Todd B. Ernst - Former Vice President of Investor Relations Thomas A. Kennedy - Chairman and Chief Executive Officer David C. Wajsgras - Chief Financial Officer and Senior Vice President Toby O'Brien -

Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division Howard A. Rubel - Jefferies LLC, Research Division Robert Stallard - RBC Capital Markets, LLC, Research Division George D. Shapiro - Shapiro Research Hunter K. Keay - Wolfe Research, LLC Jason M. Gursky - Citigroup Inc, Research Division Peter J. Skibitski - Drexel Hamilton, LLC, Research Division

Good day, ladies and gentlemen, and welcome to the Raytheon Fourth Quarter 2014 Earnings Conference Call. My name is Taheesha, 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 your host for today, Mr. Todd Ernst, Vice President of Investor Relations. Please proceed. Todd B. Ernst: Thank you, Taheesha. Good morning, everyone. Thank you for joining us today on our fourth quarter conference call. There is also -- 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 the printable version of the slides will be available in the Investor Relations section of our website. With me today are Tom Kennedy, our Chairman and Chief Executive Officer; Dave Wajsgras, our Chief Financial Officer; and Toby O'Brien, who will formally take over as CFO on March 2 of this year. We'll start with some brief remarks by Tom and Dave and then we'll move on to questions. Before I turn the call over to Tom, I'd like to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly the 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 Tom. Tom? Thomas A. Kennedy: Thank you, Todd. Good morning, everyone. Raytheon concluded 2014 with a strong fourth quarter, driven by global demand for advanced technologies and solid executions across the company. Bookings were better than expected at $7.1 billion, yielding a book-to-bill ratio of 1.16 for Q4. Sales were up nearly 5% in the quarter as both domestic and international sales increased, and cash flow and margins were strong as well. These results were made possible by the dedicated efforts of the entire Raytheon team and I want to thank everyone on the team for the strong quarter and solid year. As I look back on 2014, I'm pleased with our overall performance. We had a book-to-bill ratio of 1.05 for the year. Bookings of $24.1 billion exceeded the high end of our expectations. The company capitalized on key domestic and international opportunities in missile defense, electronic warfare, cybersecurity, C4ISR and training. This highlights our continued alignment with our customers' priorities and our strong competitive position. Furthermore, we're especially proud that we delivered better-than-expected bookings performance, even as one of our anticipated large international Patriot awards moved into the first quarter of 2015. Operationally, we continue to focus on reducing costs, improving affordability and delivering strong returns, while at the same time, we follow through on our commitment to invest in our future. As we look forward to 2015, we expect to continue to perform well. Dave will walk you through our 2015 guidance in a few minutes. Demand from our broad base of customers continues to drive growth in our international business. Over the past few months, I continue to receive feedback from our international customers and investing in national security remains a top priority, given the global threat environment, and you can see this in both our fourth quarter and full year results. Full year 2014 international bookings were up 27% over 2013 and were 35% of the total company bookings. I would note that our international book-to-bill ratio for the year was 1.28 and at 4 -- at the fourth quarter, it was 2.0. So we finished the year with very solid international bookings. We saw strong demand across our international portfolio during the year, including bookings from Qatar for Patriot and an air defense operating center; Kuwait for Patriot fire units; Canada for the North Warning System; several countries for AMRAAM; South Korea for GEM-T missiles and the Australia for the Air Warfare Destroyer, among a host of others. At the end of Q4, international backlog increased to 40% of our total backlog. Our domestic bookings in 2014 also improved over 2013. We received key awards in training, SM-3, AMRAAM, Tomahawk and the FAA STARS program. We also closed on a key competitive awards, including the family of advanced beyond line of sight terminal. And last summer, we also had successful test of the Exoatmospheric Kill Vehicle that allows us to move forward on this important program that protects the homeland. We saw strong bookings in our classified business, which includes both domestic and international, and our overall classified bookings increased by 29% in 2014. We feel good about the outlook for 2015 and we expect another year with a book-to-bill ratio above 1. International bookings are expected to continue to be strong, representing approximately 1/3 of our total 2015 bookings, driven by opportunities from a broad base of global customers and across a wide range of our products and solutions, including missiles, tactical radars and Command and Control systems. In addition, demand for the proven Patriot systems air and missile defense capability continues. New opportunities in Asia and the Middle East as well as competitive awards in Europe continue to develop. As I just mentioned, we are close to finalizing a $2 billion Patriot order from an international customer in Q1. We also expect to conclude negotiations on a Patriot upgrade program in South Korea within the next 6 to 9 months. Keep in mind the GEM-T missile upgrade awarded to us in Q3 of 2014 is a precursor for Korea's expected follow-on hardware upgrade to Configuration-3 plus. In Europe, Poland is expected to make the final down select for their medium-range integrated air and missile defense competition by the end of this year. Patriot is 1 of 2 systems in the final round of the competition. From a domestic perspective, the final agreement on the fiscal year 2015 DoD base budget was reached in December. Modernization accounts came in several billion dollars higher than requested, yielding funding increases for several Raytheon programs. We expect the Administration to submit its fiscal year 2016 defense budget request next week. While we