Greg Smith - VP, IR William H. Swanson - Chairman and CEO David C. Wajsgras - Sr. VP and CFO

Robert Spingarn - Credit Suisse First Boston LLC Troy Lahr - Stifel Nicolaus & Company Steve Binder - Bear Stearns Cai von Rumohr - Cowen and Company Robert Stallard - Banc of America Joe Campbell - Lehman Brothers David Strauss - UBS Doug Harned - Stanford Bernstein Joseph Nadol - J.P. Morgan George Shapiro - Citigroup Myles Walton - Oppenheimer and Company

Good day ladies and gentlemen, and welcome to Raytheon's Fourth Quarter 2007 Earnings Conference Call. My name is Lauren and I'll be your coordinator for today. At this time all participants are in listen-only mode. We'll conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call Mr. Greg Smith, Vice President, Investor Relations. Greg Smith - Vice President, Investor Relations: Thank you, Lauren, and good morning everyone. Thank you for joining us today for our fourth quarter earnings call. Results released this morning the audio feed of the call and the charts referenced are available on our website at www.raytheon.com. For a live call an archive of both the audio replay and the printable version of the slides will be available on our Investor Relations website. With me today are; Mr. Bill Swanson, our Chairman and Chief Executive Officer; and Dave Wajsgras, our Chief Financial Officer. We'll start with some opening remarks by Bill, Dave will then discuss the financials and the outlook. Please limit your questions to two per caller to allow for broader participation. Before I turn the call over to Bill, I would like to caution you regarding forward-looking statements. Any matters discussed that are not historical facts particularly comments regarding the companies future plans objectives, and expected performance consists of forward-looking statements. These statements are based on a wide range of assumptions the company believes are reasonable but are subject to range of uncertainties and risks that are summarized at the end of our earnings releases and we discussed in detail in our SEC filings. With that I'll turn the call over to Bill. William H. Swanson - Chairman and Chief Executive Officer: Thank you, Greg. Good morning everyone. 2007 was a very successful year for the company. We ended the year with both records bookings and backlog. We grew sales by 8% while increasing the operating income by 20%. If you take a look at our bookings and sales over 26% of our booking and 20% of our sales in 2007 came from our international customers. Our results demonstrates the success we've had in driving operational improvements throughout the business and executing on our strategy. In 2007, we increase the dividend for the third year in a row and announce the 2 billion share repurchase plan are largest today. During the year, the company repurchased close to 30 million shares for 1.6 billion and retired over 1.7 billion of long-term debt enabling us to reach our target credit rating at BBB+. 2007 was a also a year in which we reshaped our portfolio to focus on our core business. To this end we completed the sale of Raytheon Aircraft company and flight options. We are now fully focused on leveraging our world-class technologies within our core business to serve both our domestic and our international customers. We made a couple of acquisitions in 2007, Oakley Networks and Sarcos Robotics Technologies. Oakley strengthens our capabilities and information security, and supports our strategic focus on information assurance and information operations. Sarcos brings specialized robotics capabilities to the company and both of these acquisitions will enhance Raytheon's technological capabilities in attractive growing markets. The company's customer focus on performance relationships and some solutions are process discipline and Six Sigma efforts continue to deliver outstanding results. This was evident in a number of key competitive wins last year, that position us well for the long-term. I'd like to talk about a few of those. E-Boarders are $1.4 billion with the UK home office to develop and implement the nation's advanced boarder management program. The Australian Air Warfare Destroyer, a contract valued at over $1.3 billion where we will design and develop the combat systems for Australia's next generation destroyer. The Navy's Multi-Band Terminal, or NMT as we call it, a contract which has a lifetime value of over $1 billion, the best way to think of NMT is the satellite communication terminal design to be installed on ship, shore, and submarine platforms for the U.S. Navy. The Warfighter Focus Program, an IDIQ award that has a potential lifetime value of over $11 billion. The Warfighter Focus Program is a landmark consolidation of the U.S. Army's live, virtual, and constructive training operations since support systems worldwide a first of its kind. And the Common Sensor, a U.S. Army IDIQ award that starts out small, but can grow to more than 1 billion of potential sales. It is a sensor payload for both manned and unmanned aircraft that demonstrates our unique capabilities in reconnaissance, surveillance and target acquisition add a good value. And just at the end o for the year the U.S. Army awarded us $234 million contract to develop the Mid Range Munition for the future combat systems mounted combat system. MRM is a precision guided gun fired smart munition that will provide a beyond line of site capability for the army. This award is establishes Raytheon as the world leader in the development of affordable precision guided projectiles. These competitive wins highlight the execution of our strategy, our technology, our systems engineering expertise, and our world-class talent. Our strategy going forward will be to continue to provide our customers with outstanding capabilities and focus on our core markets of sensing effects, C3I and mission support, as well as our focus on international for both our core and adjacent markets. In summary, we're going to remain focused on the areas that enabled us to be successful in 2007, including technologies delivering on our commitments and continuing to drive shareholder value. In closing, I'd like to thank our 72,000 employees for job well done. With that I'll turn it over to Dave, who'll walk you through the financials. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Okay. Thanks, Bill. I have a few opening remarks starting with the fourth quarter highlights followed by our updated 2008 financial guidance, and then we'll move onto questions. During my remarks I'll be referring to the web slides we issued earlier this morning. As a reminder we completed to sale of the Flight Options business in the fourth quarter, and as we previously discussed and disclosed we're now reporting FO as a discontinued operation for all periods presented. If you'd now move to slide 3; we performed well in the fourth quarter with EPS from continuing operations of $1.45 and for the full year $3.80. Adjusted EPS from continuing operations was $0.96 in the quarter and $3.31 for the year both up 26% from last year. Adjusted EPS from continuing operations excludes tax related benefits of $0.49 both in the quarter and in the year primarily related to the resolution of an R&D tax refund claim that goes back to the 1984 to 1990 timeframe that ones disclosed in our prior public filings. We had strong net sales of $6 billion for the fourth quarter and $21.3 billion for the full year both up 8% from 2006. Bookings were very strong for both the quarter in the year leading to a healthy backlog of $36.6 billion. We also had good performance from an operating cash flow standpoint for both the quarter and at the year. Looking ahead to this year given our recent program wins and the continued focus on performance improvements driven by our Six Sigma efforts, we've increased our 2008 guidance, which I will address later in my remarks. If you'd now move to slide 4, let me start by providing some detail on our fourth quarter and full year results. Our total company bookings for the quarter were $9.2 billion giving us a 1.5 book-to-bill ratio. Notable highlights include over $2.1 billion at IDS the largest of which was $1.3 billion for the Air Warfare Destroyer Program for the Australia Navy. This business also booked $233 million for the Patriot Pure