Jim Singer - IR William H. Swanson - Chairman and CEO David C. Wajsgras - Sr. VP and CFO

Robert Spingarn - Credit Suisse Troy Lahr - Stifel Nicolaus Cai von Rumohr - SG Cowen & Company Doug Harned - Sanford Bernstein Myles Walton - Oppenheimer Rob Stallard - Macquarie Research Joseph Nadol - J.P. Morgan

Good day, ladies and gentlemen and welcome to Raytheon Second Quarter 2008 Earnings Conference Call. My name is Angela and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will 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. And now, I'd like to turn the presentation over to your initial host for today's call, Mr. Jim Singer, Director of Investor Relations. Please proceed sir. Jim Singer - Investor Relations: Thank you, Angela. Good morning, everyone. Thank you for joining us today for our second quarter earnings call. Our results were released this morning, the audio feed of this call and the charts referenced are available on our website at www.raytheon.com. Following the live call, an archive of both the audio replay and a printable 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 will leave plenty of time for questions. We ask that you please limit your questions to two per caller to allow broader participation. Before I turn the call over to Bill, I would like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance constitute 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 and Chief Executive Officer: Thank you, Jim. Good morning, everyone. I am pleased with the performance of all our businesses, which resulted in another strong quarter for Raytheon. We had solid bookings, sales, op income and EPS in the quarter, each of which experienced double-digit growth over Q2 in 2007. Overall, very good results for the quarter and year-to-date. As we look ahead, our view for the balance of the year is also positive. Our operational improvements have enabled us to increase our outlook for the year on sales, EPS, operating cash flow and ROIC, which Dave will address in more detail shortly. All of this bodes well for the future. I want to leave enough time today for questions, so I will be brief. Let me just reiterate that I believe Raytheon's strong results reflect our continued focus on execution and providing our customers with the best technology and solutions for their missions. This was reinforced last week in the U.K. at the Farnborough International Air Show, where we had the opportunity to meet with many customers and get their positive feedback. Raytheon team continues to execute with excellence and customer focus on all our programs. I am proud of the work they do everyday for our customers. With that, I will 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 second quarter highlights and then we'll move on to questions. During my remarks, I'll be referring to the web slides we issued earlier this morning. Okay, if everyone would please move to page three. As Bill noted, we performed well in the second quarter. We had solid bookings and ended the quarter with a strong backlog. Sales of $5.9 billion were up 11% from Q2 of last year, and EPS from continuing operation of $1 was up 27%. Operating cash flow from continuing operations was $767 million, which was significantly better than the same period last year. The company repurchased 5.2 million shares of common stock for $340 million, bringing the total amount repurchased for the year to 10.7 million shares. Looking forward, we have increased our guidance in a number of areas that I'll address in just a moment. Turning now to page four, let me start by providing some detail on our second quarter results. Our total company booking for the quarter was $6 billion. A notable award for the quarter included 412 million of missiles for AMRAAM, roughly split 50/50 between international and domestic customers. 376 million for the production of Standard Missile-3 for the U.S. Navy and the Missile Defense Agency and 245 million for the production of Evolved SeaSparrow missiles for international customers in the U.S. Navy. TS booked an additional 309 million of work for the Warfighter FOCUS contract for the U.S. army to provide live, virtual and constructive training services bringing the year-to-date bookings on this program to $419 million. 179 million was booked at IDS for the upgrade and support of the Patriot system for Kuwait and South Korea and 143 million for the Rapid Aerostat Initial Deployment program for the U.S. Army. NCS booked 115 million for the AMF Joint Tactical Radio System or JTRS program. IIS and SAS booked over $800 million on a numbers of classified contracts, the largest being close to $400 million. Backlog at the end of the second quarter was 37.5 billion, compared to 33.3 billion at the end of the second quarter of 2007. Our total backlog has improved by about $900 million year-to-date. Turning now to page five. As I noted earlier, second quarter EPS from continuing operations was $1, versus $0.79 in the prior year. The increase was driven by operational improvement and lower pension expense. The company also incurred a $0.09 charge in 2007 associated with the early retirement of approximately $1 billion of debt. Before moving to page six, I would like to briefly address operating