won't speculate on what the final funding level for DoD will be in fiscal year 2016, we will point out that even if the Budget Control Act caps are not raised at all, DoD base budget funding will be several billion dollars higher in fiscal year 2016 than fiscal year 2015. While the domestic market is still constrained, the trajectory of the DoD base budget is finally starting to trend upwards. We see considerable opportunities in the domestic market. The growing sophistication of the threat to our national security is creating demand for new innovative solutions. As a result, we are investing more to develop the discriminating technologies and differentiated capabilities that will enable us to provide our customers what they need in areas such as missile defense, electronic warfare, high-energy lasers, advanced propulsion and undersea sensors. These investments will position us to capture future franchise programs and lay the foundation for growth. Another area where we see continually evolving a pervasive threat is in cyber. In fact, we've seen a nomenclature change for certain areas of the industry. Whereas C3ISR expanded to C4ISR, this is now evolving to C5ISR where the latest C stands for cyber. Consistent with this, many of our customers are turning to us to incorporate the latest cyber protection into their networks and systems so that they are more secure. As always, we stand ready to help our global customers with our advanced cyber capabilities. At the end of the last decade, we began adding to our organic cyber capabilities through acquisitions and we've made a number of cyber-related acquisitions since then, positioning us as a technology leader in this growing market. Our latest cyber-related acquisition was Blackbird technologies, which we completed in the fourth quarter. Blackbird not only adds unique cyber and other capabilities but also expands key market channels in the special operations and Intel markets for Raytheon. It is a great fit and we welcome their employees to the Raytheon team. One of the key strengths of Raytheon is our ongoing commitment to our core values and in 2014, we were recognized for our achievements in the area of ethics and integrity, health and safety and sustainability. We were awarded the 2014 corporate leadership award by Transparency International-USA for our commitment to shape initiatives that promote high business standards, transparency and anticorruption in the U.S. and internationally. We achieved the best safety record in our history, significantly reducing both lost workdays and recordable injuries. We received the ENERGY STAR Partner award for an EPA and have been recognized as one of the top green companies in America for our strong greenhouse gas reduction program and sound energy practices. We were also recognized as one of the 100 best corporate citizens by Corporate Responsibility magazine. Our goal is to continue to build on these successes. Before wrapping up, I'd like to highlight another significant attribute that we pride ourselves on here at Raytheon: that is having a deep bench of management talent as a result of our strong leadership development and succession planning programs. Over recent weeks, we've made announcements that clearly demonstrate this. I'd like to again congratulate Dave Wajsgras on his new role as President of IIS. Dave has been CFO of Raytheon since 2006. His tenure as CFO has been an integral component of an exceptional period of value creation for the company. His deep industry background and broad experience working with both customers and industry partners will be key in driving the global growth strategy in IIS. Dave will be succeeding Lynn Dugle who will be retiring after serving more than 10 years with the company, including 6 years as a President of IIS where she delivered solid operating results and outstanding leadership. I'd also like to welcome Toby O'Brien to his new role as CFO of Raytheon. As many of you know, Toby has been with the company for nearly 30 years and has held a number of business CFO roles in the company. He was CFO at IDS when I led the business. So I've had the pleasure of working with Toby before and look forward to doing so again. I'm confident he'll do a great job. In summary, we had another great year at Raytheon and we have a solid outlook for 2015. With that, let me turn it over to Dave. David C. Wajsgras: Okay. Thanks, Tom. I have a few opening remarks, starting with the fourth quarter and full year results, then I'll discuss our outlook for 2015 and after that, we'll open up the call for questions. So during my remarks, I'll be referring to the web slides that we issued earlier this morning, which are posted on the Raytheon website. Okay, if everyone could please move to Page 3. We delivered solid results in both the quarter and the full year. Fourth quarter operating margin was 14.1% and on an adjusted basis was 13%. For the full year, operating margin was 13.9% and 12.7% on an adjusted basis. Our fourth quarter EPS from continuing operations was $1.86 and on an adjusted basis, was $1.71. For the full year, EPS from continuing operations was $6.97 and our adjusted EPS was $6.12. Our sales for the quarter were $6.1 billion and $22.8 billion for the year. We also generated strong operating cash flow of over $825 million for the quarter and $2.1 billion for the year, after a $600 million pretax discretionary pension contribution, which was not in our prior guidance. Additionally, the company repurchased 7.7 million shares of common stock for approximately $750 million in 2014. The company ended the year with a strong balance sheet and net debt of $611 million. Also, as previously announced, the company acquired Blackbird technologies in the fourth quarter for approximately $425 million. If you turn to Page 4, let me go through some of the details of our fourth quarter and full year results. We had strong bookings of $7.1 billion in the quarter and $24.1 billion for the full year, resulting in a year-end backlog of $33.6 billion. Our book-to-bill ratio in the quarter was 1.16 and 1.05 for the year, and the company ended 2014 with a funded backlog of $23.1 billion. For the quarter, international orders represented 50% of our total company bookings and for the full year, was 35% of total bookings. At the end of 2014, approximately 40% of our total backlog