Todd Ernst - Raytheon Co. Thomas A. Kennedy - Raytheon Co. Anthony F. O'Brien - Raytheon Co.

Cai von Rumohr - Cowen and Company, LLC David E. Strauss - UBS Securities LLC Robert Stallard - Vertical Research Partners, LLC Samuel J. Pearlstein - Wells Fargo Securities LLC Peter J. Arment - Robert W. Baird & Co., Inc. Myles A. Walton - Deutsche Bank Securities, Inc. Seth M. Seifman - JPMorgan Securities LLC Howard A. Rubel - Jefferies LLC Finbar Thomas Sheehy - Sanford C. Bernstein & Co. LLC Peter John Skibitski - Drexel Hamilton LLC George D. Shapiro - Shapiro Research LLC Matthew McConnell - RBC Capital Markets LLC Kristine Tan Liwag - Bank of America Merrill Lynch Robert M. Spingarn - Credit Suisse Jason Gursky - Citigroup Global Markets, Inc. Noah Poponak - Goldman Sachs & Co.

Good day, ladies and gentlemen, and welcome to the Raytheon First Quarter 2017 Earnings Conference Call. My name is Shelley and I'll be your operator for today. As a reminder, this conference is being recorded for replay proposes. I would now like to turn the call over to Mr. Todd Ernst, Vice President of Investor Relations. Please proceed, sir. Todd Ernst - Raytheon Co.: Thank you, Shelley. 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 in the Investor Relations section of our website. With me today are Tom Kennedy, our Chairman and Chief Executive Officer; and Toby O'Brien, our Chief Financial Officer. We'll start with some brief remarks by Tom and Toby, and then 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 we discuss today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance constitute forward-looking statements. These statements are based on a wide range of assumptions that the company believes are reasonable, but are subject to a range of uncertainties and risks that are summarized at the end of our earnings release and are discussed in detail in our SEC filings. With that, I'll turn the call over to Tom. Tom? Thomas A. Kennedy - Raytheon Co.: Thank you, Todd. Good morning, everyone. We're off to a strong start in 2017 as we continue to build on our momentum from last year. In the first quarter, sales increased by over 3%. This growth, combined with operating margin expansion, drove strong EPS performance. I'm also pleased to report that all of the businesses met or exceeded our expectations in the quarter. Bookings were solid and our backlog increased by 5.5%. Overall, our growth strategy continues to be well aligned with the needs of our global customers. And you're seeing this in our operating results. Toby will take you through the quarter's financials and the increases to our sales and EPS guidance in a few minutes. I'd like to take a moment to talk about the threat environment. It continues to evolve and is driving a significant increase in demand signals from every one of our major global markets. Whether it's capability for strike, integrated air and missile defense, or long-range sensing capabilities, Raytheon is at the forefront providing high technology solutions for our customers' most complex challenges. Key areas, where we see strong future opportunity are the sea and undersea domains. As we have discussed on prior calls, Raytheon is a leader in providing the next generation of GaN-based navel radars. Our solutions include the air and missile defense radar and the enterprise air surveillance radar for the U.S. Navy and international customers. Together, these will form the backbone of radar capabilities for the allied surface fleets of the future. We are making considerable progress towards delivering these advanced capabilities. To that end, in the first quarter, AMDR successfully completed its first test which called on the radar to acquire and then track an advanced ballistic missile target, a significant milestone for the system. Our development work on AMDR continues and the program is expected to enter low rate initial production this year. Beyond radars, Raytheon also provides a broad set of naval missile defense and strike systems, which include Tomahawk, which just this month again proved its value as the weapon of choice for standoff engagement, protecting the warfighter and achieving a critical mission. We're adding new capabilities to Tomahawk that will enable it also to engage maritime targets, providing the Navy with a much longer reach. While Tomahawk has been in the headlines lately, let me also remind you about SM-6 and SM-3, which provides the Navy with over-the-horizon air and missile defense capabilities. In fact, in the first quarter, the latest version of SM-3 Block IIA, which we are co-developing with Japan achieved a significant milestone and successfully completed its first intercept of a target resembling an advanced ballistic missile threat. This intercept is an important demonstration of the new missiles capabilities and the program is on track for deployment in the 2018 timeframe. We also have many other ship protection systems that include the Evolved Seasparrow Missile, Rolling Airframe Missile and the Phalanx as well as the Mark 54 Torpedo. To maximize the effect in this of all of these