Todd B. Ernst - Former Vice President of Investor Relations William H. Swanson - Chairman, Chief Executive Officer and Chairman of Executive Committe 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 Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division Robert Spingarn - Crédit Suisse AG, Research Division Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division Noah Poponak - Goldman Sachs Group Inc., Research Division Myles A. Walton - Deutsche Bank AG, Research Division Howard A. Rubel - Jefferies & Company, Inc., Research Division George Shapiro George D. Shapiro - Access 3:42, LLC

Good day, ladies and gentlemen, and welcome to the Raytheon First Quarter 2013 Earnings Conference Call. My name is Chantile and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Todd Ernst, Vice President of Investor Relations. Please proceed, sir. Todd B. Ernst: Thank you, Chantile. Good morning, everyone. Thank you for joining us today on our first quarter conference call. The results that we announced this morning, the audio feed of this call and the slides that 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 on 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'd 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 filing. With that, I'll turn the call over to Bill. Bill? William H. Swanson: Thank you, Todd. Good morning, everyone. Before I discuss our first quarter results, I wanted to say a few words about last week's tragedy at the Boston Marathon. Monday, April 15, wasn't just the day of the marathon, it was the day we celebrated Patriots' Day in Massachusetts. A holiday commemorating the first battles of the American Revolution in 1775 and made famous by the ride of Paul Revere. It's a day of immense civic pride and community, and the spirit and energy that pervade its many annual events are a unique part of what it is to be from Boston and Massachusetts. Raytheon's been part of this community here since our founding over 90 years ago. While our offices and operations were not impacted, we have more than 12,000 employees in the state, including some who participated in the Boston Marathon as runners, volunteers and spectators. In fact, one of our local employees was at the finish line and seriously injured in the attack. So for us, this hit very close to home. Our thoughts and prayers are with all the victims and their families and all of those who were affected. I would like to thank the first responders for their swift and heroic efforts that saved many lives. I also want to thank our hospitals and medical professionals for their truly amazing work. The Boston area is blessed with some of the world's best hospitals, and this has never been more evident than the past few days. We are proud of Boston's Mayor Menino, Governor Patrick, local and state officials, as well as federal government for their leadership and efforts in the aftermath of this incident. The events of last week had a profound impact on our state. But they brought out the best in our community. From our local leadership to our first responders, from the hundreds of volunteers to the thousands of people who have donated funding to the victims. We've never been prouder to call Massachusetts home. Now turning to our first quarter performance. I'm pleased to report that Raytheon had another good quarter, with sales, margin, EPS and cash flow all above our expectations. The Raytheon team delivered solid results during the quarter, continuing to lower our costs and improve our agility, as well as providing affordable solutions for our customers. International continues to be a key differentiator for the company. In the first quarter, our international business represented 26% of our total sales. And after the close of the quarter, we announced that the Republic of Korea selected Raytheon's Advanced Combat Radar or RACR to modernize its fleet of F-16s. We expect a booking in the last half of this year. This is a key competitive win and a meaningful validation of our international strategy, as well as a confirmation of our leadership in AESA technology. Importantly, this win opens new opportunities domestically and international for our AESA products. Our portfolio of international opportunities remains robust and includes Kuwait Patriot, the Oman ground-based air defense system, the Qatar [ph] air defense system, Air Traffic Management, as well as radars and missiles. We are making considerable progress on these opportunities. With the evolving threat environment and our customers' desire to acquire the most advanced technologies in the world, we remain confident that international will continue to be strong for Raytheon. The domestic market continues to evolve as well. We were encouraged by the passage of the fiscal '13 defense budget, as it averted a potentially harmful year-long CR and afforded our customers more flexibility. New starts such as Space Fence and Air and Missile Defense Radar, AMDR, for example, are important new opportunities for the company and will provide more advanced capabilities for our customers. On April 10, the fiscal year '14 defense budget request was released. While it did not comply with sequestration and is likely to undergo modification over the coming months, it was a clear statement of DOD's priorities. The focus continues to be on rebalancing to the Asia-Pacific region and our key mission areas such as missile defense, EW and cyber, which play to our strengths. In addition, as a technology company with a broad program base, we benefit considerably from funding areas such as science and technology portion of the budget. And this area fared well in the fiscal year '14 budget request. We focus on growing small science and technology awards into substantial capabilities for our customers over time. This is another important strength of the company. In a couple of minutes, Dave will talk about our updated guidance that now includes the effect of sequestration, which is consistent with the 1% to 2% impact on sales that we discussed on the January call. Importantly, we've raised both our earnings per share and our cash flow outlook for the year. Over the past 10 years, we've been on a clear path to implement world-class processes and continuously improve our operation. We're pressing forward with a number of initiatives. In January, we established our Global Business Services group. GBS has given us the ability to more quickly integrate and streamline our processes and procedures across the company. Additionally, GBS is leveraging our innovative approach to common systems that enhance our working capital and operating profit performance. They are on track to deliver planned productivity savings for 2013. I'd like to take a moment and mention our March 25 announcement regarding consolidation. The move is just another step on our path of continuous improvement. While our businesses have always collaborated to provide the best solutions for the customer, now we're aligned even better with our needs in future markets. It provides greater synergy within our products and services, and most of all, increases our speed in responding to our customers' future needs. For example, we're moving the Command and Control business to IDS. What we've seen are more of our international customers wanting an integrated solution, and given IDS' strong international presence, it's a natural fit. In addition, we're moving our commercial product lines -- or excuse me, our communications product lines to SAS, which has considerable expertise in the RF spectrum with its suite of radars. For those of us who work in this area, our advanced radars have the ability to handle multiple functions, such as EW, radar and communications. We see the day when an AESA radar is just a multifunctional sensor. Regarding our Land Combat Systems, we're moving our ground-based EO/IR sensors to our missile business. This will allow us to maximize integration of the ground sensor with the missile. This combination consolidates the 2 capabilities and allows us to offer integrated solutions to our customers rather than individual products. Lastly, we combined IIS and RTSC to leverage the synergies they share in providing services to our customers. This new business is structured to perform in a more competitive environment and better serve our customers going forward. To help implement and manage these initiatives, along with the day-to-day operating activities, we have established a new position, Chief Operating Officer, and named Tom Kennedy to that position, which was effective April 1. Many of you know Tom from his most recent position as President of Raytheon's Integrated Defense Systems where he delivered outstanding operating results. Tom's leadership skills and deep understanding of our technologies, our customers and our global markets, make him well qualified to fill this new important role. Before concluding, I'd like to point out that during the first quarter, we announced a 10% increase in our dividend per share. This marks the ninth consecutive year we've raised the dividend. It remains an important component of our balanced capital deployment strategy and a reflection of the confidence in the financial strength and outlook for the company. In conclusion, I want to say how proud I am of the Raytheon team. In a challenging environment, their dedication and hard work have made it possible for the company to deliver these solid results and provide for the continued success of our customers. With that, let me turn it over to Dave. David C. Wajsgras: Okay. Thanks, Bill. I have a few opening remarks starting with the first quarter highlights, and then we'll move on to questions. During my remarks, I will be referring to the web slides that we issued earlier this morning. So if everyone would please turn to Page 3. We're pleased with the solid performance the team delivered in the first quarter. Our adjusted EPS of $1.56 was up 5%, and EPS