Todd B. Ernst - Vice President of Investor Relations William H. Swanson - Chairman, Chief Executive Officer and Chairman of Executive Committee David C. Wajsgras - Chief Financial Officer and Senior Vice President

Joseph B. Nadol - JP Morgan Chase & Co, Research Division Carter Copeland - Barclays Capital, Research Division Jason M. Gursky - Citigroup Inc, Research Division Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division Yair Reiner - Oppenheimer & Co. Inc., Research Division Robert Stallard - RBC Capital Markets, LLC, Research Division Howard A. Rubel - Jefferies & Company, Inc., Research Division William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division Peter J. Arment - Sterne Agee & Leach Inc., Research Division Myles A. Walton - Deutsche Bank AG, Research Division

Good day, ladies and gentlemen, and welcome to the Raytheon Third Quarter 2012 Earnings Conference Call. My name is Chanel, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Todd Ernst, Vice President of Investor Relations. Please proceed. Todd B. Ernst: Thank you, Chanel. Good morning, everyone. Thank you for joining us today on our third quarter conference call. The results we announce this morning, the audio feed of this call and the slides we'll reference are available on our website at raytheon.com. Following this morning's call, an archive of both the audio replay and a printable version of the slides will be available in the Investor Relations section of our 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 move on to questions. 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 are discussed in detail in our SEC filings. With that, I'll turn the call over to Bill. William H. Swanson: Thank you, Todd. Good morning, everyone. We're pleased to report another solid quarter. Our operating margin, EPS and cash flow were above expectation. Overall, the businesses executed well in the quarter. We remain focused on reducing our costs, improving our productivity and delivering innovative, affordable solutions to our global customers. As we said on the last call, we expected bookings to ramp up in the last half of the year, and our third quarter orders came in strong at $7.3 billion. Notable awards included more than $1.2 billion for the Standard Missile-3, which follows on 2 successful intercepts that we had in the second quarter. Our classified book-to-bill was approximately 1.2 and has been above 1 every quarter this year. We also received significant awards for domestic and international training. In addition, I'd like to highlight one of Raytheon's core market areas, C3I or command, control, communications and intelligence. Within this area, we're a leading provider of strategic communication terminals. We currently are providing the Navy Multiband Terminal or NMT for the Navy, as well as the Secure Mobile Anti-Jam Reliable Tactical Terminal, also known as SMART-T to the U.S. Army. Adding to our success in this area, during the quarter, we are awarded a $70 million competitive development contract for the FAB-T program. This is a significant effort, and it enhances our secure communications position within the U.S. Air Force as well. FAB-T will allow communications between military aircraft, ground sites and the new higher data rate satellites, and like the systems for the Navy and the Army, it will allow secure protected communications for our customers' most sensitive missions. Also, during the quarter, the Air Force awarded us a steady contract to help define the next generation of tactical protected SATCOM systems. These wins, plus our existing franchise, positions us well for the future. Our international pipeline is strong, with Kuwait Patriot completing the congressional approval process in late August, and we expect to book an award by the end of the year. Other international opportunities are proceeding through the process, including a large precision munitions award, a C4I system, a Rolling Airframe Missile, and just -- these are just a few among many others that we are pursuing in the fourth quarter. Over the past years, we've pursued a strategy of growing our international business, and I'm encouraged and pleased by the increasing number of international opportunities for the company. At the same time, as we know, the timing of international awards is always a factor. It's the nature of the business. The bottom line is, for 2012, combining our strong domestic orders and our substantial international opportunities. We remain confident about achieving the $25 billion plus or minus $500 million booking objective we set in January of this year. At the end of the third quarter, congress passed a continuing resolution for the fiscal 2013 defense budget that runs through the end of March next year. They've become a way of life, essentially in this fiscal environment. This one is a little different in that it extends past the January 2 sequestration implementation date. While the CR does not preempt sequestration, it does provide a mechanism for continued funding through the end of March, should sequestration be delayed. Although we continue to believe a resolution could occur after the election, we're planning for a variety of potential outcomes. As you've heard me say on prior calls, we're focused on the things we can control. This includes operating the business as efficiently as possible and delivering value for our customers and our shareholders, regardless of whether sequestration happens or not. We believe that Raytheon's large international market presence, portfolio of programs, technology and focus on high-priority areas should help to mitigate some of the potential overall impact the sequestration has implemented. Importantly, over the past several years, we've