Fleet program for the U.S. Army. IIS had strong bookings in the quarter as well coming in a $2.4 billion including $1.4 billion for the UK e-Borders projects, and $160 million contract for the U.S. Air Force for the GPS operational control segment. IIS booked $538 million on a number of classified contracts including $246 million on a major classified program. Missiles booked over $1.6 billion including $242 million for the Phalanx Weapons Systems for U.S. Navy, $234 million for the design and development of the Mid Range Munition System, $196 million for the production of the TOW Missile for the U.S. Army, and $146 million for the production of enhanced paidway [ph] for international customer. SAS captured a number of classified contracts in the quarter including one valued at $380 million. TS booked $118 million for the initial work on the Warfighter Field Operations Customer Support contract the program with the U.S. Army to provide live, virtual, and constructive training services. Full year booking for the company were 25.5 billion a book-to-bill ratio of 1.2. Backlog at year-end was a new record for the company totaling $36.6 billion an increase of 8% or $2.8 billion from 2006. Turning now to slide 5, as I noted earlier fourth quarter adjusted EPS from continuing operations was $0.96 versus $0.76 for the same period last year. The increase was primarily driven by improved operating results at IDS, Missiles, and SAS combined with lower pension and net interest expense. Full year adjusted EPS from continuing operations was $3.31, up 26% was essentially the same key drivers as the fourth quarter. Turning now to slide 6, as I noted earlier sales increased by 8% in both of the fourth quarter and the full-year of 2007. IDS net sales were up 8% compared to fourth quarter 2006, primarily due to growth on missile defense agency, U.S. army And international programs. Intelligence and information systems had fourth quarter 2007 net sales of $808 million, up 17% primarily due to new programs including e-Borders. In the fourth quarter Missile Systems net sales were up 3% driven by volume increases on the standard missile programs. Network Centric Systems had fourth quarter 2007 net sales of $1.1 billion, up 13% principally the result of programs that supports the US Army. Space and Airborne, Space and Airborne Systems had $1.2 billion of net sales in the fourth quarter up 6% primarily due to growth on airborne radar and sensor programs, and technical services had fourth quarter 2007 net sales of $643 million slightly up from last year primarily driven by the Warfighter Focused contracts. If you'd now move to page 7, in the fourth quarter our operating margins were up 90 basis points to 10.8% driven by IDS, Missiles, SAS and lower pension expense the 70 basis point increase at our SAS business was the result of both higher volume and overall performance. IDS was also favorably impacted by stronger volume as well as improved performance across several domestic programs. The 40 basis points increase of Missiles was the result of both higher volume and the royalty on a foreign military sales. IIS posted lower margins for the quarter primarily due to the transition cost associated with the Oakley Networks acquisition and the start of the e-Borders program. NCS also experienced slightly lower margins in the quarter primarily due to the timing and mix of programs. Total company full-year margins increased 100 basis points from 2006 primarily driven by IDS, NCS, Missiles and again lower pension expense in 2007. Our continued focus on both top line growth and operational improvements resulted in our improved financial performance. Shifting now to cash flow on slide 8, operating cash flow from continuing operations for the fourth quarter 2007 was just under $1 billion versus $1.3 billion for the fourth quarter 2006. The decrease is primarily due to the acceleration of $500 million discretionary cash contribution to the company's pension plan previously forecasted to be made during the first quarter of 2008, and the timing of customer advances partially offset by the $381 million in tax refunds received from the resolution of tax matters, which I addressed earlier. On a total year basis operating cash flow from continuing operations was $1.2 billion compared to $2.5 billion in 2006. The decrease in 2007 was primarily the result of higher cash tax payments of $740 million, which included $630 million attributable to the gain on the sale of Raytheon Aircraft Company, $700 million of higher discretionary pension funding, and $170 million of other items including a reduction in customer advances. This was partially offset by the $381 million aforementioned tax refund. Moving now to slide 9, I'll address 2008, but let me first put the fourth quarter and 2007 full-year results in perspective. Sales growth and international bookings were very strong and the businesses executed well across the Board. Both operating margins and return on invested capital improved, and we ended the year with the strongest balance sheet the company have had in a number of years. Taken together we see these positives forming a solid foundation as we begin in 2008. We now expect to grow sales to a range of between 22.4 and 22.9 billion for the total company up $300 million from our previous guidance driven by the competitive wins in the fourth quarter. As for pension... as for FAS/CAS pension expense 2008 is now expected to be a $150 million versus $259 million in 2007. This results primarily from a change in the discount rate to 6.5% for 2008 versus 6% used in 2007. We continue to use an 8.75% assumed rate of return on our pension assets. Net interest expense is expected to be in a range of $45 million to $60 million, which is slightly higher than 2007. The increase is the direct result of the net cash balances an interest rate environment expected throughout 2008. We expect our average diluted shares outstanding to be in a range of 427 to 429 million, which does assume share repurchases during the year. The diluted share count is also expected to be impacted by other items such as option exercises, restricted stock grants and most importantly the timing of our repurchases. We're increasing our EPS guidance by $0.15 per share on the high-end and $0.20 per share on the low-end when compared to what we were seeing a few months ago. We now expect to be in the range of $3.65 to $3.80 per share representing growth of between 10% and 15%. As for the R&D tax credit extension we do want to be clear. For planning purposes we are assuming the credit gets passed in 2008, and accordingly we've included it in our 2008 guidance. It favorably impacts the effective tax rates by approximately 70 basis points. So our current guidance does includes $0.04 earnings per share from the credit, which is consistent with 2007. Our operating cash flow guidance has been revised to a range of $2 billion to $2.2 billion. We expect to improve ROIC in 2008 to a range of 9.6% to 10.1% an improvement of 10 to 60 basis points over 2007 adjusted ROIC. Now moving to slide 10 for review of our outlook by business. First of all from a sale standpoint all of our businesses continue to do well. Overall, we expect sales to grow in the 5% to 8% range. With respect to margins with the exception of IDS and IIS margins across all of the other businesses are either in line or improving when compared to 2007. The IDS margin decreased in 2008 is primarily due to a mix change this year related to our international business. In 2007, margins were also benefited from the favorable impact related to contract nearing completion and the milestone payment received in connection with the successful flight test. With respect to IIS we expect the margins to be in the range of 8.6% to 9% at or slightly below 2007 due to the transition costs related to the acquisition of Oakley Networks, as well as the start up of the e-Borders program. Now the summarize, we made great progress on a number of fronts in 2007. We are pleased with our performance and look for continued growth and strong performance again in 2008. We will continue our relentless focus on supporting our customers missions while at the same time enhancing shareholder value. And with that we'll be glad to take any questions. Question And Answer