systems, we provide ship-based strategic communication systems and advanced command and control such as the Cooperative Engagement Capability. CEC ensures that the Navy has advantageous situational awareness of the battlefield through superior networks and shared sensor information. CEC is a key element in Naval Integrated Fire Control-Counter Air capability. Another key growth opportunity for us is in the area of advanced sonar programs for the U.S. Navy. This month, we were pleased to have our award for the new variable-depth sonar program affirmed. While the award is initially for the Littoral Combat Ship, this advanced sonar program will ultimately allow us to deliver game-changing capability to the entire fleet. This is one of the most significant anti-submarine warfare opportunities of the decade positioning us well on a number of new programs going forward. And we see a number of classified undersea opportunities that should drive future growth as well. So as you can see, we have a broad portfolio of sea and undersea capabilities and we are well-positioned for future growth in modernizing the Navy fleet and the fleets of our allies. Now turning to the quarter, bookings exceeded our expectations and included the $1 billion award for the Qatar early warning radar as well as a number of awards for missiles and radars. Based on this and new opportunities, we are raising our bookings outlook for the year to a range of $25.5 billion to $26.5 billion, an increase of $500 million. Revenue increased by 3.4% in the quarter and was driven largely by a growth of 7.5% in our international business. International comprised 32% of our total sales in the quarter. We also saw strong sales growth in our domestic classified business of 6.4%. Last year's record classified bookings were a key driver behind this quarter's continued strong classified revenue growth. As we look forward, we are making progress on a number of large international opportunities. For Poland Patriot, as announced last month, an updated LOR is being provided to the U.S. government with an estimated value for us of up to $5 billion. Patriot will provide the Polish government with integrated air and missile defense capabilities to meet the threat today with an upgrade path to new GaN-based radars that will address the threats of tomorrow, a key competitive discriminator for the customer. Later this year, we expect the Polish Ministry of Defense to sign an LOA with the U.S. government, which will make Poland the 14th country to utilize Patriot. Beyond Poland, we see other opportunities for Patriot in Europe, driven by customer demand due to evolving threats to the region. These opportunities, in combination with demand for additional fire units and upgrades for existing customers in other regions, continue to demonstrate the strength of the Patriot franchise. Earlier this month, Raytheon Australia announced that it has been selected to be the sole bidder for the country's ground-based air defense system. This system will provide the innermost layer of Australia's enhanced integrated air and missile defense capability. Our offering, which would be produced in cooperation with Australian industry, is initially based on our NASAMS system and represents an opportunity of up to $1 billion for Raytheon. This award is currently expected in the 2019 timeframe. Following the award of Qatar EWR in the first quarter, we continue to see growing interest from customers in the MENA region for long-range surveillance capabilities. This includes significant additional demand for early warning radars, as well as our TPY-2 X-Band radars in the 2018 to 2020 timeframe. To meet future threats, we've continued to evolve TPY-2. Last year, we received a contract from our domestic customer to incorporate GaN technology into the TPY-2 radars. This provides a potentially significant future upgrade opportunity for the existing global inventories. Now turning to domestic. While the debate about government funding levels is ongoing, we are optimistic that the longer-term budget trends will be favorable. For us, we see a number of key opportunities developing across multiple domains as the Department of Defense looks to invest in new technologies to deter rapidly evolving threats and fund increases and readiness to meet high operating tempo requirements. Before concluding, I'd like to mention, in the last month, we announced an 8.9% increase in our dividend. This marks the 13th consecutive year of increasing dividends at Raytheon. Our solid growth, operating performance, and strong alignment with our global customer needs provide us the flexibility to continue to execute our balanced capital deployment strategy. A key priority of this strategy continues to be paying a competitive, sustainable dividend. I would like to thank the Raytheon team for their dedication to delivering world-class solutions for our warfighters, as well as their commitment to creating value for all of our stakeholders. With that, I'd like to turn the call over to Toby. Anthony F. O'Brien - Raytheon Co.: Okay. Thanks, Tom. I have a few