made the investments in common systems and infrastructure across the entire company. This enables us to be more agile. We can more effectively balance workloads. We can win work anywhere, design it anywhere and build it anywhere across the company. This allows us to respond quickly in this dynamic budget environment that we're currently experiencing. I'd like to thank the Raytheon team for their hard work and dedication. In an environment marked by higher-than-normal level of complexity and uncertainty, the team has remained focused and has executed well. We're prepared for the future and stand ready to continue to deliver value to our customers and our shareholders. With that, let me turn it over to Dave. David C. Wajsgras: Okay. Thanks, Bill. I have a few opening remarks, starting with the third quarter highlights, and then we'll be move on to questions. During my remarks, I'll be referring to the web slides that we issued earlier this morning. Okay, if everyone could please move to Page 3. As Bill noted, we reported solid operating results in the third quarter. The company had strong bookings in the quarter of $7.3 billion, resulting in a book-to-bill ratio of 1.21. Our adjusted EPS of $1.60 was up 15%, driven by continued operational improvement and capital deployment actions. Adjusted operating margin was 13.8%, up 80 basis points compared to last year's third quarter, reflecting strong performance for the company. Sales were $6 billion in the quarter, down slightly from last year's third quarter. We delivered strong operating cash flow from continuing operations of $1.1 billion better than expected, and primarily driven by the timing of collections. We've updated our full year 2012 guidance, which I'll address further in a few minutes. During the quarter, the company repurchased 2.2 million shares of common stock for $125 million, bringing the year-to-date share repurchase to 14.1 million shares for $725 million. Turning now to Page 4. Let me start by providing some detail on our third quarter results. Our total company bookings for the quarter were $7.3 billion, and on a year-to-date basis were $18.6 billion, representing a year-to-date book-to-bill ratio of 1.04. We continue to see our book-to-bill range for the full year 2012 of between roughly 1 and 1.05x. Notable bookings in the third quarter included $1.2 billion of missile systems for SM-3 for the Missile Defense Agency. MS also booked $350 million on a multi-year TOW missile contract for the U.S. Army and Marines, $101 million for Phalanx Weapon System for the U.S. Navy and an international customer and $87 million for MALD, our Miniature Air-Launch Decoy for the U.S. Air Force. Technical Services booked $246 million for work on the Air Traffic Controller Training contract, ATCOTS, for the FAA. CS also booked $252 million and $137 million, respectively, for domestic and foreign training programs in support of the Warfighter FOCUS Program. Intelligence and Information Systems booked $170 million on a contract to provide intelligence, surveillance and reconnaissance support to the U.S. Air Force. Integrated Defense Systems won a competitive award of $123 million for the upgraded Early Warning Radar System for the MDA and the U.S. Air Force. IDS also booked $84 million to support air and missile defense capability for the U.S. Army. And as Bill just highlighted, Network Centric Systems received a $70 million award for the Family of Advanced Beyond Line of Sight Terminals program for the U.S. Air Force, a key competitive win for the Raytheon team that positions us well to address the Air Force's need for secure, protected communication by leveraging proven technology that we've also provided to the Army and Navy. IIS and SAS booked $559 million and $382 million, respectively, on a number of classified programs. Backlog at the end of the third quarter was $35 billion compared to $35.3 billion at the end of 2011. On a funded basis, our backlog is up over $400 million from the end of 2011, and up approximately $1.2 billion from the same period last year. If you'd now move to Page 5. Sales were slightly below last year's third quarter. By business, IIS, missiles and SAS had sales essentially in line with the comparable period last year. IDS had third quarter 2012 net sales of $1.3 billion, an increase of 8% on a year-over-year basis. The increase from prior year is primarily due to stronger international sales on Patriot programs and the TPY-2 radars. Technical Services had net sales of $785 million, down a little more than $30 million from the comparable period a year ago due to the completion of the polar contract in the first quarter of 2012. NCS had net sales of $963 million in the quarter. The 13% decrease in net sales was primarily due to the decline of some U.S. Army production programs. Some international programs, which we had expected to book earlier in the year, have moved to the right and we have updated our guidance accordingly. It's notable that NCS' book-to-bill was greater than 1 in the last 2 quarters, driven by both domestic and international orders. For the full year, the business is expected to achieve a book-to-bill of between 1.1 and 1.5x. Moving ahead to Page 6. We're pleased with the overall company operating margin. The year-over-year improvement was driven by operational performance. Our adjusted margin was 13.8%, an increase of 80 basis points. On a year-to-date basis, our adjusted margin was 13.5%, up 90 basis points over the comparable period in 2011. The strength in our company margins is the result of our planning process, including our continued focus on improving productivity, strong execution across the company and contract mix. We are realizing the benefits from reduced cost in our