cash flow, which was notably better than the same period last year. The improvement this quarter was attributable to a reduction in working capital items, combined with lower cash tax payments. The prior year included $316 million of cash payments related to the sale of the Raytheon Aircraft Company. If you now move to page six, you can see that overall sales grew by 11% in the second quarter of 2008 and all businesses contributed to this increase. IDS net sales of 1.3 billion were up 8% compared to the same period last year. This was primarily due to growth on U.S. Army programs. Intelligence and Information Systems had second quarter 2008 net sales of 829 million, up 24%, driven by the e-Borders contract. Missile Systems net sales of 1.4 billion were up 9% from the second quarter 2007 with higher volume from the Phalanx, Paveway and AMRAAM programs. Network Centric Systems had second quarter 2008 net sales of $1.2 billion, up 12% when compared to the second quarter 2007. The most significant driver here is centered on support for U.S. Army communication and EO/IR programs. Space and Airborne Systems had second quarter 2008 net sales of 1.1 billion, up 3% versus the second quarter 2007. Technical Services had second quarter 2008 net sales of $647 million, up 26% as a result of higher volume on training programs. We were pleased with the performance of Technical Services and feel that the strategy around mission support and training is paying of. Turning now to page seven, our overall operating margin for the quarter was 11.3%, which was an increase of 10 basis points from the second quarter of 2007, as a result of lower pension expense, which was in part attributable to the discretionary contributions we made last year. Turning back to our businesses, as we discussed on our prior calls, IDS as expected, experienced lower comparable margins, primarily as a result of a change in program mix and a positive adjustment last year related to award fees. The 16.6% margin for the quarter is consistent with our guidance for the year. IIS margins for the quarter reflect the impact of acquisition cost and other investments, as previously discussed in cyber operations and information security capabilities. Missiles posted solid margins in the quarter, improving 70 basis points to 11.5%, primarily due to our award fees. As for NCS, the business continued to have strong results. You may recall that last year's second quarter margins had a cumulative benefit from performance improvements recognized on some U.S. Army programs. SAS and Technical Services, both posted higher margins for the quarter, primarily driven by improved operational performance. Moving to our financial outlook on page eight. We now expect sales to be in a range of between $22.6 billion and $23.1 billion, an increase of $200 million over our prior guidance. Net interest expense is now expected to be in a range of between $40 million and $55 million as a result of improved cash flow. Our EPS outlook has improved by $0.15, and I will address this in further detail in a moment. With respect to operating cash flow from continuing operations, our outlook is now expected to be in the range of between $2.2 billion and $2.4 billion, an improvement of $200 million. This increase is due to higher income as well as our focus on and results in working capital management. And finally, we have increased our ROIC guidance by 30 basis points to a range of between 9.9 and 10.4%. Moving now to page nine. As I mentioned earlier, we have raised our full year EPS guidance to a range of between $3.80 and $3.95. This increase is driven primarily by improved operational performance and lower taxes. The improvement in our effective tax rate is driven by the realization of favorable outcomes on several tax planning initiatives. If you'd now move to page 10, I will put a little more color on where we see each of our businesses. With respect to sales, our current outlook reflects further clarity on the DOD supplemental and customer priorities for the balance of the year. Based on this, we have increased our sales outlook for NCS and TS. We now expect NCS sales to be in the range of between $4.4 billion and $4.6 billion, and TS to be in the range of between $2.3 billion and $2.5 billion. Overall for the company, as I previously mentioned, we improved our sales outlook by $200 million for the year to a range of between $22.6 billion and $23.1 billion, which represents a 6 to 8% increase over last year. With respect to overall margins, the company has performing well. We have increased our full year total company margin outlook by 10 basis points to a range of between 11 and 11.3%. We had an excellent second quarter; a solid backlog, double-digit organic growth and strong cash flow generation. Our businesses continue to perform well and we expect that to be the case going forward. With that, let me open up the call to questions. Question And Answer

