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

Troy Lahr - Stifel, Nicolaus & Co., Inc Robert Spingarn - Credit Suisse First Boston LLC Steve Binder - Bear, Stearns & Co. Cai von Rumohr - SG Cowen Securities Inc. David Strauss - UBS Doug Harned - Sanford Bernstein Howard Rubel - Jefferies & Company, Inc. George Shapiro - Citigroup Investment Research Heidi Wood - Morgan Stanley Myles Walton - Oppenheimer & Co. Ronald Epstein - Merrill Lynch Gary Liebowitz - Wachovia Capital Markets

Good day ladies and gentlemen, and welcome to the First Quarter 2008 Earning Conference call. My name Lauren and I will be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference, [Operator Instructions]. I would now like to turn the presentation over your host for today Mr. Greg Smith, Vice-President Investor Relations. Greg Smith - Greg Smith Vice President, Investor Relations: Thank you Lauren and good morning everyone. Thank you for joining us today for our first quarter earnings call. Our results released this morning the audio feed of this call and the charts reference are available on our website at www.raytheon.com. Following the live call an archive and both the audio replay and the principal version of the slides will be available on our Investor Relations website. With me today are Bill Swanson, our Chairman and Chief Executive Officer and Dave Wajsgras our Chief Financial Officer. We'll start with some brief remarks by Bill and Dave and then we've plenty of time for questions. We ask you to limit your questions to two per call as it will 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 today they are not historical facts, particularly comments regarding the company's further plans, objectives and expected performance consist of forward-looking statements. These statements are based on a wide range of assumptions that the company believes are reasonable but are subject to a range of uncertainties and risks that are summarized at the end of our earnings release and we discuss in detail in our SEC filings. With that I will turn the call over to Bill. William H. Swanson - Chairman of the Board and Chief Executive Officer: Thank you Greg, good morning everyone. I am pleased to report another good quarter for Raytheon. Sales were up 11% compared with Q1 last year, EPS was up 31% and I'm especially pleased to report that we achieved a record end of quarter backlog at $37.7 billion. We also had strong bookings in the quarter of $6.5 billion. Over 25% of our Q1 bookings came from international customers, including some notable initial awards for South Korea and Taiwan for the design, development and support of the Patriot system. We also had additional work added to the UK e-Borders contract, bringing total bookings for this program to $1.6 billion from inception-to-date. These increased bookings shows that our focus on our international business is paying off. Also, after the close of the quarter the company announced the acquisition of SI government solutions, a leading provider of proprietary software security solutions focused on vulnerability assessment to our government customers. SI strengthens our end-to-end information assurance and information operations capability. In summary I believe we are off to a good start in 2008 and we've continued to focus on delivering value to our customers and our shareholders. I want to leave plenty of time for the questions so with that I'll turn it over to Dave. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Okay, thanks Bill. I have a few opening remarks starting with the first quarter highlight and then we'll move on to questions. During my remarks I'll be referring to the webslides we issued earlier this morning. Okay whatever would everyone please move to slide three. As bill noted we performed well in the first quarter, we had solid bookings and ended the quarter with a record backlog. Sales of $5.4 billion up 11% from Q1 of last year and EPS from continuing operations of $0.93 up 31%. The company repurchased 5.5 million shares of common stock for $340 million and announced a 10% dividend increase. We now move to slide four, let me start by providing some detail on our first quarter results. Our total company bookings for the quarter was $6.5 billion representing a 1.2 times book to bill ratio. Notable awards include $578 million of Missiles for the Standard Missile 3 for the U.S. Navy and the Missile Defense Agency and $293 million for the production of the Tactical Tomahawk Cruise Missiles. $331 million at IDS for the design, development and support of the patriot system for international customers, including a $246 million initial award for South Korea and an $85 million initial award for Taiwan. NCS booked $309 million to provide Horizontal Technology Integration forward-looking Infrared kit and $100 million for Long Range Advance Scout Surveillance Systems for the U.S. Army. NCS also booked $203 million for the production of improved Target Acquisition Systems for the U.S Army and the U.S Marine Corp. IIS booked $182 million for additional work on UK Borders contract. IIS also booked $556 million on a number of classified contract including $171 million on a major classified program. Backlog at the end of the first quarter was $37.7 billion compared to $33.9 billion at the end of the first quarter of 2007 an increase of $3.8 billion. You should also note that sequentially our backlog improved from year end by $1.1 billion. If you now move to slide 5. As I noted earlier first quarter EPS from continuing operations was $0.93 versus $0.71 in the prior year. The increase was primarily driven by higher sales volume. Lower pension and net interest expense coupled with reduced share count, also contributed to the improvement. Now before moving to the next slide, I'd like to briefly address operating cash flow. Our efforts resulted in positive cash flow for the quarter. When compared to prior year, the improvement this quarter was largely attributable to the $400 million discretionary pension contribution we made for the first quarter of 2007. As we mentioned on our January call, the company also contributed an additional $500 million of discretionary cash for our pension plan in the fourth quarter 2007. Our strong balance sheet and cash position has allowed us the flexibility to implement a balanced capital deployment plan. If you now move to slide 6, you can see that overall sales increased by 11% in the first quarter of 2008. I do want to point out that the first quarter fiscal reporting period for 2008 included four additional work days when compared to the first quarter of 2007. IDS net sales were up 9% compared to the same period last year this was primarily due to growth on Missile Defense Agency in U.S Army programs. Intelligence and information systems have first quarter 2008 net sales of $692 million, up 18% primarily due to the e-Borders contract. Missile systems net sales of $1.3 billion are up 15% from the first quarter 2007, driven by higher volume on international and development programs. Network Centric Systems had first quarter 2008 net sales of $1.1 billion of 15% when compared to the first quarter 2007, the most significant driver here center on support for the U.S Army's Surveillance and Acquisition programs as well the family of Battlefield radars. Space and Airborne systems had first quarter 2008 net sales of $995 million up 3% versus the first quarter 2007 primarily due growth on Airborne Sensor programs. Technical services had first quarter 2008 net sales of $521 million, up 13% the result of higher volume on training, mission support and depot support services programs. Turning now to page 7. Our overall operating margin for the quarter was 11.4% which was an increase of 60 basis points from the first quarter of 2007, primarily the result of lower pension expense which was in part attributable to the discretionary pension contributions we made last year. Let me now provide a few highlights by business. As we discussed on our January call, IDF has expected experience to lower comparable margins primarily as a result of program profit adjustments recorded in the first quarter of 2007. I also want to point out that margins in the first quarter 2008 were favorably impacted from the sale of licensed software. IIS margins for the quarter reflect the impact of acquisition costs and other investments in cyber operations and information security capabilities. As for NCS, this business continues to post strong results. Last year's first quarter margins benefited from performance improvements recognized on some US Army programs. FAS first quarter margins were impacted by program mix in both the classified and international areas. Cost reduction actions are expected to improve the margin profile in the back half of this year. Missiles experience solid margins in the quarter essentially in line with Q1 2007 and technical services posted higher margins for the quarter primarily due to profit adjustments taken on certain programs in Q1 2007. You will note in the corporate and eliminations category and that change of $22 million the reduction in expense is primarily due to timing of various corporate expense items. We expect these costs and eliminations to be more in line with historical levels for the balance of the year and remain comfortable with our full year guidance of between $250 and $260 million as shown on slide 8. Overall, margins on a full year basis remained solid for the company and our outlook remains unchanged for the total company and by individual business. Turning now to slide 9. We still expect sales to be in the range of between $22.4 to $22.9 billion up 5% to 8% and EPS to be in the range of $3.65 to $3.80 per share representing growth of between 10% and 15%. Before we open the discussion for Q&A I should note that in the appendix we've provided some general direction on how we currently see the three quarters ....the next three quarters for sales, EPS and operating cash flow from continuing operations. And we also added a slide on work days for the 2008 fiscal reporting calendar compared with 2007. We hope you'll find this additional information helpful in modeling the quarterly financials for the company. Now let me summarize first quarter performance. We ended the quarter with a highest backlog in the company's history with over 25% of the bookings coming from international customers. Overall bookings outpaced our 11% sales growth, a 1.2 book to bill ratio and international sales for Q1 grew by 14% over Q1 2007. We repurchased 5.5 million shares and increased our dividend by 10% and we have a strong balance sheet. We're off to a good start this year and look forward to solid financial results for the balance of 2008. With that let me open it up for questions. Question And Answer