[Operator Instructions] And your first question comes from the line of Robert Spingarn with Credit Suisse. Robert Spingarn - Credit Suisse First Boston LLC: Hey, Good morning guys. William H. Swanson - Chairman and Chief Executive Officer: Good morning. Robert Spingarn - Credit Suisse First Boston LLC: I wanted to ask you about your cash flow. If I take the pension contribution that you accelerated. Am I wrong that you just... between 07 and 08? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Sorry, Rob we lost you for a minute there. Robert Spingarn - Credit Suisse First Boston LLC: I'm sorry.

Alright. David C. Wajsgras - Senior Vice President and Chief Financial Officer: The whole center part of the question disappeared on our end. Robert Spingarn - Credit Suisse First Boston LLC: Okay. Let me just repeat the question then. If I take the $500 million accelerated contribution out of 07, do we have flattish number between 07 and year 08 guidance? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Well the $500 million obviously took down 07 and improved 08. The way I would look at it as we have about 100% cash conversion relative to our income year-over-year. Robert Spingarn - Credit Suisse First Boston LLC: Okay. But then of course you are growing... you are growing the business between the two years. Robert Spingarn - Credit Suisse First Boston LLC: And so that the flat number seems a little bit conservative perhaps. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Well we feel comfortable with the guidance and there is some big moving parts obviously. We have $900 million of discretionary cash contributions that took place in 2007. We had this $380 million or so tax refund. We had the impact of on our obviously on cash taxes with respect to the RAC sale. So there is number of moving parts. But, if you stand back from this I would say the conversion is pretty healthy. Robert Spingarn - Credit Suisse First Boston LLC: Okay. And then one other question on your upcoming programs, if you could just update on some of these Boarder program in Saudi Arabia and UAE Patriot that sort of thing what's the latest on that Bill? William H. Swanson - Chairman and Chief Executive Officer: Yeah I would tell you that we've submitted our bids on the Boarder program, those are in evaluation and for me to say anymore on that I really can't it just moving forward and it's a process, and we'll wait for the kingdom to make there determinations there. Regarding Patriot, Patriot's got more moving pieces today than its had in a number of years. We've go Korea, Taiwan, Kuwait, UAE, Saudi, Turkey, Gutter, Pure Fleet which is on the U.S. side and that's just a name of few, so we expect some activity this year, but as most you know that have been around with me for a long time on Patriot international was all timing and so we are working with each country, and we expect some movement this year. Excuse me, a little frog in my throat. We probably have got couple of 100 million in international sales this year that we're forecasting, and if some these awards happen sooner and bigger then we'll reflect that as we go forward, but very healthy for Patriot especially the fact that we booked about 400 billion to-date on Pure Fleet and we expect about another 130 million this year just remember some numbers off the top of my head. Robert Spingarn - Credit Suisse First Boston LLC: And if you take all those nations you mentioned for Patriot and you've added a lot, what's the total addressable market the way you look at it? William H. Swanson - Chairman and Chief Executive Officer: I think I would pop a bottle of champagne at that level it's a big number and there big numbers because there is spread over a link the time and I would be speculating you've all have read the releases that have gone forward in congress, and I'd rather not speculate because each country is going through their budgeting process and timing, but very, very bright future for Patriot given world events the way I described, but it's a rebirth not many programs have this kind of longevity and it's a real credit to the system that keeps getting upgraded to handle all those threats and it's still the worlds best, just to do a little marketing. Robert Spingarn - Credit Suisse First Boston LLC: Well thanks for the color. William H. Swanson - Chairman and Chief Executive Officer: Okay.