from continuing operations of $1.49 was up 12%. Adjusted operating margin was 13.2%, up 10 basis points compared to last year's first quarter. Sales of $5.9 billion were roughly in line with last year's first quarter and exceeded the high end of our expectations, which I'll discuss further in just a moment. Operating cash flow from continuing operations of $422 million was also better than our prior guidance, the result of working capital. During the quarter, the company repurchased 4.2 million shares of common stock for $225 million. We have updated our full year 2013 guidance, which I'll discuss in more detail in a few minutes. As previously announced, effective April 1, 2013, the company's structure was consolidated from 6 businesses to 4. The company will report its financial results consistent with the new structure in the second quarter. Turning now to Page 4. Let me start by providing some color on our first quarter results. Our total company bookings for the quarter were $3.6 billion, in line with our internal plans. As you may recall, we had strong bookings in the back half of 2012, so on a trailing 4-quarter basis, the book-to-bill is about 1.02. As I mentioned on the January call, we continue to see the order book back-end loaded for 2013 ramping up in mid-year, similar to 2012. From a cadence standpoint, we expect the book-to-bill ratio to expand as we move through the year. Notable bookings in the first quarter included $208 million at IDS to provide Patriot air missile defense capability for an international customer, and $160 million to provide Patriot engineering services for the U.S. and international customers. Missile Systems booked $156 million for the production of rolling airframe missiles for the German Navy and $85 million on MALD, a decoy program for the U.S. Air Force. NCS booked $126 million on the Wide Area Augmentation System program for the FAA. Space and Airborne Systems booked $90 million for the production of AESA radars for the U.S. Air Force. Technical Services booked $135 million for foreign training and $64 million for domestic training in support of the Warfighter FOCUS Program. In addition, IIS and SAS booked $266 million and $184 million, respectively, on a number of classified contracts. Backlog at the end of the first quarter was $33.5 billion compared to $36.2 billion at the end of 2012. It's worth noting that approximately 36% of our backlog is comprised of international programs. If you'd now move to Page 5. Sales were essentially flat compared to the first quarter of 2012 and ahead of our first quarter guidance that we set in January. As a reminder, the first quarter of 2013 had 1 less workday than the first quarter of 2012, and this equates to about $100 million in sales. Our domestic business declined by about 2%, partially offset by our international business, which grew approximately 2%. Looking at sales by business. All of our businesses had net sales that were at or above our expectations. IDS had first quarter 2000 (sic) [2013] net sales of $1.3 billion, an increase of 4% on a year-over-year basis. The increase was primarily due to higher sales on a TPY-2 radar program for an international customer. Missile Systems had first quarter 2013 net sales of $1.5 billion, 8% -- up 8% from the comparable period last year. The increase from prior year was primarily due to higher sales on the SM-3 and Rolling Airframe Missile programs. IIS had net sales of $743 million and SAS had net sales of $1.2 billion, both slightly lower than the same period last year, primarily due to the timing of classified programs. NCS had first quarter 2013 net sales of $931 million. The expected decline in net sales was primarily driven by U.S. Army production programs. And Technical Services had net sales of $755 million, down from the comparable period a year ago as a result of completing the Polar contract in the first quarter of last year. Now moving ahead to Page 6. We're pleased by our overall company margins, once again showing a year-over-year increase driven by operational performance. Our adjusted margin was up 10 basis points to 13.2%. Our focus on execution, productivity and efficiency continues to be reflected in our financial results. So looking at the business margins. IDS and SAS margins were up in the quarter compared with the same period last year. Solid overall program performance drove improvements at both businesses, as well as favorable mix. 13.3% margins at our Missiles business was in line with last year's first quarter. At NCS, the change in operating margin in the first quarter of 2013 compared to the first quarter of 2012 was driven by higher volume and net production efficiencies last year primarily on U.S. Army programs. And IIS and Technical Services margins were down slightly compared to the same period last year. I'd like to take a moment to highlight our ongoing cost reduction initiatives in a little more detail. We continue to move forward with a number of initiatives that are designed to improve efficiencies, streamline our operations and lower our costs. One of the earlier initiatives which I've spoken about on prior calls is strategic sourcing across our supply chain. About half of our spend is on materials and subcontracting, and since implementing this strategy, we've generated hundreds of millions of dollars in savings, much of which we've passed along to our customers. Additionally, over the last 2 years, we've driven well in excess of $500 million of indirect costs out of the business, including efficiencies in indirect labor, reduced travel, lower IT spending and reduced outside services. We have also been aggressive with our core facility consolidation efforts. From 2009 to 2012, we have reduced our total core square footage before acquisitions by approximately 1.5 million square feet. Looking ahead, we are targeting an additional 5% to 10% reduction in our existing floor space over a 3- to 5-year period. More recently, on January 17, we announced the formation of Global Business Services where we consolidated our shared services functions across the company. This is also expected to drive significant efficiencies over the next several years. And the next step in our ongoing effort to further optimize our operations is to finalize the consolidation of our 6 businesses to 4. These are not isolated actions. Rather, they're part of a comprehensive plan to drive productivity across the company, and we are not done. These efforts are all working to drive increased affordability for our customers, and importantly, they benefit our shareholders as well by increasing our competitiveness and protecting or enhancing our financial returns. If you'd move to Page 7. First quarter 2013 adjusted EPS was $1.56, up 5%. Although the increase was primarily driven by capital deployment actions, specifically share repurchases, we continue to drive strong operating performance, which is reflected in our improved margins quarter-over-quarter. And EPS from continuing operations of $1.49 was up 12%, which includes the benefit of the full year 2012 R&D tax credit, as well as the first quarter impact of the 2013 credit. If you would turn to Page 8, I'd like to briefly comment on our updated outlook for 2013, which now reflects our solid first quarter results, as well as our current expectations for the impact of sequestration. Although not on the page, in January, we mentioned our bookings outlook for 2013 was in the range of $24 billion plus or minus $500 million. And now, with sequestration, we see the outlook for the year in the range of $23.5 billion plus or minus $500 million. We now see full year 2013 net sales to be in the range of between $23.2 billion and $23.7 billion. The change of our sales outlook is consistent with the additional 1% to 2% estimated impact from sequestration that we discussed on the last earnings call in January. We have raised our full year 2013 EPS guidance by $0.10 to a range of between $5.26 and $5.41, and on an adjusted basis, to a range of between $5.75 and $5.90. I'd like to point out that the impact from lower expected sales volume for the balance of the year due to sequestration is more than offset by the solid results we achieved in the first quarter. We repurchased 4.2 million shares of common stock for $225 million in the quarter. We continue to see our diluted share count to be in the range of between 324 million and 327 million shares for 2013. As I mentioned earlier, we generated strong operating cash flow in the quarter. As a result, we've increased our 2013 guidance for operating cash flow from continuing operations by $100 million, and is now between $2.1 billion and $2.3 billion. And as you can see on Page 9, we've included the change in our guidance by business. The increase in margin guidance reflects the results from our continued efforts on productivity and efficiency initiatives, as well as from our strong overall program execution. Importantly, we continue to pass back substantial savings to our customers. On Page 10, we provided some directional guidance on how we currently see the quarterly cadence for sales, EPS and operating cash flow from continuing operations for the balance of this year. In summary, we saw good performance in the first quarter compared to both Q1 2012 and also the initial outlook for Q1 2013 that we provided in January. While the environment remains challenging, we continue to execute well, driving solid operating performance. We're in a good financial position with net debt of just over $700 million. We raised our dividend 10% in the first quarter, and are raising our EPS and cash flow guidance for 2013. We remain well positioned with our domestic customers' priority areas and are well aligned with the evolving priorities of our global customers. And we'll continue to drive the business to maximize value for all of our customers and our shareholders. With that, Bill and I will take questions.