[Operator Instructions]. And your first question comes from the line of Troy Lahr with Stifel Nicolaus. Troy Lahr - Stifel, Nicolaus & Co., Inc: Thanks, just wondering if you could talk a little bit about e-Borders at IIS. Was all of that growth from e-Borders and maybe how is the other businesses growing? I think you had some bookings in the quarter, should the non e-Borders business start picking up in the back half of the year, is that or how we should think about it? William H. Swanson - Chairman of the Board and Chief Executive Officer: If you look at e-Borders, about half of IIS's growth is coming out of there. I think we mentioned in the last call, going from memory here, so bear with me, we had about $80 million in sales in '07 on e-Borders, this year we expect around $250 million $260 million from going from memory here and so we're starting off just like we thought we would per plan, it's a good business and a good program for IIS as we go forward and its adding to their growth. Troy Lahr - Stifel, Nicolaus & Co., Inc: And the, so the other the non e-Borders businesses are still growing pretty nicely though? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yeah, exactly. When you look at it and when you think about it the Borders is exactly the kind of work and capabilities that we're looking to promote internationally around the world. Troy Lahr - Stifel, Nicolaus & Co., Inc: And the margins down year-over-year is that all e-Borders and should we see margins kind of pick back up throughout the rest of the year because you are guiding a little higher and as than where you were in the first quarter? William H. Swanson - Chairman of the Board and Chief Executive Officer: I think Dave touch based on the acquisition cost have an affect on their margins so he might want to add a little more color on that. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yeah basically we talked about, Bill mentioned a couple of acquisitions we talked about Oakley impact and impacting the margins, its more pronounced in than the first half of the year than the second. We expect the sort of the overall investments in this area to mitigate in the back half of the margins to improve. Most of the margin decrease I would say somewhere in the neighborhood of it's between 1% and 1.5% of the decrease is attributable to integrate in Oakley into the company. Troy Lahr - Stifel, Nicolaus & Co., Inc: Okay. Thanks guys. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line of Robert Spingarn with Credit Suisse. Robert Spingarn - Credit Suisse First Boston LLC: Good morning everyone. William H. Swanson - Chairman of the Board and Chief Executive Officer: Good morning. Robert Spingarn - Credit Suisse First Boston LLC: Just a little bit about the space margin you talked about a change in program mix perhaps if you could give us a little bit more color on that? William H. Swanson - Chairman of the Board and Chief Executive Officer: I think as we've been saying on the call for sometime on space its really the timing on the programs there that we still believe that from a space point of view given the demand but given the shortfall in funding things there probably won't get back to normal until the 09/10 timeframe. So there's been no change its just as we expected it would do is that all adjust out but SAS has things in lined to be able to deliver as Dave said what our forecast is for the year there.