administrative functions, improved efficiencies in our factories and increasing value from the implementation of strategic supply chain initiatives. As we have said in the past, Raytheon's Six Sigma efforts are driving tangible results for the company. So looking at business margins. Several international Patriot programs, including Taiwan and Saudi and an international missile defense radar program have now moved into full-rate production at IDS, and they are executing well. The favorable performance on these programs is being driven partially by the benefits realized from the economies and efficiencies of increased volume flowing through the factory. This, along with a change in mix, has favorably impacted the IDS margins. Missiles and SAS margins were up in the quarter compared to the same period last year. Solid overall program performance drove improvements at both businesses, as well as favorable mix at SAS. NCS delivered solid margins in the third quarter of 2012 but were lower compared to the third quarter of 2011, primarily due to a change in mix driven by higher net sales on long-term production programs last year, and as we have already discussed, the timing of international awards. And the Technical Services' third quarter 2011 operating margins benefited from efficiencies realized on some programs that completed last year. So overall, the company continues to perform well. Turning now to Page 7. Third quarter 2012 adjusted EPS was $1.60, up 15%. The increase was driven by operational improvements and capital deployment actions, specifically, share repurchases. And on a year-to-date basis, adjusted EPS was $4.61, up 12% from the same period last year. If you could please move to Page 8. I'd like to briefly comment on our updated outlook for 2012. We've lowered and narrowed the range for full year 2012 net sales, primarily due to the timing of awards at NCS. We now expect sales to be in the range of between $24.3 billion and $24.7 billion. As we have done in past years, during the third quarter, we updated our actuarial estimates related to our pension plans. As a result of the update, FAS/CAS pension expense for the year decreased by $32 million from $284 million to $252 million. We increased our adjusted EPS guidance for the year by $0.10 to reflect the strong performance through the end of the third quarter. We see adjusted EPS of between $5.85 and $5.95. You should note that we also increased our 2012 guidance for GAAP EPS to between $5.36 and $5.46, which includes the expected margin improvement for the year, as well as the updated full year FAS/CAS pension expense. As I mentioned earlier, we generated strong operating cash flow in the quarter, which is primarily the result of timing of collections. A portion of this is expected to increase our cash flow for the year. As a result, we've increase our 2012 guidance for operating cash flow from continuing operations by $100 million to between $1.8 billion and $2 billion. Overall, our updated outlook for 2012 reflects our ability to drive results through performance improvements. If you move to Page 9. I'll discuss some detail on our full year guidance for 2012 by business. So let me start with sales. We've increased the IDS full year sales outlook by $100 million as a result of strong growth in international programs. We tightened the full year sales range for IIS, missiles and SAS. We also lowered and tightened NCS' full year sales range to reflect the timing of new international awards and TSS' full year sales range due to delays on domestic training and logistics programs. Now turning to margins. We've increased the range and expect higher full year operating margin performance for IDS, IIS, missiles, SAS and Technical Services. The strong year-to-date results exceeded our prior estimates. We lowered the range of our full year operating margin guidance for NCS, driven by a change in mix due to delays in a few international awards, one of which we expect to receive in the fourth quarter. You should be aware that the fourth quarter outlook also includes costs related to potentially terminating a supplier agreement. From an overall standpoint, Raytheon remains well positioned going forward. We continue to invest in critical technologies. We relentlessly focus on execution, and we have a broad and balanced portfolio of programs. We will continue to improve productivity and deliver value to our customers and shareholders. Now turning to next year. As we did last year, we intend to provide 2013 guidance on our fourth quarter earnings call in January. So if you could please move to Page 10, we have provided a FAS/CAS pension adjustment matrix for 2013, as we've done in prior years. And just to be clear, the discount rate and the actual asset returns won't be known until we close out 2012. It is worth noting that given the current interest rate environment with discount rates at historical lows today, we expect to see improvement to the FAS/CAS pension expense in 2014 and beyond, assuming even a modest increase in rates in the future. Before we open it up for Q&A, let me summarize. We had a solid third quarter and exceeded the operating margin, EPS and cash flow guidance we provided back in July. Our book-to-bill was 1.2 or put another way, our bookings exceeded our sales by 20%, once again highlighting how our innovative and affordable solutions are aligned with our global customer priorities, and providing a solid foundation for the future. We continue to move ahead with our efficiency initiatives, which importantly, have provided savings for our customers and driven solid financial performance for the company. We are confident in our outlook for the year. With that, Bill and I will open up the call for questions.