Your next question comes from the line of Troy Lahr with Stifel Nicolaus & Company. Troy Lahr - Stifel Nicolaus & Company: Thanks. I wonder if you could talk about bookings for the fourth quarter. It seems like they were much stronger than expected were there any of those bookings pulled from 2008 you talk some stuff is going to come true or what really surprise you there because it was such a strong number? William H. Swanson - Chairman and Chief Executive Officer: ALot of competitive wins I mean if you take three programs e-Borders, the Australian Warfighter or the Australian combat system program you will look at those they were just, they were big for us we could take up free programs and that would be about $5 billion worth. We had $9.2 billion worth of bookings in the quarter. And as I commented that it bodes well not only for this year but for the future a number of our programs have longevity in them and there are longer programs, so normally we have about a three year window on programs, some of these are going to go longer five years, eight years, 10 years. We did have to the came in December that we would have figured for first quarter, one of them was the MRM program that I talked about out of Missiles and then we had our classified program that close to about $400 million in our west coast business. Troy Lahr - Stifel Nicolaus & Company: Okay. And can you throw out a number for 2008 for maybe what you think bookings are going to be? William H. Swanson - Chairman and Chief Executive Officer: Yeah we really didn't listed this guidance, but I have no problem telling you it's... we're figuring around $22 billion plus or minus $500 million or 0.5 billion, but it's lumpy. Some of the international orders I talked about earlier that those come in they are heavily factored and so that number will go up. Troy Lahr - Stifel Nicolaus & Company: And the international mix on that $22 billion. William H. Swanson - Chairman and Chief Executive Officer: We're looking as I mentioned sales were above 20% last year we look for international bookings to be around the quarter, which would be around about 25% or greater, and when we look at 08 awards and pursuits, they are dominated by international activity, and we factor those heavily. Troy Lahr - Stifel Nicolaus & Company: Okay. Thanks, guys. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question comes from the line of Steve Binder with Bear Stearns. Steve Binder - Bear Stearns: Good morning, William H. Swanson - Chairman and Chief Executive Officer: Hi, Steve. Steve Binder - Bear Stearns: How are you? William H. Swanson - Chairman and Chief Executive Officer: Good. Steve Binder - Bear Stearns: So, I guess first question on SAS I guess if you look at the history of SAS you never seen the fourth quarter been the strongest margin in the year and clearly it is better than expected, I just wondering maybe you can touch on was there any favorable keen [ph] adjustments contract close-out adjustments what happen there in because obviously it's been a laggard in the first nine months? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yeah, Steve it's a very fair question. And we're pleased obviously with their performance in the fourth quarter. We talked about SAS throughout the year and some of the softness they were seeing in the classified space area from a top line perspective. They've taken a lot of actions with respect to productivity improvements, centered around our Six Sigma efforts, and much of that benefited the bottom line in the fourth quarter. There is no particular notable contract adjustments it just that they are running the business very, very well today. Steve Binder - Bear Stearns: And do you happen to have the breakout of FAS/CAS for 08? David C. Wajsgras - Senior Vice President and Chief Financial Officer: The breakout of FAS/CAS for 08. Yeah, we were actually trying to simply it and going to one number. Again I would provide roughly what the numbers are Steve, it's not a problem. But, I do want to keep let you know and everyone else listening that as in prior years we go through a mid-year true up with our outside actuaries and the number does tend to tweak a little bit in the third and fourth quarter. But, right now we are looking at somewhere from a FAS standpoint and in the $525 million range and from the CAS standpoint somewhere in the $385 million to $400 million range plus or minus. Steve Binder - Bear Stearns: All right, and Bill just on IIS. I just wondering just from a color standpoint when back out e-Borders, you did see some a little bit better growth last couple of quarters. Are you trying to see an acceleration activity is that classified activity that you've seen? William H. Swanson - Chairman and Chief Executive Officer: Yeah, what I would tell you on the classified is that we expect more activity this year. We see IIS doing well in the competitive wins and they've got growth, e-Borders does start out slower. We want to make sure we've got the risk bounded as you take on something new especially internationally. But all-in-all what I would say is no change in the classified except classified space is still one where that's shorten its way out, some people think it will improve in 09 some say 010, but it's around that timing as we get things nail down, does that helps? Steve Binder - Bear Stearns: Great. Thanks, good quarter. William H. Swanson - Chairman and Chief Executive Officer: You didn't say anything about the Patriots. Steve Binder - Bear Stearns: We'll wait until Monday. William H. Swanson - Chairman and Chief Executive Officer: Safe answer. Okay. Steve Binder - Bear Stearns: Take care. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question comes from the line of Cai von Rumohr with Cowen and Company. Cai von Rumohr - Cowen and Company: Thank you. Could you give us a little more color on the impact of the transition to Oakley and to e-Borders what are we talking about how much were the intangible, what kind of earnings impact did that have? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Sure, with respect to Oakley we purchased it in the back half of last year and went through obviously the purchase accounting, so part of it is going to the amortization of intangibles over the next few years as we valued the business. And there are also was some obviously some integration costs as we bring it into the company that's primarily the drivers... the more significant driver what's going on in the margins. E-Borders had a much lesser financial impact as we were looking for 2008 versus 2007. Cai von Rumohr - Cowen and Company: Can you quantify what that number was approximately in the fourth quarter and next year for Oakley? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yeah, I would say within... now this is an important point and it's a fair question which I'll answer, the point is this, IIS from an operating income standpoint and absolute dollars is a nearly a significant of some of our other businesses, so small dollars are going to move that margin from a basis point standpoint much more or so than other businesses. So with that being said with respect to IIS it's somewhere in the neighborhood of 25 to 35 basis points for Oakley. Cai von Rumohr - Cowen and Company: Okay. And... David C. Wajsgras - Senior Vice President and Chief Financial Officer: In the quarter in 07, that's the number for... Cai von Rumohr - Cowen and Company: And in 08? David C. Wajsgras - Senior Vice President and Chief Financial Officer: In 08 it's about 30 to 40 basis points in 08. Cai von Rumohr - Cowen and Company: Got it. And last one could you, you mentioned that the orders you are looking for 22, so the book-to-bill a little bit under, but you've mentioned that the international bookings I guess is appropriate or heavily factored, could you give us over all basis what's the factor number for the totality of the international orders is it 25%? William H. Swanson - Chairman and Chief Executive Officer: No we -- Cai, we don't give up that of granularity on that thing I would just say that we factor them heavily because it's there are three elements it's the probability of timing, probability of the program going and probability as winning, so it's actually up one, two and three multiplier as opposed domestic, which basically has two multipliers against that if you think about it. And so for us we are not hung up on the $22 billion because one large international on Patriot or one large international homeland security type award will just swing it, and so that's why I put a little color on that thing that it's effected by binaries and I could rip off about six or seven programs that would affect that number in a heartbeat, and I am not avoiding your question it's just... Cai von Rumohr - Cowen and Company: No, no, I understand it. Here, just one follow-up could you give us a little color on the timing of some of the bigger one, do you expected timing or you expected rough timeframe as to when we might see some of these Patriot potentials come to fruition? William H. Swanson - Chairman and Chief Executive Officer: We get soon. It's... I am laughing it's so hard to do. It's dependent on world events. We probably would expect sometime maybe in the first half, Korea and Taiwan to start, Kuwait could be in the first half of the year. UAE I think its more of the end of this year probably even 09 as we look at it and so those are big windows, but that's the best I can do right now. We've got teams all over the country working to try and get this done and through the system, and that's to our advantage and our shareholders advantage for us to get them done quick, so that's what we are trying to do. Cai von Rumohr - Cowen and Company: Excellent. Thank you.