But no change? Robert Spingarn - Credit Suisse First Boston LLC: While we are on the topic of timing, just give your thoughts on the supplemental and the timing on that and to what extent it might affect your forecast? David C. Wajsgras - Senior Vice President and Chief Financial Officer: We have tried to put what we think is going to happen in the supplemental, I would tell you currently that the balance of about $100 billion is out there right now. The administration has stated what their needs are. They literally need the funding by the end of Memorial Day and given my visits last week on the hill, people are on track to trying to make that happen, but part of our guidance that we look at is it's not done yet. So until it's done it's really hard to put a stake in the ground, but we don't see any change taken place I guess is the way I would say that the programs are solid, they know what they need and they need to be able to get the funds to keep the troops going. Robert Spingarn - Credit Suisse First Boston LLC: Thank you. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Okay.

And your next question comes from the line of Steve Binder with Bear Stearns. Steve Binder - Bear, Stearns & Co.: Hi, good morning.

Hi.

Hi Steve. Steve Binder - Bear, Stearns & Co.: Bill, maybe you just want to touch on for the full year, I mean when you look at the margins projections with the line of business, currently we are only one quarter through, but where do you feel like there is upside potential to the plan and where is the risk for plan by line of business? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yeah, I think Steve, you said it best. It's the first quarter. The funding hasn't been said in the subs. I think from our standpoint we are not highly dependent on it, but there is some activity in there that we want to make sure is taking care of and also as we look at the process for fiscal 09 in the funding, the good news is as we look at as I have mentioned in our press release a good start for us we feel like we're taking risk out of our plan so we feel pretty good about our guidance specially as we look at it at the higher end there. Steve Binder - Bear, Stearns & Co.: Alright and Dave can you maybe just give us an update on your working capital initiatives and kind of touch down $750 million of opportunity I think and we're at the stage where do you see the greatest opportunity in the working capital components and when do you expect to achieve that by? David C. Wajsgras - Senior Vice President and Chief Financial Officer: YeahSteve I was hoping you're going to ask that question. There is a couple of them, I just want to first give you a couple historical data points, we are looking at operational working capital turns and on a trailing 12 months basis we were above 13 turns at the end of the first quarter versus 11 last year and about 9.5-12 months earlier than that, so we have made some significant improvement just over the past couple of years to the tune of about $500 million to $600 million. Now looking forward we continue to have a lot of focus on our cycle time reduction and both billings and collections and we are continuing throughout the company on systems improvements, we ...I have mentioned before we've launched an initiative that is now, we're well in to an initiative company wide that involves operation, supply chain and contracts. Again focusing on overall reductions, we have gone out and benchmarked a number of other companies. So there is a lot of activity around this, we're very focused on it and I would summarize and say to date we are about maybe 25% of the way into the longer term target of $750 million. Steve Binder - Bear, Stearns & Co.: All right thank you.