[Operator Instructions] Our first question comes from the line of Joe Nadol, JPMorgan. Joseph B. Nadol - JP Morgan Chase & Co, Research Division: I just wanted to start out -- I hear you on the international items, and thanks for the detail you gave there. So wondering if you guys have formally adjusted your expectations of the components of those bookings for the year or if you're just kind of sticking with what you have so far since you're keeping your overall number. And then also, Bill, just any color you can give on the hold up? Is this end-market related? Or is this the FMS process in Washington that's holding it up, et cetera? William H. Swanson: Yes, Joe. Let me try and frame it first from the top. We still expect bookings to be in around the 25% to 28% of our total bookings. So from our standpoint, we feel pretty good that what we said we were going to do in January, we're doing. The good part on the international is no cancellations, and we're just being cautious as we look at the market, getting into it. We said the back half of the year was where our activity was going to be, and we brought in over $7 billion worth of bookings, and we expect Q4 to be strong. Maybe what I should do is give you some color the way I think about it if I look at the Q4 bookings. We expect IDS to bring in about $2.5 billion worth of bookings. 60% of that is international. Kuwait Patriot will drive that. We have a congressional notification that's been approved. That total award is in the $1.2 billion range, but we probably expect $750 million to $800 million in that because they'll buy the fire units first, and then they'll go to buy the spares and the services shortly thereafter. The balance of what they're going to bring in is domestic orders. Those are mainly in the naval area, and they've got a few other international contracts there. IIS will bring in about $750 million. These are all plus or minus a little, and they're mainly in the classified area. If I think about missiles, they have bookings of around $1 billion; 2/3 of what they're going to bring in is international. The largest there is a munition program, Paveway. We expect to get that approval, and we expect it to happen and the balance will be domestic. In NCS, our bookings there will be about $1.5 billion. As Dave mentioned, we've signed and expect the customer to sign momentarily an award, and are probably around $600 million to $700 million, in that range, and the balance there will be domestically as we look at it. SAS, we expect bookings there of about $1 billion. About 60% of those are international, and the biggest piece is related to Tactical Airborne radars. Classified, probably a couple hundred million there. And TS bookings, we estimate around $300 million, and that'll be in training and logistics program, about 60% of those internationally. So overall, we see a strong Q4 bookings around $6 billion to $7 billion. And from our standpoint, over half of those will be international. I think that gives you a pretty good color of what we're trying to do and to finish out the year. Joseph B. Nadol - JP Morgan Chase & Co, Research Division: No, that's very helpful, Bill. Just any color on the FMS process and if that's creating any delays or it's normal? William H. Swanson: Yes, it's -- there's a little bit of a delay there. I mean, we have to go through the congressional notification process. Things are moving. I'm not pointing any fingers at anything, but we'd sure like the process to be quicker if we could move them. These are international sales. They're good jobs here domestically, and we'd like to keep pushing as hard as we can, but we are in an election year, and we kind of looked at this at the beginning of the year and knew something would happen, but we're getting great support out of the building and people are trying here, but it's taken us just a little bit longer.

Our next question comes from Carter Copeland of Barclays. Carter Copeland - Barclays Capital, Research Division: Just a couple of quick ones. One, I noticed that the share repurchase was a little bit less in Q3 than you'd done earlier in the year, at least, it looked like that. Was there any just sort of conservatism, given the budget uncertainty that we're dealing with as we head into the back half of the last quarter of the year? And with sequestration sitting there next year, did that weigh on your share purchases in the quarter? David C. Wajsgras: So back in January, Carter, we had talked about moderating our share repurchases for 2012, going forward, relative to prior years. So frankly, we're executing along those lines, and the way the cadence has played out was something that we had essentially anticipated back in January. I think, importantly, we feel very good about the cash flow generation, both on the quarter and year-to-date. And I think it's worth noting that we've increased our guidance to between $1.8 billion and $2 billion of cash on the year. Carter Copeland - Barclays Capital, Research Division: Great, that's what I recalled. I just wanted to make sure there was no sort of difference in message. And the second question, Dave, is one of -- a more mechanical one. We're all struggling to figure out what sequestration is going to mean for 2013 as you are as well, and I'm sure you're evaluating lots of scenarios, but putting the topline impact aside, if you were to think about the mechanics about how you will evaluate the impact of sequestration on margins, given that we'll already be done with Q4 and you'll probably be closing out your EAC shortly thereafter and we won't know really what's going to happen with contractual actions by the time you report Q4 results, and may not know by the time you report Q1 results. When is it realistic in the sort of mechanical process of how you're going to set EACs and determine profit rates, that you'll have a realistic read on what the impact of sequestration could be for your margin rates? David C. Wajsgras: Okay. So I will try to answer the number of questions that you just put forward. There are many factors to consider when you're thinking about this, and frankly, at this stage, it's hypothetical. So the speculation isn't all that easy. Now with that said, a lot of this depends -- for various companies, not just Raytheon, but if you stand back, a lot of this depends on how companies' programs are going to be impacted overall. So for example, if the decreases are tied to a dedicated facility, and that's not a situation that we would want to be in and frankly, we don't find ourselves in that situation, the cost associated with the facility could have a negative impact on the margin profile. It also depends on whether a program or programs are being canceled or stretched out, whether they are funded or unfunded. The overall program mix of the company and whether or not you have offsets, things like international business, and again, from Raytheon's perspective, we believe that's a strength. I think most importantly is our ability to react quickly to any type of reductions from a cost structure standpoint. We know how to react in this regard, and you can see that especially if you look in the rearview mirror. Just look at the facts and look at the results we've posted and the margins we've been able to achieve. We do have a broad portfolio of programs, and the fact that we have company-wide systems, again, which we've talked to in the past, it does provide us with a lot of flexibility to help mitigate any kind of pressure on the margin profile. I hope that answers the question. Carter Copeland - Barclays Capital, Research Division: It does. As kind of a follow-up to that, is it fair to say that it will take an extended period of time into 2013 before we'll really have a decent handle on what some of those impacts might be? David C. Wajsgras: Well, again, it depends what kind of guidance we get from the customer and if and how sequestration is actually implemented. So it's -- my crystal ball is a little foggy this morning. It's a fair question, but it's very difficult to answer in the hypothetical. William H. Swanson: Yes. Just a little color to what Dave said. We do not expect the department to cancel programs starting in January. At least some of the discussions have stated that they'll plan their way through it, as Dave said, and for us, we'll do our planning based on both scenarios, a normal -- just a normal year, you'd call, what we're in, versus a year of sequestrations, and what's important is we have a healthy funded backlog.