[Operator Instructions] Your first question comes from the line of Joe Nadol of JPMorgan. Joseph B. Nadol - JP Morgan Chase & Co, Research Division: I'd like to drill down into the bookings a little bit and really focus on domestic. Of course, the international always bounce around and are usually strong at the end of the year. But in just in looking at the last 5 years of data at least, I don't see a quarter with below $5 billion of total bookings. Obviously, you're well below that level. And I heard what you said about the ramp-up throughout the year. I guess, really, the question is what gives you the confidence, given that sequester just happened, that you're going to see that sequential ramp on the domestic side? David C. Wajsgras: Joe, bookings were always planned to ramp up throughout the year, and Q1 actually played out a little bit better than what we were expecting. We discussed on the January call that we had about $1 billion come in to last year's fourth quarter, particularly in Missiles and our Missile Defense businesses. So as I just said a moment ago, we do expect the cadence of both domestic and international bookings to increase throughout the year. If you look at the last 6 months, given some of this timing, our quarterly bookings averaged about $5.7 billion, and over the trailing 4-quarter basis, it was about $1.02 billion. The cadence for this year is not dramatically different from what we saw last year. I think with that, Bill may want to add a couple of things. William H. Swanson: Yes. Joe, I think the easiest way is to go through our businesses. And IDS expects about half of their business to be international and those will be dominated by the Patriot awards. We've got Kuwait that's finished the -- all the military reviews and has gone over to their parliament for final signature, so we kind of see that in maybe the latter half of Q2, early part of Q3, we can touch it, not an issue. A little over $500 million. Decision in Turkey probably in Q2, award latter half of this year. At Qatar, [ph] also late this year, and that could be a couple billion. We see Oman. Oman has turned out nice for us. They've already placed an order for AMRAAM. So we see that tying together all the aero defense work there. And domestically, for them, they've got naval radars, some Aegis work and Zumwalt, and then missile defense work, and of course, as I mentioned, AMDR and Space Fence. If we go over to IIS, we don't see any composition change in their bookings. Our customers shifted from yearly funding to quarterly funding, now to monthly funding. So that's kind of reflected in how we look at things, and half of their awards are all driven by classified. Missiles expects international bookings probably here in the second quarter on AMRAAM, and Oman will be part of that. Of course, we see strong interest in RAM and Evolved Seasparrow. Paveway, Mideast, I think you're aware and others are aware that Secretary Hagel is over talking packages with those countries. So we expect Missiles to be in good shape. Referring to NCS, over 1/3 of their bookings were international, and on the domestic side, a number of opportunities. In fact, this morning, the wire just announced that we won D-RAPCON, which is a mobile air traffic control system. Initial award $252 million, we'll get a $50 million development contract. And so that was planned probably in the first quarter. It happens in the second quarter. We all know bookings are lumpy, but we look at them on a total basis and Dave kind of gave you some insight there. SAS sees about 1/3 of their bookings international, the biggest piece related to our tactical airborne radars, and South Korea gives us a good start on that one. And finally, our Technical Services, we see the range of training and logistics programs, about 25% of that is international. So that's a quick rundown in my mind going through the businesses. And I got to remind everybody that 30% of our -- 30 of our contracts represent 1/4 of our business. 128 contracts represent the 50%. And then if you look, the last half of our sales are driven by 15,000 contracts that represent $1.5 million, $2 million worth of business. And that's this company and that's what makes it so strong, because we convert those smaller programs into bigger programs later on in time, and hopefully, that answers your question. Joseph B. Nadol - JP Morgan Chase & Co, Research Division: That's very helpful. Just one more number, of the $23.5 billion this year, how much of that do you expect to be international, please? William H. Swanson: About 29% to 31%. Of course, that could be bigger.