And your next question comes from the line of Cai von Rumohr with Cowen and Company. Cai von Rumohr - SG Cowen Securities Inc.: Yes, thanks a lot. You know you showed us that you had 4 more working days this year, but sometimes when you ship products a couple of working days doesn't matter. Could you give us an estimate of how much the extra working days added, was it really the full 7% or any sense of that? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes, Cai that's an excellent question. And I just want to add little clarity. We do follow by in large contract accounting and what we try to do is align our fiscal calendar... our fiscal financial calendar to our business processes. Now with that being said, this is not a linear equation like it would be in a commercial enterprise where you are recognizing revenue as product is shipped out the door. There is a lot of things that just don't lend itself to, like I said, linear timing. Its very difficult to estimate what I would point you to is that we did post 11% strong sales on the top line but I think more importantly our book-to-bill at the end of the first quarter was 1.2 and again, if we could precisely quantify it, we would but it would be... its extremely difficult. Cai von Rumohr - SG Cowen Securities Inc.: I can appreciate that. If we look at kind of your share buyback, it was flat year-over-year, how do you think about share buyback now that your going into a stronger cash flow period and short rates have come down and therefore what you earn on that cash is less attractive. And your WAC presumably also has come down? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Right that's a good question as well. We've mentioned in the past that we view our capital deployment plan from a perspective of being balanced. Share count on a net basis was reduced by about 1.1% in the first quarter and I think I mentioned earlier about $340 million. We continue to look ahead in a similar fashion relative to sort of the fact and circumstances at any point in time. We have spoke to our philosophy of offsetting dilutive impact of options in restricted shares and we'll continue to do that. But to say much more than that would be I think a little overly speculative. Cai von Rumohr - SG Cowen Securities Inc.: Okay thank you.

And your next question comes from the line of David Strauss with UBS. David Strauss - UBS: Thanks. Good morning. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Good morning David. David Strauss - UBS: Just back on the sales question that Cai was talking about I mean was there any pull forward in terms of sales if you look at... you obviously knew coming in the quarter you are going to have a couple more working days, but you look at your breakdown that you provided in the appendix from the fourth quarter your sales is a percent of the total for the year looks like it did come in 1 or 2 points higher than you had expected? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yes what I would tell you is that there is no pull forward, we ran the quarter just like a normal quarter for us. When we looked at the results it felt good and when we wrap things up having the backlog go up kind of told us we didn't burn it off. We were doing everything we should. So I can tell you from those of us that we are sitting here getting up everyday and making the doughnuts. It just felt normal and felt okay to us. David Strauss - UBS: Okay so then as far as the guidance really the only thing that happened in the quarter that was a little bit unusual is... or different than what you expected is that the corporate elimination's lines was a little late and you are now expecting to see that in the back part of the year? David C. Wajsgras - Senior Vice President and Chief Financial Officer: That's right. I think the way to think about is its basically timing and let me be little more direct I would not assume that the first quarter is a run rate for the year. David Strauss - UBS: Okay and then last one Dave on the tax rate it looked a little bit late obviously we haven't gotten the essential the R&D tax rate. Can you just update us what you are thinking there? David C. Wajsgras - Senior Vice President and Chief Financial Officer: The tax rate came in not far off of our expectations, there were a couple of small positive events that impacted Q1 that we had essentially expected to impact the tax rate later in the year. So on a full year basis we don't see any change. David Strauss - UBS: All right thanks. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Thank you.