Thank you sir. [Operator Instructions]. And your first question will come from the line of Rob Spingarn with Credit Suisse. Please proceed. Robert Spingarn - Credit Suisse: Good morning, guys William H. Swanson - Chairman and Chief Executive Officer: Good morning, Rob. Robert Spingarn - Credit Suisse: The first question is on the color on the guidance that we just got. You kept your operating margins pretty similar here. It looks like your incremental margin on the added sales is pretty higher, am I thinking about that wrong? And also could you speak to the lower Q3 and higher Q4 guidance? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Sure. First of all, I'd like to remind everyone that the first half of the year had a couple of extra days, which are offset in the back half of this year. So there is a little bit of timing with respect to the certain sales and earnings cadence in particular. Let me point out that there were some cost reduction actions in SAS that we had originally anticipated in Q3, and Jon Jones and team out there were able to bring those forward into Q2. The award fees as well, with respect to missiles, some of which we anticipated in Q3 were also brought forward into Q2. So I was answering the second part of your question first. With respect to the higher volume, there is margin improvement on the higher volume and that did support the increase in the guidance. Robert Spingarn - Credit Suisse: Yeah. It seems like it's about double the regular margin there, on that increased 200 million in sales. The other question, Bill, perhaps you could speak to... there is obviously a lot of talk about DDG 1000. This has been out now for a couple of weeks, but really a lot of talk in last few days. What's Raytheon's position here? It seems like you have a fair amount of exposure to that program? William H. Swanson - Chairman and Chief Executive Officer: Yeah, I wouldn't call it fair amount of exposure. Let me try and put it all in perspective. It will probably be a typically longer answer than I give, but I think it deserves merits and serves a lot of swirl up there and people are reporting on things that they really don't have an in-depth knowledge on and let me try and clarify it a little bit here. Not picking on anybody, but since we live it everyday. First, Zumwalt is currently the plan or record in the President's budget. That's what it is. It's a fact. The Navy has not discussed their current plans with us or industry. Clearly, they went at least if I read the papers and understand things, they were on the hill yesterday, trying to talk about the program. It is not swashed out. So, for me to comment on it without any real knowledge would be inappropriate. But I can't comment on the program. Our efforts, just to remind everybody, is not the halls. We are talking about the electronics and the integration and the new technology that goes on every one of these ships and future ships and backfit for that matter, because most of us that live in this world, and those that don't know what it was like if we would have to go from wireless back to landlines, that's not something we want to go do. The Navy has stated publicly that they need low manning to drive out operational costs. One of the things you have to look about these older ships, they probably take 350 plus people to man them. The Zumwalt at peak loading is way under half of it, let's say 150 round numbers, just to look at it. So, in our performance on this program, from a cost and our schedule point of view, has been called a model program. So it's not like, our efforts are floundering, and we are not performing and we are not meeting the goals. The office [ph] said is true, this is technology that the Navy has stated publicly that they need. And the threats in my opinion continue to outstrip old technology. That's why you have to keep pushing the envelope here. So I am kind to, try to take the high ground to put everything in perspective. People have to also understand that we've said and the Navy has said, these technologies are forward fit and backfit. For example, the SPY-3 radar is going to go on the CVN-78. That's already under contract, so it's not like things are being thrown away here. So it's not a doom and gloom scenario by any means. We are very cognizant of the technology and the responsibility on us to do the total ship computing effort. SPY-3 radar, the underwater, the communications, peripheral launchers, I could go on, it's important in that regard. We also need to remember, this is the budgeting season. We go through this every year. For some of us that have been in the industry for a long time, on which I qualify, we go through it in a real dynamic environment during election years. I have gone through this nine times now. So it makes this year even more dynamic with all the spin going on and so we only have the Haas [ph] and the SAS mark, we don't have the HACK and the SACK. The senate supports the program of record and some senators at least on the East Coast have stated they have not seen any facts and data. And you don't make decisions like this. So the bottom line, it's still early. We are under contract to develop this technology for the first two ships. There is a lot of work yet for us to do not only this year, but well in the... and next year for that matter. So that's kind of how we look at it. We know we've got our supply facts and data to this thing and in every category of technology or manpower or operating cost. The way the ship is put together electronically is a very