomous aircraft. And so this quarter you guys gave the first forward loss I think in a decade and, of course, the negative adjustments you talked about. And it sounds like from the commentary, if we put VITA aside since it seems more like a simple termination, it sounds like technical risk identification is the similarity between those two downers that you had. And I want to kind of go back to the same question from last quarter. Are these challenges isolated? Or do they reveal anything that changes how you think about risk identification, where it's appropriate to set booking rates? As a detailed program performance person, what's the postmortem that you take away from the analysis of those things since they have been somewhat atypical over such a long time at Northrop? Wesley G. Bush - Northrop Grumman Corp.: Yeah. Carter, it's Wes. Let me reflect on that since I've probably got the most historical perspective on it than to bring you current. And I'll just take each of them as you described them. But we'll start with kind of a broader view. I really like what we've done in our company. And as I said in my opening remarks, this goes to sort of the core of our culture and the enterprise to figure out how to quantify risk, how to manage risk, and to execute our programs better. If you turn the clock back quite a few number of years ago, we were really struggling on that. And as you know, years ago, we instituted a very robust set of changes, and we've maintained those changes. In fact, it's become just core to how we operate. Does that mean we're perfect? No, we're not perfect. Clearly, if we're going to continue to help our customer community press the edge, there will be some things that we don't get exactly right, but they need to be very few and far between. And we have two, as you mentioned, and I think it is appropriate to set aside VITA. We've been very clear for a long time about our intent to exit that business and do it in a way that created a smooth transition for the Commonwealth. We were committed to supporting them through that process. And I would say on a very positive note with respect to that one, that transition was enabled a little bit faster than originally conceived. So I view that as very, very supportive of our portfolio action. But let me take the two that you had mentioned. So, first on James Webb. On James Webb, this is a program that we took on quite a number of years ago, a decade-and-a-half ago actually, with the intent knowledge at the time that there was going to be a lot of invention on the program. We have succeeded in that invention. It is a remarkable engineering accomplishment – scientific and engineering accomplishment to have gotten ourselves through that invention. And now we're down to the phase of actually integrating the final parts together. And inevitably, and this is how we do these types of programs and why we do what we do, we're going to test the heck out of this thing because we only get one shot at it to launch it. And we're going to make sure we find every little thing. Unfortunately, when you're at the very end stage of a program, finding a little thing propagates to the big thing. And that's what we're experiencing. And we and NASA – and I have to give NASA a lot of credit for the intensity of focus and their stick-to-it-ness with a flagship program like this. But we're working our way through it, and I am absolutely confident that we are going to launch something that our nation is going to be so incredibly proud that we did, we together. So that, while it's tough, we're sticking it out, and we're going to make sure we find out whatever the things are to be found as we go through the testing, and we're not going to launch it until it's right. That's what we do, and we're intent on making sure that it comes out right. With respect to the forward loss item, I think it's been covered rather extensively here. And I'll just say, broadly, this was a case where the technical requirements were, again, similar to what we do in other areas, quite extensive. And with respect to our risk management, I think we found a flaw in our process with respect to this particular class of technology and the way we looked at production. And so you might imagine we're treating that as an investment that we're going to run through the rest of the company and make sure we don't ever have that one pop up again, just as we've done with other issues that we have found over time. And I'm confident we'll get it right on this program as well and be in a place where the customer is going to be just delighted with the capability that comes through it. But we signed up to something, once again we're going to make sure that we follow through on our commitments as we always do, and that's the reason we went ahead and recognized this on a go-forward basis. But to your question about is there something endemic or are these more isolated, I see them as isolated cases. There are clearly learnings from each. And as I said, we're not perfect but we sure are striving for perfection here at Northrop and that's the way I would characterize what I'm seeing with these two issues. I feel very good about program execution across the enterprise. And I'll just add that as we've brought Innovation Systems on and we've taken a good hard look at how they're performing and the way they're going about their business, I see that discipline of program execution at Innovation Systems as well. So it's going to be another very strong culture match of a kind as we bring the two businesses together, and I'm excited about that. But I very much appreciate the question, Carter. Thank you.