Your next question comes from the line of Carter Copeland of Barclays. Carter Copeland - Barclays Capital, Research Division: Bill, I wondered if you could speak briefly on the Hagel strategic review, and your views on -- I know it's tough to call likely findings, but when we look at the recent change in posture and the pivot to the Pacific, we've got -- a sort of recently redone defense strategy. When you take that in mind and say, what is it that Secretary Hagel is going to end up concluding? What do you think the focus of that review will be on? Does it -- is it more related to that strategy? Or is it more related to the realities of the budget and how we're going to prioritize spending? Any color you could provide would be really helpful. William H. Swanson: Okay. Let me take a shot. I'm not in charge of the building so remember that when I give you my opinion. I think, having recently heard Deputy Secretary Dr. Ash Carter speak, clearly, the department is trying to make sure that they're leaner, they're more flexible, they're agile, they're going to be smaller, and they're going have to be able to adapt. And there is a focus on the Asia-Pacific region. There's been 60 years of peace there. And the United States wants to make sure our allies and our friends over there continue to enjoy another 60 years of peace. That doesn't mean from a standpoint that the threat is China. Some people predict it's more of, how do we make sure that North Korea and others don't threaten the well-being of our friends and allies over there. So I think part of the strategy is how do we do that. Probably more of a focus on naval. It'll be a repositioning of personnel, probably in places they haven't been before, but that's because they've been fighting a battle in Iraq or Afghanistan. And so from my standpoint, I think special ops are going to get more attention. They're quicker. I think companies are going to have to have technology and things they can put on the table rather than view graphs, which appeals to us. And I also see a real attention to cyber, and I break the cyber down into 3 areas. Those areas would be the network, they would be in cyberweapons and they'd be in infrastructure. And that's where part of the focus is going to be there. And of course, you all know that, that's what we've been doing for the last 4, 5 years here, getting ready for what we thought was coming. So I think there will be a strategy and then you tie your funds to your strategy, no different than what you do in a company, and I expect them to do that in a thoughtful way. Carter Copeland - Barclays Capital, Research Division: That's very helpful. And one for Dave, just quickly. Dave, can you clarify what the difference in year-over-year, the contribution from net EAC cum catches was? David C. Wajsgras: On a net basis, it was essentially flat. It's around $140 million last year's first quarter and roughly $140 million this year.