Our next question comes from Jason Gursky, Citi. Jason M. Gursky - Citigroup Inc, Research Division: David, a quick question for you, and then one for Bill. Dave, you mentioned that there were going to be some costs related to the termination of a supplier agreement. Can you give a little bit more detail about, a, what that is, and b, what the extent of the costs might be? And then Bill, if you could share a little bit about cash deployment going forward and kind of update us on your current thinking on priority. David C. Wajsgras: Sure. So relative to the NCS supplier agreement, we are in negotiations, so there's not a lot we can say. What we've done is essentially set up a worst case scenario for the fourth quarter and have assumed a $30 million adjustment to NCS's earnings. That's from a company standpoint in the fourth quarter. From a fourth quarter margin perspective, that's about 50 basis points, but again, it is a worst case scenario, and the team is working through the situation, and we are working hard to not have this happen. But we did think it was appropriate to put that into the guidance in the fourth quarter, so that's Part 1. Part 2, you asked about capital deployment. At this point, we don't see any wholesale changes moving forward. We have a balanced approach. We have moderated our share repurchases in 2012 when compared to 2011. We had a meaningful dividend increase earlier in the year, the eighth consecutive increase on an annual basis. We feel comfortable relative to the funding profile of the pension. You can see, as you dig into the details of our financial results, that we continue to invest in ourselves, particularly in the R&D area. Going forward, we'll continue to -- we'll continue with the acquisition strategy that we put in place a few years ago, adding critical technologies to the overall portfolio. So the short version would be, I wouldn't expect meaningful changes as we look ahead to the next couple of years. I do believe that the company has done an exceptionally good job from a cash performance standpoint and converting earnings into cash, and that puts us in a very good position and gives us a lot of flexibility as we look to 2013 and '14.

Our next question comes from the line of Doug Harned, Sanford Bernstein. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: I wanted to talk a little about NCS, and my understanding had been that you were pretty much done with the impact from decline in war-related activity, and that what was left could be offset by growth elsewhere in the unit, particularly international. That didn't appear to be the case this quarter. I mean, backlogs are holding up well, but do you think we're at the bottom yet with respect to the impact from the decline in Army programs? William H. Swanson: Yes, I think so, Doug. At least, from what I see, their book-to-bill was above 1 this quarter. We expect it to stay above that. Going forward, I think, for us, NCS went through the transition. They've got a strategy of the power of the network, really, with network-enabled solutions. They're tapping into that for our customers and working it across the business base here in the company. The Army drawdown, they've transitioned from what I'd call single-mission army products to network solutions, bringing actionable intelligence to the individual soldier. That's where we see the Army going. They need to accomplish that on the move. You've heard me talk about MAINGATE, [indiscernible] and Command View and PSDS2, are things that we can do to broaden NCS and help the Army get in there. There are large Army and Navy satellite communications programs. I talked about that earlier on the call. We see that as a real strength for them. And then, of course, I mentioned they'll be getting a sizable contract here in the fourth quarter. We really feel good about it. It's all buttoned up. We just got to wait for the final signature here. We thought we would announce it, but things move a date or a day around here at times. So we feel good about that. And then the thing that's really exciting is our air-traffic business. Demand is there. They're partnering with the FAA to -- of all the terminal automation systems to be interoperable with the FAA and DoD to provide a common operating picture and increase capacity. In short, to implement and deploy NextGen. So we feel pretty good about where they're at, and we look to the vector to be up as we go forward. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: And then, regarding bookings more generally, in Q3, it looked like a lot of your large awards were heavily U.S. awards this time, and did you see any of the strength in bookings as DoD efforts to get things done before the end of fiscal 2012? William H. Swanson: No, Doug. We haven't seen a delay, and we've not seen an acceleration. The guidance DoD has is business is normal, obligate the funds and proceed forward. So from our standpoint, it feels normal on the DoD side and kind of what we expected as we looked at things.