And your next question comes from the line Robert Stallard with Banc of America. Robert Stallard - Banc of America: Good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning. Robert Stallard - Banc of America: Just afollow-up on the UK and Australian contracts that you've won. Could you give us an idea of first of all the timing how these program will time over the next few years? And also are they fixed priced development contracts? William H. Swanson - Chairman and Chief Executive Officer: If you look at them there are mix within the contract, Australia starts now it goes for a good length of time. We probably expect sales in that around let say $100 million this year on that program and it goes from 07 to 2018 and that will be fluid as we move things in and out of that, but a nice steady state program is as we go and do that and that really leverages off our Zumwalt DDG 1000 way we have run that program hitting every milestone and outstanding award fees and we expect to do AWD the same way. If we look at e-Borders we expect sales there this year probably around couple of $100 million. As we look at it that program will go over 10 years the front of it the first five years were the heaviest part of it and as you can imagine with that and we expect from a standpoint to leverage that other places as we work with the UK and other countries. Mainly because nobody else is doing this, I think of it describe it is count them in, count them out and to know what's going on immigration is important to all nations and the UK is kind of leading in that regard I hope that helps. Robert Stallard - Banc of America: Yes. Just a follow-up on that fixed price development, are these contracts fixed price? William H. Swanson - Chairman and Chief Executive Officer: There are parts of them that are fixed price, but it's a fixed price and something that we've already done. So I think we've got it bounded, but at the same time we understand the risk and the way we manage these programs as the risk is retired as the milestones were met. So we've got a rigorous process here in the company where it's laid out for the whole period on the milestones. All these international programs are managed with earned value which is what we do on everyone of our programs even though they are not called for on international program. So they get the same kind of management that we do on our domestic programs. Robert Stallard - Banc of America: Okay. Thank you. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question comes from the line of Joe Campbell with Lehman Brothers. Joe Campbell - Lehman Brothers: Good morning, Bill, Dave and Greg. William H. Swanson - Chairman and Chief Executive Officer: Good morning, Joe.