Your next question comes from the line of Jon Raviv with Citi. Jon Raviv - Citigroup Global Markets, Inc.: Hi. Good afternoon. And congratulations to Kathy and Wes. Kathy J. Warden - Northrop Grumman Corp.: Thanks, Jon. Wesley G. Bush - Northrop Grumman Corp.: Thank you. Jon Raviv - Citigroup Global Markets, Inc.: At the risk of oversimplification, guys, the number of segments that Northrop has had over the years has shifted around a little bit and you recently had a nice consolidation of the three. Now we're at four. Obviously, Orbital just sitting in IS, maybe there's some opportunities there. So, just now that the deal is closed, what are some of your perspectives on organization and portfolio at this point? Where do you see the opportunity to pull some levers in that organization and to what effect do you usually make those sorts of decision? Kathy J. Warden - Northrop Grumman Corp.: Thanks for the question, Jon. As we have brought on the team and stood up Innovation Systems, we're taking this opportunity to really understand the portfolio through revenue synergy to identify where else in the company we can work together to realize that synergy. And we're already off to a strong start. We've talked about some of the areas already, like Space, particularly National Security Space and the recapitalization that we see going on there, and the great work that our teams are already doing to begin working together. We've also talked about missile defense, and even as we look forward into smart munitions, that's another area of synergy opportunity. So it will be a process over the next period of time to really assess where that alignment should be in the future. We believe that in the near-term, it's best to keep that team organized together. They had recently gone through the integration of Orbital Sciences and ATK, and done a lot of good work in realizing their own synergies in coming together as a team. And we want to have a smooth transition for that team so as to take advantage of the growth that they already were experiencing, which was quite rapid if you look back at their first quarter performance year-over-year, they experienced significant growth. We want to ensure that they are able to continue to stay focused on both that growth attainment as well as their program performance, and that anything we do to change the organization structurally is done very thoughtfully.

Your next question is from the line of Hunter Keay with Wolfe Research. Hunter K. Keay - Wolfe Research LLC: Hi, everybody. Thank you. Wesley G. Bush - Northrop Grumman Corp.: Hi, Hunter. Hunter K. Keay - Wolfe Research LLC: Wes, congratulations, by the way, both you guys. Wesley G. Bush - Northrop Grumman Corp.: Thanks. Hunter K. Keay - Wolfe Research LLC: Sure. The positive performance adjustments on restricted programs at Aerospace, is that related to B-21 as much as you can say? And how do you think about progress on that program, given the upcoming CDR that the Air Force itself has publicly talked about? Thank you. Kenneth L. Bedingfield - Northrop Grumman Corp.: Hunter, I would say that there's not a lot – actually, there's nothing that we're going to be able to say beyond what's in the documents. The positive earnings adjustments at Aerospace were related to multiple restricted programs. And with respect to program performance and progress on the B-21, I would simply just refer you to comments made by the Air Force as probably the best place for you to get information on that. Hunter K. Keay - Wolfe Research LLC: All right. Thank you. Wesley G. Bush - Northrop Grumman Corp.: Hunter, I'll just add, we're really proud of our team. They're doing a great job for us.

Your next question comes from the line of Robert Stallard with Vertical Research. Robert A. Stallard - Vertical Research Partners LLC: Thanks very much. Good afternoon. Wesley G. Bush - Northrop Grumman Corp.: Hi, Rob. Kathy J. Warden - Northrop Grumman Corp.: Hello. Robert A. Stallard - Vertical Research Partners LLC: Wes, Kathy, a question for you, either collectively or individually. There's been obviously the news recently about peace breaking out in the Korean Peninsula, or potentially. And also we've had the NATO summit as well and various things going on there. I was wondering how this has translated through to what you're hearing from your customers. Have you seen any change in Asian demands as a result of what we've seen? Any clearer than any change in Europe? Wesley G. Bush - Northrop Grumman Corp.: So we actually see demand picking up in both arenas. You can look at very, very narrow focused events in one region or another and try and reach conclusions on it. But you really have to look at the big picture. And the big picture, if you just look at Asia Pacific for just a moment, the nations all see very, very – I would characterize it as high-risk potential on their horizon with the growth in some nations, both in their economic capacity but also their intentions in terms of their behaviors, causing many of the nations, many of our allies throughout that region to realize that they are going to need to continue to increase their investment in their own security. So that region in particular, I think as we think about the future, poses a significant both opportunity for us to be supportive of our allies but also a challenge for many of them to sort through how they're really going to achieve their security objectives both through the construct of allied partnership but also in the construct of their own security investments. And interacting with the leaders across Asia Pacific, you can just see that dialogue ongoing all the time. If I look at Europe, Europe too has a variety of issues and concerns that it's going to have to address. And I think a lot of that was evident in some of the recent summits and discussions about investments that the nations need to be making. And that's not all just prompted from U.S. pressure, clearly some of it is. But they recognize themselves that their own security environment is changing and that they need to take a more aggressive approach to investing in their security, again, in cooperation across all of our allies. I think we all recognize that we're in it together. We've got to make sure that we are capable of working together, both in an operating construct but also in a technology construct, to be able to do the things that we're going to need to do going forward. So I don't want to sound like an alarmist. That's not the intent. But the message is, clearly, from a market environment perspective, that our allies are going to be counting on us, and we're, as a company and I would say more broadly as an industry, stepping up to make sure that we're going to be there for them. Kenneth L. Bedingfield - Northrop Grumman Corp.: And, Wes, I might just add that we are seeing in fact this year strong international sales growth. And as we look forward, international growth remains a critical part of the strategy as well as ultimately what we believe is our ability to grow this business. Wesley G. Bush - Northrop Grumman Corp.: Yeah.