Our next question comes from Yair Reiner of Oppenheimer. Yair Reiner - Oppenheimer & Co. Inc., Research Division: I have a long-term question about margins. In both IDS and missile systems, you're entering new territory in terms of profit rates. I think many of us are trying to figure out whether something really structural is taking place that can allow these type of margins to become a new baseline or whether we're just kind of at a crest to the cycle. I think -- if you could help us think about that structurally in terms of both the contracting dynamics and product cycles, that would be helpful. David C. Wajsgras: So let me start off with kind of the near-term view and then address the longer-term view. So for IDS, the third quarter margins were higher than the guidance that we had earlier provided. That's really the result of the strong execution in our factory operations. So on a quarter-to-quarter basis, if you're looking at Q4, it actually moderates a little bit relative to Q3 and year-to-date, but that's the result of the timing of the efficiencies that we spoke to earlier, combined with the overall schedule acceleration on a number of international programs. Looking forward, we would continue to see strong margins in IDS. I'd suggest, of the 6 business areas, likely the strongest margins for the group, driven primarily by the strength of the international business, specifically, in the air and missile defense area, as well as continued performance on a number of domestic programs as we look ahead. From a missile system standpoint, structurally, there isn't anything too remarkable. I would suggest that the third quarter performance was again driven by a number of areas of focus on the efficiency side and the productivity side, as well as overhead reduction efforts again that we spoke to earlier. Going forward, I'd suggest that margins would be in the general range that we expect for 2012. Again, I'm extrapolating over the next couple of years.

Our next question comes from the line of Robert Stallard, Royal Bank of Canada. Robert Stallard - RBC Capital Markets, LLC, Research Division: Dave, I was wondering if I could ask a couple of questions on your favorite topic of pensions. So I thought, first of all, if you could give us an idea of where your returns are year-to-date, and what the discount is that you're looking at, at the moment, say, out of this 30 of September. David C. Wajsgras: Sure. Returns year-to-date as of last night were just above 10% from an asset plan standpoint. If you were to put a stake in the ground today, we would be looking at around 4.25% discount rate. And I'll remind you, and I recognize you're aware of this, that the discount rate will be set on the last day of the year based on a hypothetical bond portfolio that mirrors the liabilities of the plan. So it's obviously difficult to handicap where that's going to end up. But again, if you're looking at today, we would suggest about 4.25% discount rate. So let me answer your next question before you ask it. If you're looking at the FAS/CAS impact of '13 versus '12, we see that likely increasing by about $50 million, 2013 to 2012, and you can see that if you just look at what's on the pension matrix. Robert Stallard - RBC Capital Markets, LLC, Research Division: Okay. Actually, the next question I was going to ask was something different, was whether you'd assumed any material change in your contributions moving into next year? David C. Wajsgras: At this stage, we don't see any material change in our contributions. Let me just give you some specifics. From a gross pension funding standpoint, we'll be at around $750 million in '12. And after the CAS reimbursement, we're actually positive, about $100 million. That's the same neighborhood as we look at '13. It's about just under $900 million gross, but again, positive, about $100 million from a cash flow standpoint. I do want to just mention one other thing before we close out this subject. If we look at a 2014 from a FAS/CAS expense standpoint, we see that number being in the neighborhood of -- on an absolute basis, of about $50 million negative, so there is a fairly significant movement in the numbers from '13 to '14.

Our next question comes from Howard Rubel, Jefferies. Howard A. Rubel - Jefferies & Company, Inc., Research Division: Two things I want to just ask about. One is, Bill, as you look at sort of your bid and proposal and opportunities that you're going after, what sort of percentage would you say in general terms is new things that you don't currently have, so that they, in effect, represent market share opportunities? William H. Swanson: Howard, I don't know if I've broken it down that way. But if I think about it from a technological point of view and where we make our investments and where we're heading, we're seeing more technology and where we're focusing in to upgrade systems. If you take older devices, there's a great opportunity to go from what I'll say are the old maggies [ph] or tubes to solid-state. There's a way to go from gallium to GaN, and so there's a push for us in that area. The other thing that we see an opportunity and you saw this in the EW World, that where you could take multiple systems and go to multi-function systems, and that's an area where we see that taking place. And of course, the last one is that we believe you need technology to be able to reduce manpower. And we think, going into the headwinds, that's something important. So from our standpoint, that's kind of our focus. We see, as our military gets smaller and tries to be more agile in their strategy, we see ourselves going there. And then the other part that something I've talked about before is our CRAD. Our development is running at about $1 billion to $1.5 billion for us, and that's really all the seed corn stuff we see in the company that leads to new programs. And you know, of course, for us, EW, advancing AESA radars on older platforms and so forth are just examples of things we're trying to do. But I don't have a percentage, and I hate to swag it, but it is something I'll go look at, see if I can get an answer. Howard A. Rubel - Jefferies & Company, Inc., Research Division: And then just to finish, is that -- part of all of this pressure on defense is obviously units and things like that, but part of it's also process at the customer. Have you been able to be effective either in coming up with some notable solutions or examples that you can take from one business unit to another, where you're contracting costs and processes to deliver the good is really... William H. Swanson: It's a great question. I've talked about it in B and P funds, bid and proposal. Clearly, for us, we have and are sharing best practices across the company. The number of programs we're bidding on is going up. We're opening the aperture, and one of the things we've found is some of our businesses have got some very creative ways to be able to bid more with no more, and we pass that around the company. The other thing I should have mentioned, back to your original question, in cyber, what we're encouraged about now is we have the ability to work cyber from the network to the cloud to the desktop, to the laptop, to all forms of mobile, and we believe that's an opportunity for us that we haven't had before as we've added some niche acquisitions in here, and I should have mentioned that.