Good morning. Joe Campbell - Lehman Brothers: It's been a tough month on Wall Street and it's nice to see at least one stock up for the year I think Raytheon's are best performing... William H. Swanson - Chairman and Chief Executive Officer: Thank you. Joe Campbell - Lehman Brothers: Whatever you do and keep it up. William H. Swanson - Chairman and Chief Executive Officer: We'll buy more. Joe Campbell - Lehman Brothers: Whatever, I think everybody is thinking that the defense outlook is reasonably strong amount of what happens in 08, but as we go in to the second half of 08 and start looking seriously at the next President, I think people would like to sort of sorted out what stuff is in the base budget and unrelated to the war including oversea sales and non-DoD and what stuff projects are related to the war funded in the SOP [ph], to trying to get a sense of how... which... what percentage of each company is kind of depends on what happens on the war having this budget these budgets kind of keep going or not. Can you give us a sense you told us 29 odd percent are international, how does it look when we look at Raytheon, how much of it's Army and Marine Corps and war and SOP versus... William H. Swanson - Chairman and Chief Executive Officer: Wellwe don't break it out by service for that way, but maybe I can give you a little color. Joe Campbell - Lehman Brothers: This color is great. William H. Swanson - Chairman and Chief Executive Officer: Yeah, we don't swing on the supplemental, I tell you supplemental bookings for us and our sales are in the low single-digit range. As we look at it from that standpoint we might have around $1 billion in bookings, but that get spread over three years so you look at it, that's well under 5% as we look at it, so let's say we're on the 2% to 3% range if we do that the stuff that we're doing is adding some more capabilities in theatre. We all know that as we'd look to the future here, a lot of these gears coming back. It's going to have to be updated or upgraded or refurbish so the reset is not in these numbers. I think the supplemental, I'm trying to remember on top of my head, $189 million of which they out as 70 billion, excuse me, 189 billion. They put 70 billion bridge in that will come up this spring. Some of us believe that probably around this summer they are going to put another bridge in, they won't put the full... another full supplemental in because they will probably give the new administration a chance to think through that. So, but I see or at least we see or read about that continuing, but we still have to face the fact that in 09, 010 and 011 timeframe we are going to have to refurbish a lot of gear that bodes well for us because these platforms will need to be upgraded and we are looking to put our latest and greatest on them, if that helps. Joe Campbell - Lehman Brothers: The only thing I would notice always that the Army is more than 50% funded in the sub. I would have thought with your Army exposure that the number would be bigger than in bookings five and... William H. Swanson - Chairman and Chief Executive Officer: No, no we are not ... we are kind of well positioned across all three services. So, not one of them really drives us, but all three have an affect on us. I mean this is the way I would say it. So, we don't rotate around anyone of them. It's well balanced and we are in the electronics end of it, so it's a platform agnostic, as we look at it. Joe Campbell - Lehman Brothers: Terrific. Thanks for the color Bill. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question comes from the line of David Strauss with UBS. David Strauss - UBS: Good morning. Thank you.

Hi, David.

Good morning. David Strauss - UBS: Bill, can you maybe give a little bit of color on IDS margins over the long-term. Obviously they ramped up tremendously over the past several years. They look like they are starting to come down now with the large amount potential international activity coming through. How do you view margins in that business over the long-term? William H. Swanson - Chairman and Chief Executive Officer: Well, first of all they've got some good margins. They performed well, we understand their business. They get driven by the mix of their business from a standpoint that as we look at international contracts our mix of the company is about 60-40, 60% direct, 40% FMS. We are about 50-50 cost plus versus fixed price. So what happens to IDS is as we look at their portfolio really is dependent on the mix related to their international business. And some of the near-term orders we see are probably going to be foreign military sales. If they are not FMS then they will go to DCS, if they're DCS then we take on more risk and we price in the risk and have to manage it. So I would tell you to look at them, there is not a performance concerned at all in my mind regarding IDS. It has to do with watch their mix and what we see coming and we've taken that into account in our forecast this year. David Strauss - UBS: Okay, and I think we all have an idea, but any color on the margin differential you see in that business between direct and FMS. I mean, just I know you are not going to give exact, but any type of idea in terms of the difference? William H. Swanson - Chairman and Chief Executive Officer: No, it's really dependent on our customer and what they really want and if you look at that business we've been doing it a long-time, I think we do it appropriately and that the point is, is if you have a direct commercial sale you are taking on more risk. And so... and then you have to really be tenacious in the management of that risk and for us we sell in 80 countries. So we've got good experience on how to do that, but we all have to remember it still international business. David Strauss - UBS: All right, okay. And Dave, one question for you... you gave us this FAS number for 08 typically in UK you will give one year out. Do you have any inkling at this point of what 09 FAS pension expenses looking like? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes, I don't think we are ready to discuss that right now. Again it's a fair question and I think the most important thing to notice what I mention to one of your colleagues earlier, it's... this is an estimates the $150 million net impact on the P&L is an estimate. It will be trued up in the back half for the year. So, even the FAS/CAS split at this point, again we are just... we are trying to give the folks who are going to go through the financial modeling something they can work with. David Strauss - UBS: Okay, and last one share repurchase. Obviously your forecast includes a large decline in the amount of shares you have outstanding. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Right. David Strauss - UBS: Can you give us some help in terms of what you are budgeting for share repurchase is in the same order magnitude what we saw in 07? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes. I think the way I'd like to address that is giving the... our estimate as we sit here today and what we are seeing with respect to the bookings on the average diluted share count outstanding for the year is realistically, as far as we want to go, because it's subject to so many different variables and I think that's probably all we are comfortable and talking about right now. David Strauss - UBS: Okay. Thanks a lot. David C. Wajsgras - Senior Vice President and Chief Financial Officer: All right.

And your next question comes from the line of Doug Harned with Stanford Bernstein. Doug Harned - Stanford Bernstein: Good morning.