Your next question comes from the line of Sam Pearlstein of Wells Fargo. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: I was wondering if you can talk a little bit more about the reorganization. And I guess, in terms of what the savings are and when do you net them? Because I'm assuming there's some costs you're planning in 2013 to actually get those savings. And then when I project going forward, how are we going to actually see some of those savings just because if I look at your selling and administrative costs, or is it in cost of sales? Because selling and administrative costs seem to have stuck around 6.5% of sales or so for quite a while. David C. Wajsgras: So Sam, the savings are being driven primarily by the reduction in personnel costs as we go through the consolidation from 6 to 4. And we streamline -- this is primarily around streamlining the leadership teams. And as we noted in the press release, we expect the action to affect about 200 employees. So it's important to note that the impact to 2014 and '15, frankly from a financial perspective, is de minimis because most of the savings are priced into our contracts and passed along to our customers. In 2013, you have to account for the costs to implement the program, the relocation, the severance and so forth, and that offsets the current year savings. So fundamentally, the restructuring is weighted, more so than you may realize, toward business leadership teams. But again, the driver here is primarily to more efficiently manage the operation and the business, and serve the customer going forward. Now with that said, we will continue to drive efficiencies through supply chain actions and through indirect or overhead cost reductions. I articulated some of that earlier during my comments. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: Okay. And Dave, one more, if I can add in. Your capital spending was pretty light this quarter. Do you still think you're going to be up close to flat year-over-year? David C. Wajsgras: We'll be flat to slightly down year-over-year. We have a lot of focus on all the areas of spending, and capital expenditures are not outside of the realm of what we're looking at.

Your next question comes from the line of Robert Spingarn of Credit Suisse. Robert Spingarn - Crédit Suisse AG, Research Division: Dave, question on NCS, understanding that as a segment, we won't necessarily see this play out this way. But you were down 7% in revs on the quarter and attributed that to the Army softness. But the guidance for this segment, which you provided, suggests that this is really the trough quarter. One, is that correct? And two, does that imply that we don't see further pressure in Army going forward here, rest of the year? David C. Wajsgras: No. Rob, that's a good observation. The full year 2013 does include -- already includes lower business with the U.S. Army, particularly around the sensor production programs. This is offset, and we have talked about this in the past, and apparently you recall, this is offset by growth on the international side, particularly in the C4I area where we have substantial development work. NCS as a business, I would say Q1 could be viewed as the trough, it's a fair way to look at it. As we move through the year, we see those businesses, by and large, expanding. And I think equally important, we see expansion from a margin standpoint as well. Robert Spingarn - Crédit Suisse AG, Research Division: Okay. And then the other thing I wanted to ask you is just you talked about the buyback in the quarter and the share count that you're anticipating. I don't know exactly how you ended the quarter and what the creep would be. But given the range, you might be close to the high end of that share count, right? So we shouldn't infer from that, that you're done buying back stock? David C. Wajsgras: Well, first of all, I wouldn't infer that we would end the year at the high end of the range. But let me address that in just a second. We do have a strong balance sheet, and we continue to pursue a balanced capital deployment strategy. And this guides our thinking about how we're returning value to shareholders. We're continuing to invest in the business. We're paying a strong dividend. We're pursuing targeted M&A. And as you noted, we're continuing to buy back shares. We mentioned earlier that we raised the dividend 10% this year and we did raise it, as a reminder, 16% last year. So importantly, we do remain cognizant of what's in the best interest of our shareholders when it comes to capital deployment in general and our share repurchase plans more specifically. And just to be clear, we'll continually review these plans.