Our next question comes from Bill Loomis, Stifel, Nicolaus. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: Just looking at -- you did a good job giving us an overview on NCS. But just on IIS and TS, when I look into your guidance for the year and the fourth quarter, it really implies margins in those 2, lower margin units, anyway, going into the low 7s. Is there anything unusual there or conservatism? How do you explain that? David C. Wajsgras: No. Well, for IIS, I think if you just cut through everything, I would expect the full year margins to be at the top end of the ranges that we've provided. There's nothing unusual or remarkable going on in IIS. They continue to perform well. They're winning a lot of new business. We are very pleased with the way they have delivered results for the company for 2012, and we expect more of the same in 2013. They're particularly strong in the classified area. From a Technical Services standpoint, we talked a little bit about the timing of training and logistics programs shifting to the right. From a margin perspective, the comp to last year's third quarter is a difficult one because we had a number of programs closing out at our customized engineering and depot services area, and that resulted in some margin pickups that otherwise would have occurred later in the year. The roughly low 8% range is about the way to think about that business. They're continuing to perform well. And again, I know I sound a little bit like a broken record, but there's nothing too remarkable happening in that business either. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: And just one quick question on NCS, on the $30 million worst case scenario on the supplier agreement, if I -- I guess if I just add that back to my model based on your implied fourth quarter guidance, you have actually a very good margin in NCS. Is that -- how is that factored into the guidance specifically? David C. Wajsgras: It's just a -- think of it as directly off the bottom line. It's a $30 million -- it's not a reserve in the accounting sense, but it's a reserve in the guidance that we've built into our projections, and again, we're working hard to not take that impact, and we'll see how things play out over the next month or 2.

Our next question comes from the line of Sam Pearlstein, Wells Fargo. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: Dave, maybe you can help me with this. You talked about the strong order activity. You had orders kind of $1 billion higher than sales, but when I look at your funded backlog, it actually declined since June. So can you just talk about how things end up going into total backlog versus funded backlog? David C. Wajsgras: Well, the funded backlog, I think the place I'd like to start would be relative to where we were in this period last year, and that's up about $1.2 billion. With respect to the overall backlog as well as the funded backlog, Sam, there's always timing elements to this, and there's nothing to read into it. Again, quarter-to-quarter, things will ebb and flow. We do feel that the backlog from an overall mix standpoint is very strong. The international backlog is in the high 30% range, and we expect that to increase over time. The average funded portion of the overall backlog runs about 55% to 60%. So again, I don't think -- there's nothing significant to report. There is obviously timing from quarter-to-quarter. William H. Swanson: And I would add, it's Bill, that at least one customer base, not DoD, is on a monthly funded basis rather than a quarterly funded basis. So the number could even be or should even be higher, so it's caused a little bit of a spike, but we feel pretty good about our funded backlog going into next year. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: Okay. And then Dave, if I can follow up just on the cash flow, you were $400 million or $500 million more than you said you were going to be in terms of cash flow from ops. You said a lot of it's timing, but is this going to imply the fourth quarter is actually below the third quarter? I can't recall you doing that in quite a while, so why are we going see that reverse next quarter? David C. Wajsgras: Well, again, we did suggest that much of this was timing. I am comfortable with suggesting the higher-end of the cash flow range for the year, and that is a little bit different than what we had been suggesting in the past. Obviously, cash is measured on the last day of the year, so it's always difficult to handicap. But again, I wouldn't say there's anything unusual going on there either.