was international. Turning now to Page 5. We had fourth quarter sales of $6.1 billion, up 5% over the same period in 2013 and again, was consistent with our expectations. So looking at the businesses, all had higher sales than the same period last year. Net sales at IDS were $1.6 billion in the quarter. Compared to last year's fourth quarter, the increase was primarily due to higher sales on international Patriot programs. IIS net sales of $1.5 billion in the quarter were up from the same period last year, primarily due to higher volume on classified programs. Missile Systems had fourth quarter 2014 net sales of $1.7 billion, up 5% compared to the fourth quarter of 2013. The increase was primarily due to higher sales on AMRAAM and evolved Sea Sparrow missile programs. And SAS had net sales of $1.7 billion in Q4, higher than the comparable period last year, primarily due to increased sales on an Electronic Warfare systems program. For the year, sales were $22.8 billion, down 3.7%, again, consistent with our expectations. International sales growth partially offset a decline in domestic sales. So moving ahead to Page 6, we delivered solid operational performance in the quarter and for the full year. Looking at business margins in the quarter, at IDS, IIS and missiles, margins were essentially in-line with or better than last year. In the fourth quarter 2014, IDS achieved some important program milestones and I did briefly discuss this on the call in October. And at SAS, fourth quarter 2013 benefited from the timing of profit adjustments. Said another way, SAS had a tough comparison. Also, you may recall that this business had strong third quarter margins in 2014, driven by the timing of performance that we had previously expected in the fourth quarter. It's worth noting that at IDS, IIS and SAS, margins all exceed the guidance range that we provided back in October. Missile Systems did come in slightly below our guidance, driven by program mix. So on Page 7, you'll see the both the fourth quarter and full year EPS. In the fourth quarter 2014, our EPS was $1.86 and for the full year was $6.97. And on an adjusted basis, was $1.71 in the fourth quarter and $6.12 for the full year. EPS for the quarter was strong and included the extension of the R&D tax credit, which was not in our prior guidance. As I previously mentioned, the company generated strong operating cash flow of $2.1 billion in 2014. Again, this includes the $600 million pretax or $400 million after tax discretionary pension contribution, which was also not in our prior guidance. Excluding the net discretionary cash contribution, our operating cash flow in 2014 would have been $2.5 billion. It's worth noting that on this basis, we exceeded the guidance that we provided you in October due to the timing of collections. Moving on to the 2015 guidance on Page 8. We see sales in the range of $22.3 billion to $22.8 billion, flat to slightly down from 2014. As for pension, we see the 2015 FAS/CAS adjustment at a positive $197 million, which I'll further discuss in just a minute. We expect net interest expense to be between $225 million to $235 million. We see our average diluted shares outstanding to be between $305 million and $307 million on a full year basis. As for our effective tax rate, we expect it to be approximately 27.5%. Our 2015 tax rate is higher than 2014, primarily due to the lapse of the R&D tax credit, which, again, is not included in our 2015 guidance. If the R&D tax credit is extended, it would favorably impact the effective tax rate by about 110 basis points and our EPS by approximately $0.10. As a reminder, we had an $83 million foreign tax credit in the first quarter of 2014, which also impacted the effective tax rate. And for 2015, we are anticipating a non-cash $88 million tax settlement in the second quarter. In 2015, we show our EPS to be in the range of $6.20 to $6.35 and our adjusted EPS to be in the range of $5.49 to $5.64. Our operating cash flow guidance for 2015 is expected to increase to between $2.3 billion and $2.6 billion. Before moving to Page 9, I want to mention that we expect the 2015 book-to-bill ratio to be between 1.0x and 1.05x, driven by continued demand from a broad base of domestic and international customers. And we, again, expect stronger bookings in the second half of this year similar to both 2013 and 2014. So if you move to Page 9. Here, we provided our initial 2015 guidance by business. Consistent with our prior comments, we expect 2015 adjusted margins to continue to be solid in the 12.1% to 12.3% range. Our margins for 2015 will be impacted by a change in program mix as well as higher investments in technology, with the objective of returning to top line growth. The investments we've made in GaN and cyber are paying off in significant ways today. We fully expect these new investments in radars, directed energy, EW and advanced propulsion to lay the foundation for growth over the next few years. At IDS, we see margins in the 15.1% to 15.3% range. The change from 2014 is driven by mix, most notably, the planned completion of some of our international Patriot programs. And in 2015, we are ramping up on several new programs, including Qatar Patriot and the new international Patriot award expected in Q1. As you know, we typically see lower margins at the inception of longer duration programs, which can improve over time as we retire risks and drive operational improvements. Longer-term, we see IDS margins improving after 2015 as the overall business mix improves and as these new large international programs progress through the production cycle. Additionally, you should note that we expect IIS margins of 7.4% to 7.6% to be impacted by approximately 60 basis points due to the Blackbird Technologies acquisition related costs. Excluding these, IIS margins would be in the range of 8% to 8.2%. SAS margins are expected to be down, driven by mix from lower volume as a result of completing some international programs as well as from higher business investments in 2015. Looking ahead, from a company level perspective, as domestic development programs transition to production and our international programs mature, we do see opportunity to improve margins in 2016 and beyond. If you'd now turn to Page 10. We've provided you with our 2015 outlook by quarter. You'll notice the sales ramp