And your next question comes from the line of Doug Harned with Sanford Bernstein. Doug Harned - Sanford Bernstein: Good morning. William H. Swanson - Chairman of the Board and Chief Executive Officer: Good morning Doug. Doug Harned - Sanford Bernstein: You are still delivering very strong margins and you have for some time. When you look out further the next two or three years then you think about potential for margin expansion. Are the prospects for that linked to things like foreign sales, supplemental spending and how do you think about what the levers are to get even higher margins? William H. Swanson - Chairman of the Board and Chief Executive Officer: There is a number of levers we have here, the first starts with kind of the D&A structure of our Six Sigma efforts in the company. We use it not only on operational things on the hardware side, but we use it on the business side through all of our operations including our functions. Part of that is lean, we are always looking for what we can take out of our processes and most importantly how you make them faster. Time is worth money to us, so if you can shorten a 24 months program down to 20 months, 4 months worth of effort is worth some pretty good margins. And so, that part of it is going on. Mix as you point out is always an important element for us, and in the mix international goes in there, but that really gets depended on the country if they want a foreign military sale or they want to direct commercial sale, and we leave it up to the country. It's their choice, but that will have an effect on margins as we go forward. Also the timing of where we're out on development programs, we've got a good mix of programs that are starting out when they transition into LRIP, and then in the production, you expect the margins to change in that regard. So, it's really dynamic and one of the things we do in all of our gate reviews as we bid programs, and we model them to know how they are going to turn out, so we've got a feel of what that mix looks like over the next few years. But I think... you said it absolutely best. This company has an insatiable desire to keep working on our margins and we are never ever satisfied as probably the way I describe it. Doug Harned - Sanford Bernstein: So you feel like you've got potential to push them even higher over the next couple of years? William H. Swanson - Chairman of the Board and Chief Executive Officer: It depends on everything, I'd say, if all of a sudden we get three or four big development programs and that puts pressure on it, and our intent is to still do what we've been doing or be transparent. You could see part of that in DD(X) when it started out with lower margins, but now as we get into the program and perform and wean off the risk then you can start to recognize better performance. So I'm not avoiding your question, there is just about four or five dynamics in there that really depend on the point in time, but I can tell you if you looked at the distribution of our performance across our 8,000 programs or 14,000 contracts, you would see that bell shaped curve getting narrower meaning we are getting more predictive of what we are able to do and that's one of the things in this company that we work hard on is what's left of average and how do we tighten that up to make our performance better and we see that quarter-over-quarter and year-over-year. Doug Harned - Sanford Bernstein: And then just quickly on DD(X), there has been some debate about potentially going straight to CGX and I know from a systems standpoint you'll play it strong well on either case? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yes. Doug Harned - Sanford Bernstein: How do you see if such a transition happen, how do you see that impacting you financially? William H. Swanson - Chairman of the Board and Chief Executive Officer: I see it being good for the home team, for us if you look at DDX its a program that's got 10 different technologies on it. It works on reducing manning on a ship, one other things we all face whether you are in business or you are running a service or you are running DOD heads cost you money and so what you are trying do is how do you reduce manpower and those technologies that are on a DDX pull forward sit and backward fit compatible. So for us and plus it's the most purely open architecture system in the world. And so we see that being able promulgate itself in the other system so we feel good about it and programs got good support. Doug Harned - Sanford Bernstein: Okay, great. Thank you. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line Joe Nadol with JPMorgan.

Hi, good morning. Actually its Jeff Seidman [ph] for Joe this morning. Quick one, I was wondering if you could quantify the impact in IBS from the sale of license software to get sort of more of a pre-margin and also tell us in NCS, what's going to change later in the year that's going to allow the margins to move up the guidance. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes with respect to IBS, we guided for the year just to refresh everyone's memory of 16.7% to 17.1% and continue to be comfortable with that range. The current quarter we posted about 17.7% in the neighborhood of 70 to 100 basis points was the impact relative to the sale this quarter of the license software. With respect to NCS, we talked a little bit about it earlier, we are seeing performance improvements from various productivity initiatives in the back half of the year, in addition to sales mix and growth. More specifically, there's cost reduction and supply chain efficiencies that we see improving margins in both Q3 and Q4.

Thanks and just as a follow up, I think we talk a lot with good reason about the international growth potential at Raytheon and I wonder if you could address the US market and where you see there's strong 7% growth for you guys in the US last year and as you look at it over the next 2-3 years, where you see that accelerating... decelerating and what sort of segments and programs are going to be the key drivers? William H. Swanson - Chairman of the Board and Chief Executive Officer: As there's a lot in that question, let me see if you can do it above 40,000 feet. One we haven't seen a change when you look at the '08 budget or the '09 budget the base bill went from above $479.5 billion to $515.4 billion. The supplemental been around at around at $190 billion. So '08-'09 we see it about the same when you look at it I think you know as others know whatever you get funded now it has a 2 to 3 year tale on it so we look at that remaining consistent going out. I think where we see the spending going is still in Raytheon's core whether it be in sensing or whether it be in effects or C3I or mission support those are all strong areas that we see the forecast remaining healthy the one where you all are starting to see some spending as on the information opts information assurance side of the business we have been talking about that now I think ahead of the power curve and we are positioning on ourselves there so I think for us as we look at things we don't see a change of course there will be a new administration come in. But as we pointed out it takes about a year before you see the focus in that but we clearly see the kinds of things that we are doing whether they be on the global war on terror or on homeland security sitting nicely in Raytheon's wheel house.