efficient ship. So, sorry for the long answer, but those are the facts and we'll continue to work with the navy as they go through this. But right now, it's just what you read in the paper and it's all over the lot, so what I given you is how we see it. Robert Spingarn - Credit Suisse: Bill or Dave, on that note, there is in the paper, there is talking about the large size of the program. Could you give us some clearer sense of what's actually flowing through your P&L here in 2008? William H. Swanson - Chairman and Chief Executive Officer: Yeah. The program's in the 3 to 4% range for us. The nice part, we've said, we are a company of 8,000 programs, 14,000 contracts. We really don't rotate around any one program, and that's really the beauty of our portfolio. But that doesn't stop us from not talking about the merits of what we are doing and how we look at this program, because Zumwalt is important. To me, it's important to me as a tax payer. I mean it's important to be to make sure that our warfighters have the best technology and the most capability when they go to war, and that's what we are committed to doing. Robert Spingarn - Credit Suisse: Okay. And then just as a last question on this, how far out is the current contract extend? William H. Swanson - Chairman and Chief Executive Officer: Oh, that takes us well out into the '010 part, probably some stuff out 11 and 12. I mean, it keeps going... it's a long... I mean, when you look at this thing, it's not an instantaneous thing, this has got long legs and when you look at it, it does go into other parts of the Navy, as they use this. I mean, this is, you know, people try and portray it as you throw it away, nothing's been thrown away here. Robert Spingarn - Credit Suisse: All right. Thank you very much for the help. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question will come from the line of Troy Lahr with Stifel Nicolaus. Please proceed. Troy Lahr - Stifel Nicolaus: Thanks. You guys have really strong workings in the quarter. Can you may be just update us on your thoughts for 2008. Are you still thinking around 22 billion, and could you address the international mix, and they are also still about 25%? William H. Swanson - Chairman and Chief Executive Officer: Yeah. From our standpoint, you are right about the bookings. From our standpoint, we're figuring we are going to be in the range of about 23 plus or minus about 500 million. We are taking it up 0.5 billion. It looks good from our point of view that international is still strong for us. I think early in the year, we commented on the fact that we thought international would be about 25% of our bookings and sales would be about 20. We are still on that track. Year-to-date, we are about 3 billion in international bookings and sales are still growing at double-digit and we are running about 2.2 billion year-to-date in sales. Troy Lahr - Stifel Nicolaus: Okay, thanks. And then just a quick question, following up on the RACK [ph] sale, I thought you guys were going to focus more on internal development efforts, kind of focusing on broadening your product and going into some adjacent market. But we really haven't seen an increase in R&D that much as a percentage of sales was down I think, order year-over-year in the second quarter was up to maybe 3%. Is this just not flowing through into the R&D lines, so we would see it there or the efforts have just been real slower in pick up? William H. Swanson - Chairman and Chief Executive Officer: It's a great question and the engineer will tell me don't get trapped in percentages you got to look at absolute volume. So when you take a percentage of a median number and the same percentage of a large number, the volume of that number grows, and I am not picking on you here. I know you know that. But the point is that we are spending more on R&D, we are taking on different projects, larger projects with gestation periods that are longer. I mean e-Borders was a good example of something that we took on for about three years, went from four down to two and then ended up winning that. That was a big investment on our part in the $20-$30 million range. And those are the kind of programs we can do. When you look at it, the other thing we do is we have CRAD programs where we are funded, will probably run about $1 billion this year in CRAD, so that's where we are using both our planning and the customer funding to do things in technology. And I can tell you, the whole information and ops information assurance we've made acquisitions in those areas, we will continue to do so and plus we have internal development going on there. So from that stand point, the percentages are kind of misleading. For us, we look at volume, numbers of projects, not only our funding but customer funding and we just talking about the Zumwalt. I mean that's a huge program, billions of dollars and there is ten technologies that have Navy funding plus our own. So that's kind of how we measure it, when we look at it. Does that help? Troy Lahr - Stifel Nicolaus: Yeah, no, that's great. Thanks guys. William H. Swanson - Chairman and Chief Executive Officer: Okay, okay. We are investing on ourselves, so that's the bottom line. Troy Lahr - Stifel Nicolaus: Okay.