Good morning, Doug. Doug Harned - Stanford Bernstein: On... continuing on space and Airborne Systems. When you look forward you are guiding to pretty flat revenues and they have been pretty flat, and backlogs are little bit down. Could you comment on the long-term outlook, should we think of this as a relatively flat business and how would you compare the trajectories for the Airborne sensor portion verse the space portion? William H. Swanson - Chairman and Chief Executive Officer: Yeah, I would tell you that divided it at two parts, if you could look at it the way we do and take space out their business is growing about at the same rate as the rest of the company. If you take space that created a whole and the growth has filled in the whole, and so from ours standpoint we're going to be looking at this year as we look into 09 and if we see the recovery coming in 09 then we'll see SAS trajectoring up. If it comes in 010, I think it'll still trajectory up, but it will be of a slower... it'll be at a less steeper angle, if that helps. Doug Harned - Stanford Bernstein: Okay and... William H. Swanson - Chairman and Chief Executive Officer: But the business is a strong business. They've done a good job of offsetting what we've seen happen in space. Doug Harned - Stanford Bernstein: And then separately could you talk about DDG 1000, obviously a very big program for you and where you see the big milestones coming up and then what you see as some of the challenges given the complexity of the overall program? William H. Swanson - Chairman and Chief Executive Officer: Well first of all, I think I can say that unequivicably we've hit it our milestones. We've done exactly what we said we're going to do and the Navy has recognized that and talking about it being one of their better managed or best managed program. So we're very proud of what the team has done, but more proud of the partnership that we have with the Navy. The milestones are... we're going to be delivering 10 or 11 major technologies on that program. That will be forward fitted and back fitted, by that I mean you can take our SPY-3 radar, you can take some of our communications suites, our peripheral launchers, our underwater systems, warfare systems and those will not only be used for this class of ship, but we believe it will be used for other classes of ship. We also believe that sometime in the future, the... our Navy along with other Navies in the world operate together. A classic example is, we'll pay our friends in Japan a compliment. They fired a Standard Missile-3 in December, their first international firing taking place intercepted a holistic target in space and knocked out of the sky and a good example of how the Navy looks at technology, shares technology with favored nations. So we feel very good about the Zumwalt program, whether it's accomplishing, how the Navy is managing it and where we think that will... those electronic systems can be used, not only domestically, but in the internationally sometime in the future when it's releasable. Doug Harned - Stanford Bernstein: But, is there any area you see as the biggest challenge when you look forward? William H. Swanson - Chairman and Chief Executive Officer: Just keeping it all going, is that... I mean it's a complicated program. It's not something that keeps me awake at night, but the real challenge is when you think of what we are doing, what we are accomplishing, it's breathtaking. And... but the team is doing a great job and I think our customers are pleased with our performance. I wish there were going to be more ships. But, that's not going to limit us from propagating it to carriers or other future ships when you look at CGX or other things. Doug Harned - Stanford Bernstein: Okay. Thank you. William H. Swanson - Chairman and Chief Executive Officer: But its... there is not a breathtaking technology that we are worried about or something we are not doing here. It's keeping everything moving forward. Doug Harned - Stanford Bernstein: Great. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question comes from the line of Joe Nadol with J.P. Morgan. Joseph Nadol - J.P. Morgan: Good morning. Good quarter.

Thank you, Joe.

Thanks, Joe. Joseph Nadol - J.P. Morgan: My question is back on Patriot and it's a little bit bigger picture. We went for many years where as you noted earlier, Bill the well was pretty dry for Patriot orders and now we just have a laundry list of countries that are looking at this and getting close looks like to a number of contracts. And I am wondering besides the weak dollar and besides sort of global conflict, which I guess has been going on for almost a decade now. What's changed about the program, is there something technological below the surface that is attracting customers, there is something in terms of cost that's improved. What's really changed? William H. Swanson - Chairman and Chief Executive Officer: I think world events have a lot to do with it. I mean people are worried that short range ballistic and medium range ballistic missiles are a real threat. You can look around the world and some people have fired them in the areas that have gotten people excited. I know it would get me excited and I think people are worried that harm that it could cause from both the political and population point of view and they look at Patriot. Clearly for us with PAC-3, we've improved the system with... I won't get into the techno, but its dual TWT. We've doubled the range 3 DB better. We can see both airborne targets, aircraft crews, and tactical ballistic missiles. You can have a mix load of both PAC-3 or JIM plus missile in it. So, you can... the system will determine what missile to use for what circumstances and it does it on probability of killing a cost effectiveness methods, so it's very sophisticated. It has remote launch, so it can be used in other places and I think countries realize that they're trying to protect their borders and it's more sensitive today then I think I've seen it at least in my 36 years in the business and I think people want to buy the best. And so, when you look at it, you mention that the dollar, now is a good time to do that so all-in-all, given political events, given the threat, given the technology and given the value, things kind of line up the right way and we're going to try and help them in anyway we can. Joseph Nadol - J.P. Morgan: Okay. And then just second question which is back on IDS. It's been... the margins there are great, which we've discussed. It's been several years now though I think where you've been guiding down and the margins have actually gone up each year and is there... and I know why you said that that margins will be down this year. It's mostly a mix issue on the international side. But, is there that possibility that the margins could be flat or up again if some good things happen? William H. Swanson - Chairman and Chief Executive Officer: I think we've given you the best guidance we have. What we know today would be orders. Clearly last year they had a successful one-time award fee for a success, that's a non-recurring event. We don't have one of those this year, so we have to take that into account. They completed a couple of programs that really gave them a good year. So, all-in-all we've tried to put in the best guidance we know going forward. If all of these... now I want to quantify something, Patriot sales are really affected by timing, the way we look at it. We put it in for this year, we don't see much fluctuation there, but if these order all happen in the back half that would really bode well for 09 and it wouldn't affect 08 that much. So, the way I'd answer your question is, we think we've looked at it line-by-line and tried to take a good step at providing the range that we think we're going to come in at. Now, having said that we're insatiable as you all know on margin improvement and we're going to work hard to try and drive this business even better, but that takes real work. Joseph Nadol - J.P. Morgan: It's the lead-time between a Patriot order and the beginning of work is a matter of a few months? William H. Swanson - Chairman and Chief Executive Officer: Yeah, it could be at... what I'd say is, if things come in the third quarter, last half of the second quarter, you're not going to see much in that year. And so, I'm kind of trying to bound this that it would have to come in the first quarter, early part of the second quarter for it to start swinging the needle here. Joseph Nadol - J.P. Morgan: Okay. Thanks very much. William H. Swanson - Chairman and Chief Executive Officer: Okay. Joseph Nadol - J.P. Morgan: Thanks.