Your next question comes from the line of Doug Harned of Sanford Bernstein. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: I'm interested in the reorganization. You've been in this segment structure for quite some time, about 10 years. I'm curious, what was the catalyst that made you decide to make this change at this point? William H. Swanson: I think, Doug, you know us, we have a strategy. We've stuck to it. We've tweaked a little bit here and there. And as you look to the future, clearly, at least my take, is that companies have to be more agile going forward. The environment's changed. Our customers need the ability to sit down with us at the table and work through things. We were most recently, in the Pentagon, we went through, some of us -- our programs. I can tell you, I really felt good having that meeting. Our programs are doing extremely well if you look at our performance on cost and schedule indices. It looks like a 12-gauge shotgun with a choke, it's right around the sweet spot. And I can't say everybody else is in the same position, but I sure was thankful of Raytheon's. So when you look at the organization, it's how do we respond quicker, how do we respond with affordable solutions, and how do we continue to have the productivity gains that we've had on a year-over-year basis. And we elected to make some changes and that was worked on by the senior leadership of the company. We probably spent the better part of 9 months going through that to make sure we got it right. Tom's on board watching it. I can tell you it has gone extremely quick, extremely well beyond my expectations. And you know me, I set some pretty high standards. And so, we're seeing things click and work in a way that is just what we want. And especially internationally, you've got to be able to go in and offer solutions. Selling products just doesn't work. And I think this new organization is going to help us do that. And by the way, sometimes change for change's sake is healthy. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: And then one competitive question. MEADS has new life, it appears. Do you see this as having any potential impact on the Patriot outlook? William H. Swanson: Well, let me start off by saying MEADS is not a Raytheon program. The U.S. Army has decided not to procure MEADS. It made that decision some time ago and continues to state that decision. The continued performance of Patriot contrasted with MEADS' long-standing cost overruns and schedule delays were the primary reason most members of Congress thought the program should be terminated early. However, the Pentagon has told them they face cancellation fees, so the funds have been put in for the cancel -- for to finish the program so they don't have that particular thing. So I guess the way to answer your question is Patriot has a long installed base. It has numerous international customers, and I don't lose any sleep at night whatsoever over the other program.

Your next question comes from the line of Noah Poponak of Goldman Sachs. Noah Poponak - Goldman Sachs Group Inc., Research Division: Bill or Dave, I wanted to ask about margins long-term. On the one hand, you're doing a lot internally on the cost side that's proving successful; on the other hand, presumably, those cum catch numbers you talked about earlier don't sustain. We're seeing better buying power, version 2.0 come out of the Pentagon and it's unclear exactly what that means. How sustainable are current margins 2, 3 years out? And are there any segments specifically that look much different 2 or 3 years out? David C. Wajsgras: So Noah, it's a good question. We've discussed this in the past. Frankly, I've been here 7.5 years and I think I've discussed this for 7.5 years. We... William H. Swanson: I've been here 41. This has been going on for 41. David C. Wajsgras: Okay, 41 years. But we have continued to perform well. We execute, I would say, best-in-class. We continue to satisfy all customer requirements, both domestically and internationally. We've talked about our focus on productivity and cost efficiency, and that's continuing to put us in a very good position from a competitive standpoint. I mentioned earlier we have about 36% of our backlog with international customers and we continue to see that expanding over time. The financial returns, from an international perspective as a result of the risk associated with international business are -- it's typically higher than domestic business. So I would say, as we look forward, we're continuing to see sustainability from a margin standpoint. And I would say there would be upward pressure at some level from an overall margin profile. Noah Poponak - Goldman Sachs Group Inc., Research Division: Okay. That's helpful. If I could just ask about one other item. The Technical Services segment, just bigger picture. I mean, this had 3 or 4 years in a row of double-digit and a few well in excess of 10% organic revenue growth years towards the end of the defense spending upturn. It's been fairly resilient as spending has started to come down, a little weaker this quarter. Can you remind us or update us on what the handful of largest drivers are in that segment right now? And how do you think about when that one bottoms out? William H. Swanson: Yes. It's -- first of all, our Technical Service business really leads in the, what I'll call the virtual, live and constructive training. They do that in a way that really leverages from our commercial side of the business there. Many people don't realize that we provide the training for GM and Chrysler and Opel. And if you dealt with the automobile industry, you know that they're continually looking for price and value. And so for us, we find a way to do compression and education or training so we can basically take a program -- and compression means that we can take 20% or 30% out, and increase the retention and deliver better results. We've taken that and got it into our army training. That training gets propagated into other areas, it's expanding internationally. But what we've all got to realize is that with sequestration, you've got the Secretary and the Deputy, they've got to worry about the budgets and how to make everything fit. And so from my standpoint, I think about it in a way that they look at personnel, which is off-limits, the President's decided that, that's not going to be touched. They're going to take care of mandatory things like nuclear deterrents and security concerns. They're going to make sure they protect new programs that they want to go through. And finally, you get to people. And so that department's going through some hard choices now with furloughs. I think they've decided that it's going to be around 13 days. In the next 3 or 4 weeks they got to decide if they're going to implement that or not. And then you finally get to O&M. And O&M, especially, if you're on the services side, provides quick savings to the building. And they're not canceling programs, so it puts the focus there. We think we've factored that correctly into our services business. And as you point out, it's resilient because they deliver good value and they're constantly realizing that we have to come up with savings to help our customers fit their budget. So from our standpoint, we're going over a speed bump right now that we think we forecasted correctly. And then as we go forward, we'll see where things go. It's unlikely there is going to be any change in sequester in the next few months. We assume it's going to take the full year. The fiscal year '14 budget gives them -- Congress and the administration a chance for maybe a grand bargain. We'll find out what happens here. But we continue to work with our customers to help them prepare what's in front of them. I hope that helps.