Thank you. And your next question will come from the line of Cai von Rumohr with Cowen and Company. Please proceed. Cai von Rumohr - SG Cowen & Company: Yes. You mentioned that you made some investments in the cyber area and IIS. Can you comment how large were they? How big will they be in the second half and what kind of fruits do you expect them to bear? William H. Swanson - Chairman and Chief Executive Officer: Yeah, we usually don't give that out Cai, so that will be a bleak in [ph] kind of a void that one. But from our standpoint, we see that as not only being a growth market. I mean one of the things that this problem is universal. I mentioned I was over at the air show. Clearly for me, talking about this with customers around the world, this has taken on a whole new level. If you look at it in the President's budget and I think that was about 18 billion wedged in there for this area. That 18 billion wasn't there a year ago. So, I think this is really telling you the kind of attention that people are looking at and you can read about loss, the data loss, the information in the paper everyday. You can read that it's cost some companies well over 200 million when you have a breach. The way I look at it, that's on commercial terms. In our business, we can't have a breach. People's lives depend on what we do. And so we view this whole information assurance and cyber as something that's a core element of what we are doing, so it's ingrained in our programs. And as you all know, we have acquired Oakley and SI Gov, which are both world-class in what they do, married with our own capabilities and we are going to make sure that we can cover the whole spectrum here when... as we go forward. And as I have said before, we want to be a go to company in this marketplace and we see it growing. Cai von Rumohr - SG Cowen & Company: You've mentioned that, and where would you put this in terms of your growth areas? Is this your number one potential growth area for... excluding international potentials? William H. Swanson - Chairman and Chief Executive Officer: It will be below international. International kind of covers everything we've got. But I would put it in the top five and I would put it in the double-digit category. Cai von Rumohr - SG Cowen & Company: And second... last question, I'll let someone else go. Dave, you brought another 340 million in stock, that's why it was some king of a... that's the number. With your stock price down and your better than expected cash flow for the year and great performance in the second quarter, what are we going to do with this extra cash? More priority on stock or what happens here? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Well, we've talked in the past about our cash deployment plan, and that hasn't changed. We still, you know, we anticipate about 50% of our free cash flow being returned to investors over the long-term. But let me address the share repurchase program in particular, which we view as long-term in nature and will by definition, average in over cycles. And it's probably worth noting, so looking in the rear view mirror; we saw value in buying our shares in the low to mid $60 range. But again, we do view these actions as long term in nature. As far as changing priorities from a cash deployment perspective, we have no changes to talk about at this time. Cai von Rumohr - SG Cowen & Company: Well should we assume given you talk about long-term and you brought in the low 60s, one would think given those metrics you would be more interested below the 50s? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Well, you can obviously reach that conclusion. Cai von Rumohr - SG Cowen & Company: Okay. Thanks so much. William H. Swanson - Chairman and Chief Executive Officer: I would add one other thing. For us, as a company we always visit our capital appointment, capital strategy because it is a Board decision and this gets viewed in the October timeframe. So just remind everybody kind of our annualized timing here as we go through. Thanks. Cai von Rumohr - SG Cowen & Company: Thank you. William H. Swanson - Chairman and Chief Executive Officer: Okay.

Thank you sir. And your next question will come from the line of Doug Harned with Sanford Bernstein. Please proceed. Doug Harned - Sanford Bernstein: Good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning. Doug Harned - Sanford Bernstein: On Missile Systems, so you've had a change of leadership there. You've been doing a great job at building backlog, margins have been strong. I mean, there have been some challenges, it appears on the EKV. If you look at Missile Systems now, where you want to take it? Are there things that you are thinking about differently as you look ahead for the next few years? William H. Swanson - Chairman and Chief Executive Officer: Yeah, no, it's a great question. Being in this business for a while, you look at what your core capabilities are. I look at our missile business; they are probably the best in the world in control loops. When you think of sensing, to reacting to effecting something and doing it in nano or milliseconds and doing it with accuracy of hitting things that might be a 150 miles up traveling at 22,000 miles an hour. There aren't many, if any, that can do that in the world. And so how do you take that technology and capability and go use it, so that has applicability in other areas. The other thing is that we have such a broad base. Take the program that many might have thought would have been dead five years ago, the Phalanx program. If you look at it, it's one of our larger programs now, because we've adapted it to shoot in, incoming rounds, it's in the green zone. It's protecting lives everyday. We get reports of who we saved and what goes on. And the teams adapted that, they'll now be testing later on this fall, taking a commercial laser and being able to put