Great thank you very much. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line of Howard Rubel with Jefferies and Company. Howard Rubel - Jefferies & Company, Inc.: Thank you very much, first to go back to the balance sheet Dave I think you probably look at your liabilities integrated whole rather than just what we see. This potential plan is still little under funded $1.5 billion or thereabout. How do you think in terms your debt-to-capital ratio and also sort of something your other liability requirements? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Yes that's a very fair question Howard. Just again what we spoke about in the past is our capital deployment plan being balanced and certainly we do look at the fine benefit plan as a place where we would allocate funds overtime. At year end from an ABO standpoint we were actually over-funded we were at a 101%. From a PBO standpoint we were about at 90% at the end of last year we did contribute an additional $500 million in discretionary funding bringing the total discretionary funding to $900 million. Returns in the fund have historically outperformed all major indices and as we go forward we'll continue to look at closely the under funding position, but again it will depend on... but we will close it we do have a target which is not something we talked about publicly. But we do have a target of 100% PBO funded and that will continue to consider discretionary funding overtime. Howard Rubel - Jefferies & Company, Inc.: All right, but the other side of it is your debt-to-equity ratio I mean... David C. Wajsgras - Senior Vice President and Chief Financial Officer: I am sorry. Debt-to-equity, on a gross basis we are about 15%. We expect to be in that range overtime. It is a sort of our target sort of mid-teens position. Howard Rubel - Jefferies & Company, Inc.: And then Bill, also a longer term question I mean how I think an element of flexibility and how do you think about return on invested capital versus margins. It would look to me that your initiatives in IIS would indicate you are willing to give up a little bit of margin in short-term to gain some strong footing in the long-term -- William H. Swanson - Chairman of the Board and Chief Executive Officer: Howard, you are right. I mean one of the things you don't want to do is when you go buy something, sometimes people try and make it accretive in the first year. We look one to be accretive in the second year and what you want to do is make those kinds of investments to where you see the market going. We all know that great Gretzky quote that says, you got to skate to where the puck is going to be, and clearly that's what we are trying to do and the investments can take place in niche acquisitions and you can see that they don't have to be large in order to give you capabilities. The other thing is we feel good about being able to invest in ourselves, e-Borders is a perfect example of where we invested to win a program and now we've got something worth $1.4 billion will be cornerstone program for us as we go forward. So, you are absolutely right and what we are looking for as what's in the best interest of our shareholders, both short and long-term. Howard Rubel - Jefferies & Company, Inc.: I'm disappointed, there is not a Red Sox quote this time. William H. Swanson - Chairman of the Board and Chief Executive Officer: We are just warming up. Its early -- David C. Wajsgras - Senior Vice President and Chief Financial Officer: We are waiting for Q2 and Q3. William H. Swanson - Chairman of the Board and Chief Executive Officer: And the other thing back to Steve's question, there is some binary things that could happen for us this year and that's why we are kind of looking at things and waiting here. Howard Rubel - Jefferies & Company, Inc.: Thank you. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line of George Shapiro with Citigroup. George Shapiro - Citigroup Investment Research: Good morning. William H. Swanson - Chairman of the Board and Chief Executive Officer: Good morning George. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Hi George. George Shapiro - Citigroup Investment Research: First question, if you take your guidance given from the fourth quarter, the first quarter earnings would have been $0.76 from your projection, you did $0.92. Even if I figure the tax rate was a little bit low and corporate eliminations a little bit low, you still did a lot better than what you projected to do. So the question is why did you do that much better and as the result why wait till the second quarter to raise the guidance? William H. Swanson - Chairman of the Board and Chief Executive Officer: I'll give you the first answer and I'll turn it over to Dave. My first answer would be brilliant leadership and with that I'll turn over to Dave. David C. Wajsgras - Senior Vice President and Chief Financial Officer: So I'm going to add to that, George you really amaze me how quickly you run through this math. And you are absolutely right. In the first quarter the overall operational improvements are both from in our original expectations or expectations back in January. We had a higher growth and that accounted for about a third of the overall increase and margins came in stranger than we had expected as well in Q1 which amounted to about a third of the overall increase. We were helped a little bit on tax line and a little bit on the interest line and on the corporate line as well. George Shapiro - Citigroup Investment Research: Okay and then one for you Bill any timing difference on the Saudi contract and if you could just go through a couple of the other bigger international contracts you might be expecting for some time? William H. Swanson - Chairman of the Board and Chief Executive Officer: I'm glad you said some time. That's one of the things when you look at it as both Dave and I said. Our bookings came in at 25%. We probably should have mentioned our sales were about $1 billion almost 20%, 19.5% in the quarter so we see that happening of course all of us that have been around the long time know that the international business happens on a different calendar time clock than domestic one so when we look at it no changes, the northern borders or the border guard program, two of them in Saudi are still in the middle of evaluations. So we're waiting to hear on what takes place there. Relative to Patriot I think you all saw that Korea has started, we received $245 million in the first quarter. We expect some more words on that program later on in the year. Taiwan has also started with about $85 million, we expect more awards there in Q2 and Q4 and when you look at Taiwan, they are going to be buying some more units. We expect that could be late '08-'09 timeframe and then we can go through Kuwait, Israel, UAE, Saudi, Turkey and so forth. So Patriot's got a bright future there that we see them spaced out on a quarterly basis and that really determines where we go with the company given that those awards are always big awards. A: George Shapiro: Okay thanks. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line of Heidi Wood with Morgan Stanley. Heidi Wood - Morgan Stanley: Good morning. William H. Swanson - Chairman of the Board and Chief Executive Officer: Good morning Heidi. Heidi Wood - Morgan Stanley: A question for you, we have seen you more active on the M&A front and obviously its been as a small tactical acquisition. Can you talk a little bit about what's changing for you and what you are seeing happening in the environment, what kind of deal activity should we be expecting for overall '08? William H. Swanson - Chairman of the Board and Chief Executive Officer: I think the way to look at it, we have a nice ability in this company now to look out at where we see the market, what capabilities we think the market is really looking for. And then we spend a lot of time determining our capabilities, and then what we think the incapability is needed. And I think you are seeing a look-see of that on the IOIA side where we want to make sure that we understand the insider threat. We want to understand the vulnerability threat and you don't have to make huge acquisitions to be able to do that and you can pay a fair price in that market. It's when you go after the silver bullet that you are going to pay a lot of money for something and so we're systematically determining what we have to do in these markets. And I am glad you are noticing it. You know we can observe them at the right kind of pace and we want to make sure that we don't lose any of the entrepreneurial spirit of these companies when they become part of it and in the last two on Oakley and SI and some of the others have we see how they fit in and they give us real good capability. Our customers are excited about it because now when we show up its one stop shopping. Heidi Wood - Morgan Stanley: But are you seeing just starting to open for you I mean could we see this again can you give us a sense as to what we might see for overall 2008 so in terms of William H. Swanson - Chairman of the Board and Chief Executive Officer: I don't think we can do that I would just tell you we are opportunistic and it will match with our strategies. When you think of in the core area say RF or radars or whatever, we think we are in pretty good shape there. We'll show up in the game field with anybody, anytime, any place and some of these other emerging markets we want to make sure that we can show up and even have a better advantage in that thing. So I don't know how to predict that other than what you've seen from us is probably feels about right. Heidi Wood - Morgan Stanley: All right and I want to put a finer point on the DDG 1000 comment. Just as I understand your perspective a little bit better Bill. There is a scenario where the DDG 1000 migrated to CGX but it looks like on the house side there is some challenges and less favorable Raytheon scenarios being looked at including kind of rigid. I think representative Taylor was talking about funding DDG 51s and then a bridge to next gen CGX within a large DDG 51 hull which I think that's a Lockheed combat system. And then I think Murtha is talking about LPD 17s and extra TAKEs and while that does have Raytheon content that's not like what you have on DDG 1000. So can you take us through the range of implications if things do not migrate DDG to CGX the way you describe that they kind of go in the scenarios that I just saw flushed out? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yeah I guess I do it when I tell you that as you look at those scenarios you still need a volume search radar, yes, the SPY-3 radar on DD(X) is bias I will admit that when I say it world's best finest radar in its class. So if you are going to put that on a carrier or any other deck you are going to want to do that. So that would migrate. I think any body that does any future ship needs open architecture, needs a total ship computing environment. So I see that migrating. Ships need launch capability of missiles. So peripheral launchers new launchers are important, underwater warfare systems are important. And so when you look at DD(X), the ten technology programs they're doing are world class and so where we go with that I think you could go use it, and that's why we feel strong about the program. I'm not going to pick on each of the scenarios but its pretty hard to make the Arleigh Burke's in nuclear ship, I mean that's like starting all over again and I think people are realizing that when you look at DDG, when it goes into production, it will be at a TRL level which is a design level that how we measure it in the industry at a TRL level that no other ship has ever been at, so that mean that the risk of building that ship will be less than any other ship that's ever been built. And I think that's dawning on people now and why you see individuals like Murtha [ph] and others now supporting DDG as we go forward. Heidi Wood - Morgan Stanley: So it looks like you, it would be either way that your saying it, you are not anticipating a major divot on going forward in the range of the possibilities than? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yeah in terms of Golf we don't see hitting it on the hosel [ph] here. Heidi Wood - Morgan Stanley: Okay, awesome. Thanks very much.