throughout the year. In addition, the second quarter EPS is favorably impacted due to the previously mentioned non-cash $88 million tax settlement. And finally, on Page 11. As we've done in the past, we provided a summary of the financial impact from pensions in 2014 as well as the projected 2015 through 2017 impact, holding all assumptions constant. As I mentioned earlier, we see the 2015 FAS/CAS adjustment at a positive $197 million, which reflects our investment returns in 2014 of over 6% on our U.S. pension assets and the December 31 discount rate of 4.1%. The discount rate is down 100 basis points from last year. Further, we reduced our long-term return on asset assumptions from 8.75% to 8% due to a change in the allocation of our planned assets and related investment strategies. Taken together, these result in a lower favorable FAS/CAS pension impact in 2015 compared to '14. Looking beyond 2015, it's important to keep in mind for each 25 basis point change in the discount rate, a result of $65 million to $75 million change in FAS/CAS takes place. Lastly, required pension contributions are decreasing in the near term as CAS recovery is increasing. This has a favorable impact on our pretax net cash flow over the forecast horizon. Before concluding, I would also like to take this opportunity to congratulate Toby on his promotion. I've worked with Toby for 9 years and I can tell you that he understands Raytheon, has a strong network and is well respected across the entire company. He has a deep understanding of finance, the industry and our customers and he also has a strong commercial background, having been the CFO of Raytheon Aircraft for close to 5 years. His extensive and broad background provides a strong foundation for his and Raytheon's future success. Now on a personal note, I would like to mention that it's been great to work with all of you since joining Raytheon, and I'm looking very forward to my new role. I'm sure I'll see you at future Raytheon events. Let me conclude by saying that in 2014, Raytheon, again, delivered solid operating performance with bookings, margins, earnings and operating cash flow, all on or ahead of expectations. Book-to-bill was strong and our international business continues to grow. We have a strong balance sheet which gives us substantial flexibility and options to continue to drive shareholder value. With that, we'll open up the call to questions.

[Operator Instructions] Your first question will come from the line of Doug Harned from Sanford Bernstein. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: I want to make sure I understand the bookings and backlog trajectory better. And you booked $24 billion in '14, that's up from the prior year, and your book-to-bill is above 1, yet your backlog declined slightly. Can you connect those 2 so I can understand why -- how that decline happened despite the good book-to-bill? David C. Wajsgras: Yes, sure. This is Dave. Our book-to-bill in 2014 was 1.05, as you just mentioned. With that said, we did have a little over $1 billion in backlog adjustments, which was in line with the adjustments we've had over a number of years historically. And just to be clear, backlog adjustments reflect several items including currency fluctuations, under runs on completed cost type contracts and scope changes, including scope reduction on contracts and finally, contract terminations. I hope that helps. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: Yes, it does. And what I'm just trying to understand is you mentioned some of the areas that you're investing in and so -- to lead to top line growth but when you look at your guidance for next year, you've got a lower revenue number. And if we come in with a book-to-bill again like this and -- what I'm worried about is that you have a trajectory with backlog may continue to decline, and I'm trying to understand when we should expect to see that growth in the top line. David C. Wajsgras: Yes. So Doug, for next year, we see sales essentially in line with 2014, flat to maybe down 2%. As you look beyond the 2015 time frame, we do expect to return to growth in '16 and beyond. And importantly, again, we do see very strong bookings, both domestically and internationally, again, in 2015 that we saw in '14. Thomas A. Kennedy: And Doug, just one last one there, in 2016, we'll have ramped up on 2 major new Patriot programs, Qatar and the other one that will be coming in this quarter, and so that will generate significant revenue growth for 2016. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: But what I'm trying to understand on that is that the international -- a lot of the international orders, as you ramp down, say, on U.A.E, you ramp up on Qatar and others, how do you see that ebb and flow? Because you also have some coming down at the same time and it's quite difficult to track how each of these sort of adds and subtracts from your, I guess, top line. David C. Wajsgras: So Doug, let me try to add something here. So you'll recall, there was a fairly significant reduction in the DoD budget as we entered into the period of sequestration. That impacted the entire industry and Raytheon was not immune from that reduction. So what happened a few years back is now making its way through the backlog and through the sales line. That's partially offset over the last few years by the strength of our international bookings and our international growth. So as we look forward, what happened from 2012 to '13 is now in the rearview mirror from an overall financial performance standpoint. And again, we do expect to return to growth beyond '15. Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division: So does this mean that your expectations for your U.S. defense revenues, you're expecting that to stabilize, which would make the international contributions more positive and allow you to grow? Is that fair? Thomas A. Kennedy: Yes, Doug. I think you hit the nail right on the head. The bottom line is, is that the defense budget, even with the BCA restrictions in caps, does start to increase in 2016 and beyond. And so our domestic business will start to trend up at that point but at the same time, we have a very, very strong backlog on the international, which we'll also be driving forward in terms of revenue. So we think we see 2016 as a year that we start ticking up.