the energy on the target, and take out some very small rounds with a commercial laser, after many people spent a lot of a billion of dollars trying to do it with different other kinds of lasers. And our teams found a very clever way to focus the energy on a small target traveling very fast using the traveling Phalanx system. And so, those are things that I think the team that can do there. Louise did a heck of a job for us, but she wants to enjoy life now and we applaud her for that. And Taylor is a capable leader, very capable and we look him to build on what she's done. So we see a very bright future for our missile business. They are very good at what they do. They are world leaders and world-class. Doug Harned - Sanford Bernstein: But if I think back say, two or three years ago, I know, you and I had a discussion talking about where missile... where demand for missiles was heading. And I think, at that time, there were some concern. Would this be a growth market using traditional systems? William H. Swanson - Chairman and Chief Executive Officer: Yeah. Doug Harned - Sanford Bernstein: As you look forward now, do you think you are going to be able to continue to build backlog over the next few years. And if so, from what sources? William H. Swanson - Chairman and Chief Executive Officer: Yeah, the source is there. If you think about our programs, we are also in small UAVs, killer bees [ph], small programs. Those were our market that did not exist when you and I were talking back then. So it's really close to their sweet spot back on top of it. You think about their core capabilities, they have the ability to take and do high package density kinds of things. Another program, Excalibur, a small precision-guided ammunitions, didn't it really exist the way they do. In fact, that program just got awarded one of the top 10 inventions in the Army in its recognition of how fast it was conceived and fielded and actually funded in the supplemental and it's in theater. And as I call it, it's one phone call away from reaching out and touching something. And it's got the accuracy. And so those markets come about and what you want to really have is an environment where you've got that kind of creativity, that kind of innovation and I think that's really a hallmark of Raytheon. I always talk about it, is a technology company that exudes innovation. We have 42000 engineers and they are very creative. Doug Harned - Sanford Bernstein: So, you are saying that you see these new markets as sufficiently... a sufficient growth to make up for any decline you see in traditionally manner? William H. Swanson - Chairman and Chief Executive Officer: Yeah I do, and I see the international there as we look at it and clearly there are others that want what they can do. Another new market is Active Denial technology. We see that within the supplement, going to get funded. We see applications for that not only what it was first thought of, but as we get over the use, I mean, the way I described active denial is almost the way UAVs or unmanned vehicles came about. 10 years ago, you could count them on a couple of hands. You look at them today, there is more of them in theaters than anybody could ever think of. Active Denial was the same way, it's a great idea, you got to get through the barrier. But once you do, people are going to understand, it's better to be able to shout and stun rather than shout and shoot and kill somebody. So, literally, I see that taking off. So there is a bunch of things that we look at that I've mentioned the safety valves to help our backlog and keep that place running strong. Doug Harned - Sanford Bernstein: Okay, great. Thank you. William H. Swanson - Chairman and Chief Executive Officer: Okay.

Thank you. Your next question will come from the line of Myles Walton with Oppenheimer. Please proceed. Myles Walton - Oppenheimer: Thanks, good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning. Myles Walton - Oppenheimer: Bill, could you give us an update on some of your calendar obviously tentative, but expected timing for some of the larger international opportunities and maybe highlight Patriots and the Saudi Borders contract, where you are currently thinking those might fall in the next 12 months or so? William H. Swanson - Chairman and Chief Executive Officer: Yeah, only too good questions. We're going to take little while, let me try and run through them. I'll do Saudi border first. Clearly, to put some color on it, the Ministry of Interior in Saudi has selected an in-country company for part of the northern border contract. I think you can... you all remember that's the part of the fences, and the [indiscernible] wiring, the network there. They picked a in-house or an in-country construction company for that and that puts some swirl on it because people confuse the contracts in-country. That wasn't something that we were really going after, we were more concerned about or going after the integration of all the command-and-control, which has not been awarded in the northern border part. The Saudis have recently asked for updates to the proposal with different options on the Border Guard Development Program, we call that BGDP. We sometimes call it Purple internally, so you can link those two together. That... their selection of that will be responsible to integrate the border programs, both in the northern portion and in the Border Guard Development program or Purple. We are in the process of revising our offer, which is due in August. And we'll submit it, and the Saudis will go through a comprehensive evaluation period in the update. And the award now appears to be late in the year. That's the current update and the information that we have, at least to tell you on that. On the Patriot, we remain optimistic on our bookings, starting with the domestic, we expect about another $80 million from the Army for