And your next question comes from the line of Myles Walton with Oppenheimer. Myles Walton - Oppenheimer & Co.: Thanks, good morning. I'm going to ask you for the translation of hosel [ph] layer Bill. William H. Swanson - Chairman of the Board and Chief Executive Officer: Well it's a shank word that no golfer ever wants to use. Myles Walton - Oppenheimer & Co.: You honestly had a good booking score here in the first quarter but has your outlook for the full year you changed as a result of I think previously or kind of targeting in $22 billion number plus or minus a little bit? William H. Swanson - Chairman of the Board and Chief Executive Officer: Thanks for asking that one. As we discussed last time that this year had binary stuff source hard for us on the bookings, we gave you $22 billion plus or minus $500 million, I would tell you worth at the higher in to the range right now the way it looks so hiring that and that range right now looks so, we're feeling pretty good about bookings this year. Myles Walton - Oppenheimer & Co.: Okay. And one quick follow-up if I could. I know you are on bounds and a couple of targeting and mission control segments is that a larger opportunity for you overtime? William H. Swanson - Chairman of the Board and Chief Executive Officer: Well, it's really from our standpoint ground station work and center work, we are part of the MP-RTIP team and so forth as we go do that, so for us I think it plays into what we've said is that we love platforms, but we're platform agnostic and so for us it's a great opportunity, Northrop's a great partner and we are looking forward to expand that. And literally we are on all teams so, good position for us to be in. Myles Walton - Oppenheimer & Co.: Okay, thank you. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay.