Your next question comes from the line of Myles Walton of Deutsche Bank. Myles A. Walton - Deutsche Bank AG, Research Division: I'll stick to just one. It sounded like the bookings target for the year was lower by about $500 million. The sales for this year is lower by about $400 million. So the year-end backlog projection really doesn't move very much. And I guess what I'm struggling with is, where does sequestration actually hit you for '14 if it doesn't hit you in your year-end backlog? David C. Wajsgras: So as you -- as we go through this year, and I'm not sure we addressed this earlier, but it's primarily in our services businesses that backlog is impacted as a result of sequestration. It's primarily IIS, RTSC, as well as some of the classified business in SAS. By and large, it's our quick-turn type business. We've talked about the back half of the year being weighted from a booking cadence standpoint. It's also heavily weighted to international. So just to give you some additional perspective. From a first half standpoint, we expect to see a book-to-bill of under 1, say roughly about 0.9. As you go to the back half of the year, we see about 1.15. And as we close out the year, we see it just around 1 overall. From an international standpoint, we see the book-to-bill at about 1.05 to about 1.15. So you can see how the cadence sort of is back-end weighted and the cadence is also weighted toward international. Myles A. Walton - Deutsche Bank AG, Research Division: I was just going to say, am I right that your year-end projected backlog, though, didn't -- doesn't move with sequestration? David C. Wajsgras: The backlog is just about flat, even including sequestration. That's about right. I mean it's -- yes, that's the math. William H. Swanson: Yes. What people also have to remember, some people expected the world to end with sequestration. It happens over time, it's a slow buildup. And for me, the world has changed, and the area you worry about or you focus on is where you don't deliver a product is the easiest place to go get money or it's fungible. So where you have programs or products or international, which will continue anyway, so you really worry about what I'll call the seats or positions you have on the service side. And we've looked through that, and we've got some strong programs, and we think we've taken that into account as Dave pointed out.