the fore lot [ph] in the fourth quarter this year. We've got an upgrades from Korea, so that continues to give us awards. Taiwan has started, we expect another balance in of about 100 million in the balance of the year. They are going through or waiting for congressional release for new units, which we expect in the latter part of this year, first quarter next year. Kuwait, Kuwait has started their upgrades. We expect another 50, 60 million in the Q4 this year, and they've got new units in the plan, which will probably be a late '09, '010 kind of thing. Israel will be upgrading, we expect them fourth quarter this year. That might be in the 50, $60 million. UAE would be large, but it would be late '08 or early '09. Saudi, we are planning on latter part of this year, first quarter of next year. That will be an upgrade for all of their systems to PAC-3. And then sometime in the future probably '010, we expect Turkey. So that's a run down of all the international countries and kind of rough order of magnitude, to stay out of trouble here in and to give you an idea about Saudi. I hope I got it all. Myles Walton - Oppenheimer: Yeah, that perfect. And I guess, so Turkey may surpass 10 I guess cutters out in that period of time as well? William H. Swanson - Chairman and Chief Executive Officer: Yeah, what you do is, that's why we treat them as binary and you all understand how we look at it and the real big ones would be additive to the plan. And as you can see, they move around quarter-to-quarter, and sometimes they start out a little slower than we update as we go through it. But we still feel really optimistic about Patriot and how it's viewed in the world. That's still the best, there is nothing even close. Myles Walton - Oppenheimer: And I guess that's the biggest one of those UAE still looks like it's roughly on schedule? William H. Swanson - Chairman and Chief Executive Officer: Yeah. They are working their way through it. In international, they always take time and because these are big acquisitions and like the U.S. any country is prudent as they go through it. But we work with them, and help them go through that. Myles Walton - Oppenheimer: Sounds great. One other question on TS, if I could, starting to show some real signs of life in that business. Sales growth, margin improvement looks like it may be upward pressure on margins for the first time in a while. What are the kind of long-term margin potential of that business? I mean is it a high single-digit type business? Can you get it to 10% over time or mission and training just lend itself to kind of an 8... 7, 8% type market? William H. Swanson - Chairman and Chief Executive Officer: Where you are at is right, it's not a double-digit kind of business. And what makes that a really good business is it doesn't require a lot of capital. So it has a good ROIC. And since it's not my worry about, I like the kind of business they bring in. It's good business and it has good reach back capability into the rest of the company plus the company depends on them. They are world-class in training. And if you look at all new systems that counties need domestically and international, they are all looking at how to do training better. Literally, it's no different in the commercial world. If you are training Mr. and Mrs. Goodringe [ph], when you are training them, they are not on the maintenance floor generating sales. They are in a classroom. So what you worry about is the compression factor, how fast you can get all that information learned and then get them back generating revenue. It's no different in the military side, where you don't want your warfighters off the battlefield. You want them to be ready. So we worry about compression, and we can take some of our real commercial practices that we have, and apply them to military programs. And they've been very successful at it, and it shows, I'm glad for the comment on TS. They are starting to move the needle here. Myles Walton - Oppenheimer: Great. Thanks a lot. William H. Swanson - Chairman and Chief Executive Officer: Okay.

And your next question will come from the lime Robert Stallard with Macquarie Research. Please Proceed. Rob Stallard - Macquarie Research: Good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning. Rob Stallard - Macquarie Research: Just a couple of questions. First of all, in your commentary you mentioned a number of items that would seem to link into the supplemental. Based on your current estimates, what you reckon as a percentage of 2008 sales that will come from the supplemental would be? William H. Swanson - Chairman and Chief Executive Officer: We are probably a little north of 1billion, 1.2, probably coming out of that. And some of that is not classic supplemental stuff, I guess the best way to do it. But it has a percentage for us, but it's not something that really drives the train here as we look at it. Rob Stallard - Macquarie Research: Okay. And secondly, ATK, Lockheed and Northrop announced a teamy agreement a couple of weeks again, multi-role weapon, what do you think impact this will have on Raytheon's competitive situation? William H. Swanson - Chairman and Chief Executive Officer: Nothing. There is no program, there is no contract and I think even one of the team members said they don't have any money. So it was a press release. I don't wanted to diminish it, but the fact... those are the facts. Rob Stallard - Macquarie Research: But is this an area that you are also looking at it potentially interesting for the long term? William H. Swanson - Chairman and Chief Executive Officer: Yeah, we are in it already. Somebody is trying to come after us and I wish them luck. Rob Stallard - Macquarie Research: Okay, thanks very much. William H. Swanson - Chairman and Chief Executive Officer: Okay. Jim Singer - Investor Relations: Angela, we have time for one more question please.