And your next question comes from the line of Ronald Epstein with Merrill Lynch. Ronald Epstein - Merrill Lynch: Hey, good morning guys.

Hi Ron. Ronald Epstein - Merrill Lynch: Bill, so how should we think about the potential change in administration, and what impact that could have on kind of longer term defense spending? William H. Swanson - Chairman of the Board and Chief Executive Officer: Yeah, I think from our standpoint I've said it before in the company's 86 year history, if you look at you can say that we have a democratic administration and senate in the house, and if you look at that, the company has faired well in that. I think, the way I look at it and I say it is that it doesn't matter whether you are red or blue in your party that all parties care about national security. And whoever goes in the office and takes over is going to have to deal with a Iraq, will have to deal with National and Homeland Security and international security, and that's not really changing. So, they've got tough choices as they go in there and so from our standpoint the way we try and look at it is what are the true needs of our country and international countries and how do we line up our capabilities in that regard. So we don't look at a change in administration or something that keeps us awake at night because whether you are democrat or republican what you really care about is red, white and blue and I really see that as I travel around the world and makes you pretty proud live in this country that you know that people on the hill in administration are trying to do what's right for the country and we both on national issues when it comes time like crisis. So we are not loosing any sleep on it. Ronald Epstein - Merrill Lynch: Okay and then one follow on if I may, when we think about the supplemental budget and maybe changes in spending there, can you just remind us how tight breaking on to this supplemental or not? William H. Swanson - Chairman of the Board and Chief Executive Officer: We have got about a $1 billion in that from a bookings point of view you have to divide that by about a third to get an impact. So when you look at it, it really doesn't swing us and we are not dependent on it. And then the other thing we got to look at is clearly the equipment and what's being used over there is going to have to be reset and we kind of look at it in a way that you are probably not going to buy exactly what's over there that if you have to reset and redo why wouldn't you do with better capabilities better technology and so how do you spiral that equipment. So when you replace it you maybe don't have to buy as much but what you get does that job in a little bit more so that's kind of how we look at it. Ronald Epstein - Merrill Lynch: Sure, great. Thank you. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay. Greg Smith - Greg Smith Vice President, Investor Relations: Okay, Lauren we'll take one more question.

Your last question comes from the line of Gary Liebowitz with Wachovia. Gary Liebowitz - Wachovia Capital Markets: Good morning guys. William H. Swanson - Chairman of the Board and Chief Executive Officer: Good morning. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Hey Gary. Gary Liebowitz - Wachovia Capital Markets: You talked about the Patriot missile... Patriot systems for South Korea and Taiwan you expect more orders later this year. Could you quantify the long term dollar potential of these Patriot awards? William H. Swanson - Chairman of the Board and Chief Executive Officer: Wow. That's hard because we look out to about 2013, 2014 its in the billions and the big billions. Let me just put it that way. It's.. I've really never said in total each of them because some are outside of our five-year horizon, but they are big numbers. If you take usually if somebody's buying four fire units or more it's a $1 billion program. If that helps? Gary Liebowitz - Wachovia Capital Markets: Yes it does, thank you. William H. Swanson - Chairman of the Board and Chief Executive Officer: Okay. Greg Smith - Greg Smith Vice President, Investor Relations: Thank you, thank you that concludes today's phone call.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Good day. Greg Smith - Greg Smith Vice President, Investor Relations: Thank you Lauren.

My pleasure.