And your next question comes from the line of George Shapiro with Citigroup. George Shapiro - Citigroup: Good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning, George. George Shapiro - Citigroup: Bill, looks like that international sales grew about 11% 07 verses 06, given that you want from 18% to 20%. What kind of a growth rate for 08 that you have embedded in your sales forecast for international? William H. Swanson - Chairman and Chief Executive Officer: George, I never want to correct you on math, but it was about 13%. And we expect double-digit growth in volume this year. I'd say from a standpoint that right in that range, 10 to 13, right in there. George Shapiro - Citigroup: Okay. And then maybe Dave, just one, if you look at SAS, the sales sequentially from Q3 were up over $200 million. Normally Q4 is the strongest, but we usually don't see that bigger jump. So, can you tell us what happened sequentially and how much of that's sustainable into 08, because it wouldn't seem like the 08 guidance there, might be a little bit low in revenues? David C. Wajsgras - Senior Vice President and Chief Financial Officer: No, there was some, the way I would frame it is some timing between Q1 and Q4. There was a lot of activity in the latter part of Q4 last year. So, it was really timing between quarters. Although notwithstanding, they had a very strong quarter in spite of that. George Shapiro - Citigroup: Okay. Those were my questions. Thanks. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Okay. George. William H. Swanson - Chairman and Chief Executive Officer: Thanks, George. Greg Smith - Vice President, Investor Relations: This willbe... we'll take one more question.

And your last question comes from the line of Myles Walton with Oppenheimer and Company. Myles Walton - Oppenheimer and Company: Thanks. Good morning, good quarter. William H. Swanson - Chairman and Chief Executive Officer: Thank you. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Thank you. Myles Walton - Oppenheimer and Company: Bill, in response to Joe's question, you talking about the drivers to pickup here in international interest. You left out foreign policy piece, which seems to be from my outlook, it seems to be far more open to release a lot of these systems. So I guess the question is, do you think the current administration has been a significant enabler to a lot of this interest in the near-term? William H. Swanson - Chairman and Chief Executive Officer: Well, if you look at some of the countries I mentioned, they are not the ones that are getting the... what we are calling agreements. The UK and Australia are two countries that the administrations working with to speed up the process. I can say that those of us who are the members of AIA really look and work with the administration to work on export import control, speeding up the process, how do we do licensing for normal products and what we will call the fast track, but... people are really see this is how do we improve it to making it quicker. I think foreign policy has a lot to do with, I didn't mean to shirk that one in my comments, but it also helps when you think of Korea, Taiwan, Kuwait, Saudi they have already got Patriot when I talk about it. So, being able to upgrade and release is a lot easier and the other things is Patriot's defensive system. You only use it, if somebody is doing something to you. And so, that makes the release a little bit different. And so, yeah, you are right it has something to do with it. It takes a lot of pieces to make sales of that size go forward. And when you look at for us homeland security or border security, I think the administration, we know where they stand on the war on terror and they don't have the issues with countries trying to protect themselves. Myles Walton - Oppenheimer and Company: And Dave just kind of a follow up. Given you have been around the block far more times in May. Administrations roll over and these international agreements are kind of out there being negotiated. There is a probability of the deal changed materially? David C. Wajsgras - Senior Vice President and Chief Financial Officer: You mean with changes in administration. Myles Walton - Oppenheimer and Company: Yes, exactly from the policy makers? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes, I think people honor agreements made by previous administrations. It's not like I grow up etch-a-sketch, you don't turn it upside down, shake it and come up with a clean screen and start all over again. So, from me if you look at whether you are democrat or republican and I think people believe in homeland security and border security and protecting your nation and having relationship. So, I'm looking at 09 as if things are going to be turned upside down to startup clean again. Myles Walton - Oppenheimer and Company: And then maybe lastly on Patriot. One time in the past you did disclose kind of how significant that program as a total was to the company. Can you give us kind of an update there, either percent of revenues for the total company or percent of IDS? William H. Swanson - Chairman and Chief Executive Officer: Can you repeat again? Myles Walton - Oppenheimer and Company: Yes, Patriot as a complete program inclusive of all the work you do on it. You once disclosed I think back in 04 the size of that program. Can you give us an update on the size of that program? William H. Swanson - Chairman and Chief Executive Officer: Yes, it's hard for me to do this year, but I would tell you we are expecting about 20% growth in Patriot year-over-year. Is that... that's kind of the way I look at it. There are so many pieces that do we call a mission support piece or a logistics piece or an engineering service piece in Patriot. So, we kind of get away from that, that's why it was out way back in 04 and the definition is so hard to do it, but kind of for us, we do it on a percentage basis. So 20% is good growth from year-to-year. Myles Walton - Oppenheimer and Company: Okay, that's great. Thank you. William H. Swanson - Chairman and Chief Executive Officer: Okay. Greg Smith - Vice President, Investor Relations: Thanks everyone that concludes today's call. Thank you, Lauren.

Thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Good day.