Thank you, gentlemen. Your next question will come from the line of Joe Nadol with J.P. Morgan. Please proceed sir. Joseph Nadol - J.P. Morgan: Thanks. Good morning. William H. Swanson - Chairman and Chief Executive Officer: Good morning, Joe. Joseph Nadol - J.P. Morgan: Bill, just if you wouldn't mind engaging me in a hypothetical, just back on the DDG 1000. William H. Swanson - Chairman and Chief Executive Officer: Okay. I am glad it's not a November election. Go ahead. Joseph Nadol - J.P. Morgan: No, no, not at all. William H. Swanson - Chairman and Chief Executive Officer: Okay. Joseph Nadol - J.P. Morgan: If we go back to the DDG 51 hull in that sort of the will of Congress and the government, what are the solutions that Raytheon could offer that could help maybe bump Lockheed off some of their systems and get some of your newer technology from DDG 1000 on to that ship? William H. Swanson - Chairman and Chief Executive Officer: Well, first, I've got to correct one thing. I can't say it's the will of Congress. The senate... Joseph Nadol - J.P. Morgan: But, if it is. William H. Swanson - Chairman and Chief Executive Officer: What? Oh, if it is, okay. Joseph Nadol - J.P. Morgan: Yes. William H. Swanson - Chairman and Chief Executive Officer: Okay, I didn't hear that. I just wanted to classify that this isn't over, it's a football analogy. Somebody called an audible [ph]. And sometimes audibles [ph] work, sometimes they don't. And so, given that you put it in that category. I'd look at the 51 and say, one of the things that you need is an advanced radar, but probably more than advanced radar is how you'd network that ship into everything. DHS [ph] system is a federated system, it's not an open architecture. The Navy has been on a path for a long time, to be able to have open architecture, so that you can plug different systems in and not have the ship sitting in a dock trying to get the software working. And so that's really important as we go look at this as if we are on a path to have open architecture, then you got to you have the total ship computing effort that you need. For us, we call it TSCE, Total Ship Computing Effort and that's something that Zumwalt has, that no other ship in the world has is that you can plug and place software into that system, because it's open. I mentioned the radar, the SPY-3, X-band, it can do things that I wish I could tell you. But being a radar person, it will water your eyes in its capabilities. The sonar effort is also something the underwater warfare systems need to be updated. You always got to worry about the underwater threat and if you have these ships, you got to take care of them. And of course, how you handle the communications, radio room kind of activity, and then above all is... you know, I am factory person. When you pick systems that are manpower intensive, you know in the long run they are going to cost you money. And you got to think through that. We're trained over and over again, and how do we get costs out of what we do. And taking a 350-person ship down to 150, I mean, even the CNO in testimony has said they need low manning to drive off the operating cost. People cost money. The other thing is, that you are now going to have more manpower intensive ships, where you going to get the people to man them? So there real is a pressure always on recruiting. And so, as I think through it, there are number of areas that I think kind of go apply to like in, you've all heard me say on reset and other things, we don't need to go back to the future. We need to keep pushing things to give our men and women in uniform, as I say, an unfair advantage on the battlefield, we owe that to him. Joseph Nadol - J.P. Morgan: The radar system is a big percentage of your systems and there has been some sense that on a smaller hull like DDG 51 that your radar wouldn't fit. Are there things you could do in a relatively timely manner to get that radar on the ship, maybe in a smaller form? William H. Swanson - Chairman and Chief Executive Officer: Yeah, the SPY-3 can go do that mission. And the trouble that's why I said, there is a lot of speculation out there and you just got to get the engineers and smart people in a room and there is a doable loop. Especially, if you want to have that ship be a BMD kind of ship, I mean, look at all the radars that are tracking these things, they are X-band radars. Joseph Nadol - J.P. Morgan: Okay. And then just one for Dave. On the cash flow guidance, which went up about 10%, I think you mentioned it was working capital on improvement. Just wondering if that's something that we've seen already in the first half of the year or for something you expect to see in the second half? And any kind of detail or color you can give on what part of the company you are seeing it come from? David C. Wajsgras - Senior Vice President and Chief Financial Officer: Sure Joe. Yeah, we've had for about a year now a company-wide effort on reducing our working capital overall. And much of that has dropped to improve cash flow. I talked a while back about sort of a target laid about a year, year and a half ago, about a target of about 750 million in cash from these actions. So we've realized about $400 million of that. Turns have improved over that period from 10 to about 14. With all that said, we are continuing to see improvement in the back half of the year. So I would take it as a combination of both first half actions and further improvement in the second half. Joseph Nadol - J.P. Morgan: Okay. Thank you. David C. Wajsgras - Senior Vice President and Chief Financial Officer: Okay. William H. Swanson - Chairman and Chief Executive Officer: Angela; that will wrap up our call. Thank you all and just to reiterate, we think we had a nice clean quarter and we have upped our guidance and we think that bodes well for the future. And thank you all for taking the time with us today.

Ladies and gentlemen, this now concludes Raytheon's second quarter 2008 earnings conference call. We thank you for your participation in today's conference. You may now disconnect. Have a wonderful day.