Your next question will come from the line of Sam Pearlstein from Wells Fargo. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: Dave, can you talk a little bit about the cash flow? If I just look year-over-year, you talked about a $900 million less contribution for pension but you don't see operating cash flow go up anywhere near that. So can you just talk about some of the moving pieces as to -- cash taxes and others as to why you're not seeing as big of an increase without the pension contribution? David C. Wajsgras: So Sam, I was literally 100% certain you were going to ask me that question. So let me try to summarize it for you. In 2014, we had 2 items that impacted cash flow at the end of the year. We had the discretionary pension contribution of $400 million on a net basis, and we also saw some year-end collections in Q4 that we had expected in the first quarter of 2015, that's between roughly $100 million and $150 million. So when you normalize for these 2 items, 2014, we did achieve the high end of our guidance at roughly $2,350,000,000. And for 2015, adjusting for the earlier collections, the range would be $2.4 billion to $2.7 billion. So if you look at this year-over-year on a normalized basis, 2015 is roughly $300 million to $400 million higher than '14 at the high end of the range. So I hope that clarifies it for you. I tried to give you some numbers as I was walking through this. Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division: Yes. And then can you give an update just on the GPS OCX program just because there was a lot of press about overruns there? I'm trying to just square that as to is that any impact in why IIS margins, even without the Blackbird, are still showing a decline next year or in '15? Thomas A. Kennedy: Let me attack that one. On the GPS OCX program, there were some issues, we have worked with the Air Force on those. It is a very complex program, technology advanced. Number one, it is a cost-plus program, development program, and it is revolutionary relative to adding information insurance capability to a very large ground station for the GPS system. And we have been working with the Air Force on that program, we believe that we have turned the corner on that program moving forward, and we don't see any impact in this year or in the out years relative to that program.

Your next question will come from the line of Howard Rubel from Jefferies. Howard A. Rubel - Jefferies LLC, Research Division: Two questions. Nice to -- good luck, Toby. Toby O'Brien: Thanks, Howard. Howard A. Rubel - Jefferies LLC, Research Division: But first is if we look across the board, although you set us up, Dave, a little bit for lower margins and discussed mix, it still seems as if there's a change in the trajectory of the business. And is this as much a setup for what you said is well, we beat our margins from our initial guidance? Or in fact, is there a business change? David C. Wajsgras: No. So Howard, I appreciate you asking that question. So let me start out by saying at the end of last year, when Tom and I participated at the Crédit Suisse conference, we did talk about adjusted margins in 2015 being in sort of the lower 12% range. So again, we're projecting 12.1% to 12.3%. Now there's a number of areas that are important to mention here. Firstly, there is the program mix, particularly at IDS. And we talked about the cadence of the longer duration production programs coming down in '15 as we start out on the new programs that we were recently awarded and fully expect to be awarded in the first quarter and throughout the year. Secondly and maybe more importantly, we are increasing our spend in IRAD and program investments. Last -- we closed out the year last year with IRAD at just a little over 2% of sales. And as we look at 2015, we expect it to be closer to 3% of sales and that is -- those are important technology investments that Tom addressed earlier that position us well for both the top line and the bottom line growth. And then lastly, we mentioned this a little earlier as well, IIS, the acquisition of Blackbird Technologies, from an IIS standpoint, there's about 60 basis points of impact from the amortization of acquisition cost through intangibles. And at the company level, that's about 15 to 20 basis points. Now what I just went through, there is an offset there. There continues to be higher productivity as a result of the focused efforts throughout the company. But when you stand back and look at this, 2015 is a very strong year and positions us well for 2016 and beyond. Howard A. Rubel - Jefferies LLC, Research Division: Okay. And then I'm going to switch for a moment. And Tom, I know you've been talking about a large $2 billion order for some time and it's always hard to pin down a date. Could you elaborate a little bit on what gives you increased confidence that we'll see it in this first quarter? Thomas A. Kennedy: Yes. So last year, we had 2 big international awards that we were working to bring in. One of them, we did, which was Qatar for about $2.4 billion that came in December. This other one did slip into the first quarter and we are very close to closing on that deal. Based on the customer schedule, this one will close in this quarter, I'm highly confident of that. And that's about a $2 billion Patriot order. What's significant here, Howard, is both the Qatar and this order will be going on at the same time. So it's definitely going to give us an economic order quantity capability in terms of being able to get the best material buys for those programs. And also we'll definitely be turning the factory 3 shifts on those 2 programs over here for the next 3 to 4 years. So they are very important and are back-to-back, which is good for us.