Your next question is from Cai von Rumohr with Cowen & Company. Cai von Rumohr - Cowen & Co. LLC: Yes. Thank you very much. And let me join in the congratulations to you, Wes. I've probably seen you at work longer than the other guys and always been (58:06)... Wesley G. Bush - Northrop Grumman Corp.: It's been a lot of years. Cai von Rumohr - Cowen & Co. LLC: So yesterday, Lockheed Martin that has a mix somewhat similar to yours basically had a significant increase in their sales guidance and earnings guidance for this year that really touched every single one of their divisions and cited new wins put on contract earlier than they expected and quicker flow-through of the FY 2018 kind of budget add-ons that were done in March as the reasons. Could you comment, by your business areas, what are you seeing in that respect? Kenneth L. Bedingfield - Northrop Grumman Corp.: So, Cai, maybe I'll start on that and then I'll let Wes and/or Kathy add color as they see fit. But maybe I wouldn't want to comment on anyone else's guide or their updates relative to that. But if I think about where we were for the year, when we gave our initial guide in January, we had a pretty strong, I would say, amount of growth in our sales guide. And you can pick whether you want to think back to actual 2017 on the 605 basis or on a 606 basis, but our view was that we had a strong sales guide that indicated that we could grow this business in 2018. And we continue to believe that, and that's relative to the three sectors' organic growth that we had at that point in time. If you think about Innovation Systems, it's had strong growth. You can see just the partial month since the acquisition closed, $400 million in sales, and they themselves had a strong first quarter of growth as well prior to the acquisition closing. And then, just thinking about the guide as well, we continue to hold strong margins in all of the sectors for the full year. So we feel pretty good about our guide. In terms of the impact of the 2018 budget increase you referenced. I would say that we've seen some of that impact in a few areas of our business, probably more so in Innovation Systems than others, and some of that being in the ammunition and missile side. Kathy, I don't know if you want to comment further on any of those areas. Kathy J. Warden - Northrop Grumman Corp.: Yes. So, Cai, I agree. We see strong budget outlook. And in response to that, our portfolio aligns very well to where we expect that growth to come from. Missile defense, munitions, space are all areas where we're seeing increase in growth and also focus in our own portfolio. And we do anticipate recognizing some of that opportunity within the year. And as Ken said, it was reflected in our guide earlier in the year.