Our next question comes from Peter Arment, Sterne Agee. Peter J. Arment - Sterne Agee & Leach Inc., Research Division: Bill, I want to get your thoughts on just kind of -- you mentioned kind of the changes there or navigating with sequestration, but your thoughts on kind of M&A? We saw, I think, a big announcement last month with the ADS and BAE and obviously, that's not going forward. How -- what's your -- any change in your approach there? I know you guys have been very consistent, but I wanted to get your updated thoughts. William H. Swanson: Yes, consistency is a good thing and transparency is even better, and no surprise this is the best. And so from our standpoint, I think we think about it the same way. First of all, can we invest in ourselves? If we do that, then we know the kind of margins and returns we're going to get. The next part, can we partner with someone that helps if they have the capability? For us, we have a good record teaming with universities on some of these smaller jobs and programs that we have as we go forward. Dave talked about share repurchase and dividends, how we look at that, and the next part is the M&A, and we're very comfortable with the type of M&A activity we have. We just announced Teligy. That's a strategy, really, there to broaden cyber even further for us. They specialize in wireless RF communication, vulnerability analysis, reverse engineering and rapid prototyping. We're thrilled to have this firm join the Raytheon team, and they just give us more capability in this very complicated cyber world that continues to get more attention. But the bottom line is we have not altered anything, and I can't comment on the transaction other than those are hard to do in this environment. Peter J. Arment - Sterne Agee & Leach Inc., Research Division: Right. And just regarding the smaller niche, Teligy, are you seeing --- are there more opportunities or -- for you where you feel like you have technology gaps? It feels like you already had a very big base to work from in the cyber. William H. Swanson: Right, we do, but one of the things you have to look at cyber, it evolves. It's a threat that is basically, depending on whether you're right-handed or left-handed, a click of the mouse. And from our standpoint, we've always had this vision of being full service to our customers, and to us, we want to make sure that we can handle not only the network, but the cloud, the desktop, the laptop or what we see. The whole world's going mobile, and that's very vulnerable and as an engineer, I realize that an aperture is a door, and that door can be opened or closed, and we want to be able to provide that service to our customers that we have full knowledge of the spectrum, and that's kind of how we think about it. And oh, by the way, I should point out, as we add these firms, we have a very nice transition plan here in the company, where they become part of it, and what I'm really thrilled about is the acquisitions we made, talking to those leaders, how they feel about joining the company and being able to broaden their capabilities too.

Our final question comes from the line of Myles Walton, Deutsche Bank. Myles A. Walton - Deutsche Bank AG, Research Division: Maybe, first, Dave, on cash, just a clarification. Coming into 2012, they did have some tough comps on customer advances from 2011, and I think at the time you talked about 2013, kind of showing a nice rebound. Kind of thinking about it conceptually between the 2 years, is that still about the right way to think about '13 as you go forward? David C. Wajsgras: So '13, it's a little early to talk about the guidance. We did come into the year with a balance that was, I would say, high relative to prior years, specifically around customer advances, international customer advances, which is being liquidated in 2012 and 2013. As you know, we have improved cash performance and the guidance that we had suggested back in January. I'll provide more details this January on how we see '13 playing out. But given just the number of moving pieces for '13, I think it's just a little bit early. What I would feel comfortable conveying at this stage is that the cash flow expectations for next year in a general way should be in line with what we're seeing for '12. Myles A. Walton - Deutsche Bank AG, Research Division: Okay. And Bill, a question for you on communications, on the defense landscape, it seems like JTRS has been restructured and now is inside of a new program office. And I know Raytheon's engaged on the software side, but it seems like the hardware side is opening up opportunities for you as well. Can you touch on where you think Raytheon fits in that? Are you competing on the vehicular radio competition? William H. Swanson: Yes. No, we are in -- from my standpoint, I really don't think of it as a radio business anymore. I really think about it is a software business. That's where communication's going, not only in wave forms and so forth, but the other thing that we're going to see a real push on is in secure communications, how do you move data around the battlefield in a secure way. And if you think about it, it's no different than I think what U.S. industry is going to have to think about how corporations move around big data and information in an encrypted format. So from our standpoint, we see that as something that's really important to us, and where part of our focus is here, as you move, think about data from an airborne or a satellite platform, down to a ground station, and then you move that information around. That information has to be secure, and it's secure, really, through software and through wave forms. Myles A. Walton - Deutsche Bank AG, Research Division: But specifically, on the JTRS vehicular radio, have you been able to get a placement in that competition? William H. Swanson: Yes, we have. And the other thing is MAINGATE really puts a hole in everything there, if you think about it. And we'll be participating -- I think they call it the NIE. Let's see if anybody around here at the table... Myles A. Walton - Deutsche Bank AG, Research Division: Network Integration Exercise, yes. William H. Swanson: Yes, you got it. That's good. I'm impressed, but we're participating in that big time, and we're looking forward to demonstrating what our hardware can do, and that's a great environment for us to operate in because we don't believe in [indiscernible]. We believe in hardware. Todd B. Ernst: Okay. Thank you for joining us this morning. We look forward to speaking with you again on our fourth quarter conference call in January. Chanel?

Thank you. Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.