Your next question will come from the line of Robert Stallard from Royal Bank of Canada. Robert Stallard - RBC Capital Markets, LLC, Research Division: Dave, we can't let you go without a question about pension. David C. Wajsgras: Yes, we had a feeling that was coming as well. Robert Stallard - RBC Capital Markets, LLC, Research Division: I thought really, when you mentioned the discount rate had changed but also I was wondering if you could comment on how your rate of return ended up for 2014 relative to what you told us in Q3. And also, what's prompted you in this 3 months' period to change your assumed rate of return. David C. Wajsgras: Sure, yes. We ended the year with a little over 6% actual return on our pension assets in '14. And looking ahead, every year, we evaluate our long-term return on asset assumptions. So in the fourth quarter of '14, we did reduce our long-term target allocation for equities and increased our target allocation for fixed income, and that's principally in order to reduce our overall exposure to equity volatility going forward. The change in asset allocation resulted in a reduction of our long-term ROA assumption of about 75 basis points, and that's basically, in a nutshell, how we see things going forward. Robert Stallard - RBC Capital Markets, LLC, Research Division: Okay. And then as a follow-up on the guidance. I notice you've increased your interest expense expectations. Can you give us an idea of what's behind that ? I mean, are you anticipating taking on more debt? Or is your cost of debt going higher? David C. Wajsgras: Well, you'll recall that we issued $600 million of debt in Q4. $300 million in 10s and $300 million in 30s. Average cost was around 4% and that's what you're seeing impact interest expense in 2015. It's all fixed rate, that's an important thing to note. It's all fixed rate. Robert Stallard - RBC Capital Markets, LLC, Research Division: So you're not anticipating any additional debt movement beyond what's the announcement? David C. Wajsgras: Well, look, we're always looking at our capital structure to optimize the financial foundation of the company. Standing back, we still have a very strong A- rating. We've talked about this in the past. We don't see ourselves going lower than BBB+. I think I mentioned that exactly on the third quarter call. So we could, in the future, but I'm not signaling anything. We have a very strong balance sheet and there is room to use the balance sheet from a shareholder perspective and from other perspectives. It's just a very solid foundation.

Your next question will come from the line of George Shapiro from Shapiro Research. George D. Shapiro - Shapiro Research: A question, Dave. The margins were down in '14, you're projecting them down in '15 again and then maybe a little bit better in '16. I mean, how do you look at what normalized margin should be? I mean, obviously, the investments you're making are somewhat discretionary. So I just kind of see if you have a -- what your answer to that might be. David C. Wajsgras: Yes. Thanks, George. So let me start by saying our objective is to improve and grow earnings through both top line and margin improvement. So the company's focused on program execution, on cost reduction and importantly, margin performance and we've talked about this before. If you look at the company, changes in mix, the timing of program completions and program starts, all impact margin. In 2015, and I mentioned this earlier, we're making important technology investments that drive future growth in margin expansion. After 2015, we do see opportunity for margins to increase on an adjusted basis, not from only a FAS/CAS basis. And it's driven by a number of different initiatives, in addition to the overall business mix improving over time. Tom and I both talked about strategic sourcing, facility optimization, expanding what we call our Global Business Services, which is our shared service initiative internally. So when you look at all this together, I think you framed it correctly. We do see growing margins in 2016 and beyond. But at this point, we're not going to suggest a target margin profile for the company. George D. Shapiro - Shapiro Research: Okay. And one different one, Dave. I don't want to disappoint you because you figured I'd probably ask this as well. How much was international sales up versus domestic down? David C. Wajsgras: International sales in 2014 were up about 1.5% and domestic was down about 5.5%. George D. Shapiro - Shapiro Research: And how about Q4? David C. Wajsgras: In Q4, I'm glad you asked that, George. International was up by about 6% and domestic was up over 4%.