Your next question comes from the line of Howard Rubel of Jefferies. Howard A. Rubel - Jefferies & Company, Inc., Research Division: Just to go back for a moment and talk about outlook and sort of your forecast. If we look at the FY '13 budget and how it was constructed, and then we look at the language that was appropriated, it seems that in a number of cases, you got awards and program funding that will be far in excess of where the original proposals were. Could you sort of touch on that? It looks like it's in radar, it looks like it's in ballistic missile defense. And then I just have a follow-up related to that. William H. Swanson: Howard, you're right. It's -- part of our philosophy here, the company -- or the strategy is that our products or our services have got to both be forward-looking but they've also got to be backward-compatible. So we look at what we do. And in this world, I think some of what we have is going to have to last longer. And so when you think about an F-16 aircraft and you can put a new AMRAAM D on it and you can put an AESA Radar on it, you have made that really a potent platform. The other thing we see on the naval side are Zumwalt program, what we've been able to do there with 11 or 12 new technologies that we put there. We've been able to go backward-fit those. And now, given the shipbuilding performance, the integration and where we see that going, it really reaffirms to people that you can go both directions here. So I think you've seen our existing product lines continue to grow. And the thing we feel excited about, and that's something I talked to Dr. Carter about, is that the Department is really going to worry about new starts. The thing you have with -- you know this as well as I do, old programs have many fathers and mothers. New programs are like plants with shallow root structure that people can pull up. But what leadership has to worry about is that those development programs are really the future. And I see the building trying to protect those programs going forward, which I think bodes well for the kind of work we do, if that helps. Howard A. Rubel - Jefferies & Company, Inc., Research Division: And then -- absolutely. And that's sort of the follow-up is that there are 3 big new starts that I can point to domestically: AMDR, whatever happens with AESA Radar and -- well, actually Space Fence, and 4 if I count the Jammer as well. How have you thought about factoring those? So if you win half of them, do you end up, in fact, exceeding your bookings forecast? William H. Swanson: I think if we won half or more, it would be good for the home team. And of course, Tom Kennedy's looking at me, telling me it would be very good for the home team. So it's one of those where we don't play would've, could've, should've. And what that is, is when we submit our proposals, we give it our best shot and take into account everything we know. And what we realize is that our customers don't buy technology for technology's sake. They're really looking at what's the best value. And the best value includes a lot of different things now. One is energy consumption. And when I started in this business, nobody cared about energy consumption. And so now, when you look at some of these big radars or these systems is how much do you consume and how is that evaluated besides reliability, maintainability and the rest of the -ilities. So we feel good about where we're going. And even in the technology arena, for us, they're not big jobs, million dollars. We're worried about a hybrid dish where you can go out in the field and have a sterling engine to be able to generate energy to use 50% less power. Those are the kinds of things this company works on. And they come in here, we look at them, we get excited. And then the teams go off. And I could talk about others. We have a program that BBN's doing, which is developing script-independent technology where we can transcribe handwritten documents. We're the only ones in the country working on that from a DARPA point of view. I could go on all morning about some of the neat things we're working on, but that's how we see it. But to answer your question, yes, it would be a good thing to win more than half of them.

Okay. Your final question comes from the line of George Shapiro of Shapiro Research.

Bill, I want to generalize a little bit here. I mean, if you look at the procurement and investment accounts for 2013, they're down about 15% from 2012. So I really want to push. I mean, history would show that somebody as big as Raytheon, even with the international exposure, that you might be able to do somewhat better than that 15% decline. It's hard to believe, too, that you'd be able to have a backlog flat at the end of the year with this year. So I just wanted to push you a little bit more on that. William H. Swanson: Well, can I push back?

Sure. William H. Swanson: Okay. Well, George, I think the thing of it is, is you have to look at Raytheon's portfolio. Extremely strong internationally. And so that's growth, that's not a decrease. And then you look at, as I mentioned, 15,000 contracts make up half of our sales. Those are $1.5 million to $2 million contracts, and that's a real strength of what we do, and we're a technology company and we believe we can compete with anybody in the world in that area. And then you have to look at the budget that's going down. There's always -- those are the cold spots. You have to be able to look at the hot spots. And so for us, from a standpoint, we think we're in the hot spots, that's where we try to be. We didn't go into Fed IT, we talked about cyber before anybody could spell it. And so part of what we have to do is make sure that we're at the forefront of that area. And so that's why we think we can be, as you say, a book to bill of 1, which means you'd be flat on backlog. And by the way, if the international comes in stronger, that's even better.

Yes. I don't doubt that you can do better, I just question whether you could do that much better. And I would argue that 15,000 programs are a negative in the sense that, in aggregate, they've got to be subject to what's going on in the budget. They all can't be separate from what's going on [indiscernible]... William H. Swanson: Well, that's part of the debate, George. And I guess we've given you our best guidance. And I've been around here for a long time and I think Raytheon's been pretty accurate, at least in my last 10 years, about predicting where things were going to go.

Okay. One nitpick... William H. Swanson: And what you got to realize is we model all our 18,000 contracts and our 8,000 programs. So we have a little bit of an advantage over you. George D. Shapiro - Access 3:42, LLC: Okay. Well, I guess we'll see where the year actually... William H. Swanson: Yes. That's okay. We've been doing this for a long time, so it's a healthy debate. But I think what's really key here is you can detect no apprehension on what I'm telling you.

Yes. And one for you, Dave. You continue to do better in the margins than I figure. But in NCS, anything unique in the first quarter where it was 9.6% and you're still guiding for the year to average up 200 bps from that? David C. Wajsgras: Yes. So the decrease in the margin is due to the timing and the extent of the program improvements last year, the mix of business, and I may not have mentioned this earlier, but it's important. We made a significant acquisition at the end of last year, and the acquisition costs associated with integrating that encryption technology business costs about 60 basis points in the first quarter and about 50 basis points on the year. Now, the mix does become more favorable as you go to the back half of the year, and the timing of the efficiency improvements is also weighted to the second through fourth quarters in that business.

Okay. Well, that 60 bps gives me -- makes it certainly more feasible. William H. Swanson: Thanks, George. And we'll just -- we'll talk at the end of the year. Todd B. Ernst: Okay. Thank you for joining us this morning. We look forward to speak with you again on our second quarter conference call in July. Chantile?

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.