Your next question comes from the line of David Strauss with Barclays. David Strauss - Barclays Capital, Inc.: Thanks a lot. Congratulations, Kathy, and Wes as well. Wesley G. Bush - Northrop Grumman Corp.: Thanks, David. Kathy J. Warden - Northrop Grumman Corp.: That you. David Strauss - Barclays Capital, Inc.: Wanted to follow up on a question earlier about the cash-flow opportunity. Ken, you touched on a couple of programs at Innovation Systems. But if you just look at that business and how it's run historically, extremely-high levels of working capital, even ex-A350 and CRS. Could you talk about if you see anything structurally different that business versus kind of legacy Northrop from a working-capital perspective, because there's a huge opportunity there at least looking at it straight up? And then, quickly looking at the Q, Ken, it looks like intangible amortization in 2019, you're looking at like $275 million incremental. Is that a right number? Thanks. Kenneth L. Bedingfield - Northrop Grumman Corp.: So I'll take the first part of the question first on the working capital side, and then we'll try to address the estimated amortization for 2019 on the PI. From a cash perspective, I would say that, look, we see room for improvement. We had been building some working capital over the last few years ourselves. There have been some changes in terms of the DFARS, and I think some changes in terms of customer behavior in terms of trying to use working capital as a lever. And so, we all need to react to that and figure out how we best manage that as we move forward. We're working it and starting to see some progress, and I fully expect that we will work it together with the Innovation Systems team and start to see progress on that side. There are some customers that are simply more challenging than others in terms of working capital. And we will simply have to evaluate those business deals as we are looking at them and determining whether or not the structure of the deal in terms of return, in terms of cash flow profile meets our standards of the type of business that we want to do. You've seen us be pretty disciplined in terms of if we see business that doesn't meet our expected returns, and that's beyond margin profile, also includes cash profile. But if we don't see that as something that we think is a good business deal, then we'll take a pass and leave it to somebody else. But we'll continue to evaluate all those deals as they come forward and, largely, I just think that we're working hard. We'll work hard with Innovation Systems, and I think there is opportunity in front of us. In terms of the PI question, we have estimated an amount of amortization for the full year of 2019 of something north of $280 million. I think in the 10-Q, it's $284 million for 2019. And I would just remind you that the amortization of those intangibles are on an accelerated basis in accordance with GAAP and based on the cash flow that is behind those intangibles. And we see that then amortizing down in 2020 and then really starting to reduce in 2021 and 2022 and beyond. So, still work to do, obviously. We're only a short period into our purchase accounting process, and we'll continue to refine that as we work forward from here to when that process is complete. Stephen C. Movius - Northrop Grumman Corp.: Jamie, we'll do one more question.

Thank you. Your final question is from the line of Sam Pearlstein with Wells Fargo. Samuel J. Pearlstein - Wells Fargo Securities LLC: Good afternoon. Wesley G. Bush - Northrop Grumman Corp.: Hi, Sam. Kenneth L. Bedingfield - Northrop Grumman Corp.: Sam. Samuel J. Pearlstein - Wells Fargo Securities LLC: I wanted to go back to one of the questions just about overall performance and trying to kind of tease through this. So, just Wes, you made a comment that you don't see – or you see these as isolated cases. Is there any common thread across the different performance that could change? Or is it something that we may run into periods in the future where a confluence of isolated things come together? And then, I guess for Kathy, one of your roles right now is COO thinking about in the future. Is that something where you see a need for a COO overseeing a lot of the businesses as well in the future? Wesley G. Bush - Northrop Grumman Corp.: So, Sam, I think I would largely repeat what I said in response to Carter's question. We've had a good long track record of good execution. I see that going forward. I see that built into the way that we operate today. I see the way that decisions get made. And so, hard for me to say never, never, never, that would be a foolish thing to say. But I feel really good about the way the company is making its business decisions, the way that our teams approach the execution of the activities that we capture, and that we commit performance on to our customers. I see our customers having a lot of confidence in our ability to do that. So, if the direction of your question is kind of where does it go on a go-forward basis, I think we've got the right not only processes but also people in place as well as development programs in place, because you want to see this sustained well into the future to ensure that we're approaching our business the way we have been approaching our business. So it will require constant attention, and whenever there is a learning, to make sure that we really get the benefit of that learning, just as we've been doing for a number of years. So I do feel good about the process going forward. I appreciate especially what Kathy has been doing in her role as COO and enforcing that discipline and making sure that we are really thinking about things in a broad way as we enter into new activities and that if we do see something that has any form of issue around the company, that we're putting the full power of this amazing corporation on it to get it fixed early. So, again, I feel good about the vector that I see. Kathy J. Warden - Northrop Grumman Corp.: And, Sam, I'll just add that it was important to have this role with the integration activity that we were undertaking and standing up in IS and ensuring that we remained focused on performance across the company. But I view our risk management process as sound, and it needs to be executed at all levels within the organization and not reliant on a single role or individual. And it's my focus to ensure that our company continues to operate within our risk management framework and that as we bring new leaders into the company at all levels, that they are able to also execute this risk management process. And that's how we'll continue to be successful. Stephen C. Movius - Northrop Grumman Corp.: At this point in time, I'd like to turn the call over to Wes for some final comments. Wesley G. Bush - Northrop Grumman Corp.: All right. Thanks, Steve. Well, everyone, I think you've heard us say Innovation Systems a lot of times today but I'm going to say it again. I just want to say how delighted we are to have the Innovation Systems team join Northrop Grumman. This is such a great addition to our portfolio and to have it be accretive in 2018 is just tremendous for us. I appreciate the hard work by all of our team members around the company in continuing to drive performance and to position us well for our future. So thanks, everybody, for joining on our call and for your continued interest in Northrop Grumman.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.