Your next question will come from the line of Hunter Keay from Wolfe Research. Hunter K. Keay - Wolfe Research, LLC: I appreciate all the commentary on margins. I'm going to go there again, particularly sort of at IDS. You obviously gave great color on sort of the ramping work in Patriot and all that, but is there something maybe going on? We've obviously always held the belief that international is much more profitable than domestic, which, of course, it still is and will be going forward. But is there anything that you're seeing structurally, particularly maybe in the FMS arena that's causing some degree of pressure on the international margin side, maybe it's the bidding environment getting a little more aggressive? Is it -- should we think of that sort of traditional gap between international and domestic holding as we look out over the next couple of years? Or might we see some compression on some of the international margin side? David C. Wajsgras: Yes. So Hunter, I think it's probably best to let Toby O'Brien handle that question since he just spent 5 or 6 years at the business. So Toby, go ahead. Toby O'Brien: Sure, Dave. And Hunter, Dave hit some of this in his comments and I'll just try to add a little bit of color to that. I do have a good handle on the business, having been there for about 6 years, as Dave said, and know what drives it. From a big picture point of view, I can tell you it remains a very solid business. There are many things that can impact margins but really, the story with IDS margins in 2015 is driven by mix, program mix and timing. And I think the thing to understand is that we've seen this before a few years ago, where IDS margins did fluctuate year-over-year and then they did come back, okay? And at that point in time, it was the same thing, it was a combination of the mix and the timing related to the program completions and program startups, the same things that are impacting us here in 2015. So this is not a new phenomenon. We don't see any other pressures on the business related to your other question. And to reinforce what Dave said, we would expect to see the margin profile at IDS to improve after 2015 as the mix improves. And these awards that we've talked about, Qatar and the other one that we expect here in the first quarter that Tom talked about, as they move through their production cycle. Hunter K. Keay - Wolfe Research, LLC: And another one on -- maybe this is sort of a backdoor M&A question, but you talked obviously, about even a sequestration comes back into play, you're going to see a higher baseline budget going forward. But obviously, the investment accounts are going to be under a little bit more pressure. Do you guys see yourselves trying to move into sort of getting a bigger chunk of say, the O&M budget to generally [ph] sort of try to offset a little bit of incremental revenue headwinds that you might see in some procurement in R&D accounts? Thomas A. Kennedy: Well I think bottom line is in fiscal year '16, even with the BCA caps, the domestic base budget does go up. And we also, if you look at the F '15 fi-ed [ph] up, you'll see that the Administration has come in about $35 billion over what the BCA caps are for fiscal year '16. So in either case, there will be a larger base budget. And as part of that base budget the modernization is also going up. And so we believe that the domestic, we will have some uptick business. We're also seeing -- and that's why we're making some investments this year with the evolving threat out there, there's some opportunities for some -- inserting some new technology in -- starting in '16 and '17. And so that's another area why we're moving forward on that. On the LISC, the LISC is a great win for us. It's a joint venture that we have with General Dynamics, and that does give us insight into the ranges across an entire Air Force. So it's a great program for us there just on the base program itself, but giving us insight into what technologies we can bring to bear to the Air Force to help them as they move forward to get to a more affordable solution for all of the ranges. And then the other major area we have is the Warfighter FOCUS Program in terms of training. And we're working with our customers to ensure they have the appropriate training moving forward to be more efficient and from an affordability perspective.