opening remarks, starting with the first quarter highlights. And then we'll move on to questions. During my remarks, I'll be referring to the web slides that we issued earlier this morning. If everyone would turn to page 3. We are pleased with the solid performance the team delivered in the first quarter with bookings, sales and EPS better than our expectations. After this good start, we're raising our full year outlook for all three of these measures, which I'll discuss further in just a few minutes. We had solid bookings in the first quarter of $5.7 billion and sales in the quarter were $6 billion, up 3.4%, led by our IDS and SAS businesses. Our EPS from continuing operations was $1.73 which I'll give a little more color on in just a moment. During the quarter, the company repurchased 2.7 million shares of common stock for $400 million. And as a reminder, effective January 1, 2017, we adopted the new revenue recognition standard. The 2016 results have been recast to reflect this change. Turning now to page 4. Let me start by providing some detail on our first quarter results. Company bookings for the first quarter were $5.7 billion, which were ahead of our expectations and down slightly from the same period last year. And on a trailing four quarter basis, our total book-to-bill ratio is 1.12. International awards represented 33% of the total bookings, an increase of approximately 14% over last year's first quarter. A couple of key bookings in the first quarter included the $1 billion award for the upgraded early warning radar for Qatar at IDS, $256 million for active electronically scanned array radars at SAS, and at missiles over $200 million on AIM-9X Sidewinder short-range air-to-air missiles. Backlog at the end of the first quarter was $36.1 billion, an increase of approximately $1.9 billion or 5.5% compared to the first quarter 2016. It's worth noting that approximately 41% of our backlog is comprised of international programs. We now move to page 5. As I just mentioned, for the first quarter 2017, sales were higher than the guidance we set in January. Sales were particularly strong at both IDS and at SAS. We expect sales for the company to increase throughout the year with a strong second half driven by our bookings over the past several quarters. Looking now at sales by business. IDS had first quarter net sales of $1.4 billion. The increase from Q1 2016 was primarily driven by higher sales on an international early warning radar program. We expect IDS sales to increase through the year as some of our larger international programs continue to ramp up. In the first quarter, IIS had net sales of $1.5 billion. Compared with the same quarter last year the change, as expected, was primarily due to lower net sales on an international classified program which substantially completed in 2016. Missile Systems had net sales of $1.8 billion, up slightly compared with the same period last year. SAS had net sales of $1.6 billion. Higher sales on electronic warfare systems program contributed to the 8% increase versus last year. And for Forcepoint, sales were up about 4% in the quarter. Moving ahead to page 6, let me spend a few minutes talking about our margins. We delivered strong margin performance in the quarter. Our operating margin was 12.4% for the total company, up 180 basis points, and 11.8% on a business segment basis, an increase of 160 basis points. Margin improvement in the first quarter of 2017 was driven by favorable program mix with some of our largest international awards progressing through their lifecycle. And, as a reminder, in the first quarter of 2016, at IDS, we had a $36 million unfavorable program adjustment that impacted their margins. At Forcepoint, as expected, the first quarter 2017 operating margin was down for the quarter. This is due to the internal investment to support Forcepoint's long-term growth that we discussed on the earnings call in January. We remain focused on margin improvement going forward and see our business segment margins in the 12.4% to 12.6% range for the full year, consistent with the guidance we laid out in January. We also see our margin improving as we move throughout the year. Turning now to page 7. First quarter 2017 EPS of $1.73 was up 21% from last year's first quarter and was better than expected. This year-over-year increase was largely driven by higher volume and margin expansion. On page 8, as I mentioned earlier, we are updating the company's financial outlook for 2017 to reflect our improved performance to-date. We're increasing our full year 2017 net sales range by $100 million, which favorably impact EPS by about $0.04. This increase is driven by higher expected sales at our Missile Systems business. We now expect net sales to be in the range of between $24.9 billion and $25.4 billion. For the year, we expect sales to be up 3% to 5% from 2016. Earlier this month, we gave notice to redeem $591 million in notes that were due in March and December of 2018. As a result, in the second quarter of 2017, we expect to record a non-operating charge associated with the make-whole provision