Your next question will come from the line of Jason Gursky from Citi. Jason M. Gursky - Citigroup Inc, Research Division: Dave, can you quantify either in dollar terms or as a percentage of revenue, the investments that you said that you're making here again in cyber, direct energy, electronic warfare, advanced propulsion? Kind of on a year-over-year basis, how much is growth that we're seeing in the spend here in 2015 and what's the spend trajectory look like for the next couple of years? David C. Wajsgras: Yes. So specifically on the internal R&D, I noted it before with an earlier question, but I didn't give out the specific dollars. Let me start out again by saying in 2014, that ran a little over 2% of sales and in 2015, will be close to 3% of sales. That translates into roughly speaking, about $500 million of direct R&D spend in 2014, up to between $600 million and $650 million in R&D spend in 2015. Now importantly, that's only one element of our overall R&D focus. Every year, we book and bill, essentially, between $1 billion and $1.5 billion of customer funded R&D. And this is another important element of our overall focus on technologies. And lastly, there are occasions where we win large programs, particularly international, where part of the program win is development activity for technologies that we can leverage on the other programs in the future. So I hope that helps and clarifies the way we're thinking about the company in '15 and beyond. Jason M. Gursky - Citigroup Inc, Research Division: No, that is helpful. But as you look out to '16 and '17 and beyond, are we moving our internal R&D from 2% of sales to 3% in perpetuity? Or is 2015 a special year and we go back to 2% in the future? David C. Wajsgras: No, I'm actually glad you asked that. We're thinking about internal R&D in the upper 2% range for the foreseeable future. Jason M. Gursky - Citigroup Inc, Research Division: Okay, that's helpful. And then on the yet to be named Patriot customer, can you talk about what region in the world that might be coming from? Thomas A. Kennedy: Well, the world is a pretty big place. So let's put it this way. There's 3 regions where we have significant demand for Patriot. And one is Eastern Europe, another one is the MENA region, and the other one is Asia-Pacific. And it's in one of those regions. So I can't get into a direct -- but all I can tell you is I do have a team in country. We are -- we essentially completed all of our activities and now the customer is now going through some of their final arrangements, and we look pretty strong here for a Q1 award. And again, it is important because if you take that on top of the $2.4 billion Qatar, that's within a very short period of time, $4.4 billion of pure Patriot manufacturing where we have significant control over, how you say, efficiencies and in driving our material cost down to ensure we provide, I’d say, pretty good margins on those programs. Jason M. Gursky - Citigroup Inc, Research Division: And can you remind us, the installed base on Patriot is 11 or 12 countries at this point, how many of them still need to have an upgrade? Thomas A. Kennedy: So we have about -- the new addition of Qatar, we have 13 countries that have Patriot, that's with the addition of Qatar. And out of those, we have probably another 7 -- actually, it's 8, another 8 will have opportunities for the Configuration-3 upgrade. We have the upgrade we've done in Taiwan, we have done the upgrade in UAE. We're doing -- we'll be doing the upgrade in Korea moving forward, and also Qatar, we'll have that upgrade in it. And we've also been doing an upgrade in Saudi on Configuration-3 plus. And then Kuwait, if you remember at the beginning of this year to the beginning of 2014, the first quarter, we got an order for Kuwait for a Configuration-3 plus. So the bottom line is, significant opportunity within the consortium of Patriot users and again, we're up to 13 countries. And with the Polish competition, if that goes in the right direction, that will give us another country and allow us to have 14 participants in the Patriot consortium worldwide. Todd B. Ernst: Taheesha, we have time for one more question.

Your last question will come from the line of Pete Skibitski from Drexel Hamilton. Peter J. Skibitski - Drexel Hamilton, LLC, Research Division: Just wanted to ask about from a couple of perspectives. One, can you tell us how much Blackbird is going to contribute to revenue in 2015? And then part 2, just on the cash flow outlook, it really looks like at a reasonable level of share repurchases, it really looks like your dry powder is going to build pretty meaningfully over the next couple of years. So should we expect especially now that you've got maybe some better DoD budget visibility, should we expect M&A to accelerate kind of sharply over the next couple of years? Thomas A. Kennedy: Let me talk about Blackbird real quick here. It is a great acquisition for us, number one, for its technology and also for its channels into both SOCOM and the Intel communities. But in terms of this year, it will give us about a 1% in terms of revenue contribution to the business. Just one other element we -- it is a very excellent management team for Blackbird and also have a great workforce of I would call some very highly skilled technical folks. So we're looking forward to the synergies that we'll be able to achieve via that acquisition. David C. Wajsgras: So Pete, again, Toby O'Brien, the soon to be official CFO, it's probably best for him to talk about his thoughts on capital deployment going forward. So Toby, why don't you handle that? Toby O'Brien: Sure Dave. So Pete, as Todd mentioned, I won't officially be in the CFO seat here until early March, but capital deployment is something I've spent some time on and given some thought. And Tom and Dave have described our priorities for capital deployment for a while and they've been pretty consistent. And I do believe that our approach has and will continue to serve us and our shareholders well. So bottom line at this point, I don't foresee the need for any meaningful changes to our current approach or priorities. That said, we will continue with an active share repurchase program. We will continue to recommend annual dividend increases to our Board. And given the funded status of the pension plans and where we are now forecasting markets over the next 3 years, we are not currently seeing any need for further discretionary pension contributions. And lastly, as you know, our global growth objective, it's very key to us and will continue to be a priority. And acquisitions that create shareholder value, meaning that they have to make sense economically, they have to fill a gap from a product technology or market channel standpoint. They will become a focus more than they have in prior years and Tom just described Black Border -- Blackbird -- excuse me and that's a good example of an acquisition that met that criteria. Todd B. Ernst: All right, great. Well, thank you. We'll have to leave it there. Thank you for joining us this morning. We look forward to speaking with you again on our first quarter conference call in April. Taheesha?

Ladies and gentlemen, that will conclude today's conference. Thank you for your participation. You may now disconnect. Have a great day.