related to the early retirement of debt. This charge of approximately $40 million pre-tax or $26 million after-tax based upon current market conditions impacts EPS by $0.09 and has been included in our updated EPS guidance. We're also reducing the range of our interest expense to be between $196 million and $201 million to reflect this early retirement of debt. This is expected to reduce our interest expense primarily in both the third and fourth quarters worth about $0.04 to EPS compared to our prior guidance. We have slightly lowered our effective tax rate to reflect the improved benefit associated with stock-based compensation and various other items, which in total is worth about $0.06 for the full year. We now expect our full year effective tax rate to be approximately 31%. Looking at our EPS guidance, we exceeded the high-end of our guidance in the first quarter by $0.18. For the year, due to the strong first quarter operating performance, we are raising guidance by $0.05 after absorbing a net $0.05 financing charge that was not in our prior guidance. The remaining $0.08 is due to timing within the year. And as a result, we now expect our full year EPS to be in a range of between $7.25 and $7.40. As I discussed earlier, we repurchased 2.7 million shares of common stock for $400 million in the quarter and continue to see our diluted share count in the range of between 291 million and 293 million shares for 2017, a 2% reduction at the midpoint of the range. Operating cash flow in the first quarter was essentially in line with our prior expectations and was slightly impacted by the higher sales we saw in the first quarter. We continue to see our full year 2017 operating cash flow outlook between $2.8 billion and $3.1 billion. And, as you can see on page 9, we've included guidance by business, which reflects the higher net sales at Missile Systems that I mentioned earlier. Before moving on to page 10, as Tom mentioned earlier, we're now raising our full year 2017 bookings outlook to be between $25.5 billion and $26.5 billion. This $500 million increase is driven by demand from a broad base of domestic and international customers. On page 10, we provided you with our outlook for the second quarter of 2017. As we mentioned on our last call, we still expect the cadence for the balance of 2017 to play out similar to 2016 with sales, EPS and operating cash flow ramping up in the second half of the year. I want to point out that we expect second quarter sales to be in a range of $6.05 billion to $6.2 billion and EPS from continuing operations is expected to be in a range of $1.67 to $1.71. It's important to note that we expect the tax rate to be approximately 29.5% in the quarter, lower than the full year, primarily due to the timing of the benefit associated with stock-based compensation. Again, I want to reiterate that our second quarter EPS outlook includes an estimated unfavorable $40 million pre-tax or $0.09 EPS impact to non-operating income associated with the early retirement of debt. This charge will be recorded in other income and expense. Before concluding, I'd like to spend a minute on our balanced capital deployment strategy. As we said on the call in January, we expect the full year 2017 share buyback to approximate 2016's levels. And as mentioned earlier, we recently raised the dividend by 8.9%. We continue to expect to generate strong free cash flow for the year and target returning approximately 80% of free cash flow to shareholders, while maintaining a strong balance sheet. In summary, we saw a good performance in the first quarter. Our bookings were strong, sales and EPS from continuing operations were higher than the guidance we set in January and our operating cash flow remains on track for the year. With that, Tom and I will now open the call up for questions.

In the interest of time and to allow for broader participation, you are asked to limit yourself to one question. And the first question comes from the line of Cai von Rumohr with Cowen and Company. Please proceed. Todd Ernst - Raytheon Co.: Cai, are you there? Cai von Rumohr - Cowen and Company, LLC: Me? Todd Ernst - Raytheon Co.: Hello, Cai. Cai von Rumohr - Cowen and Company, LLC: Hello? Todd Ernst - Raytheon Co.: Yeah. Hi, Cai. Cai von Rumohr - Cowen and Company, LLC: Yes. Can you hear me? Todd Ernst - Raytheon Co.: Yes. Thomas A. Kennedy - Raytheon Co.: Yes. Cai von Rumohr - Cowen and Company, LLC: Okay. So you mentioned the heightened global threat environment. Could you talk specifically about the opportunities first for additional orders for SM-3 and SM-6 from our Asian allies given the heightened threat from North Korea? And also in the Mid-East, your partner on THAAD, Lockheed, continues to talk about potential foreign order this year. It requires the TPY-2 and yet you're talking about not getting an order until next year. Thomas A. Kennedy - Raytheon Co.: Okay. Let me – okay. Actually both of those questions are very good news. The first question is on the SM-3 and SM-6. It ties into the readiness moving forward. I'm sure you've heard that one of the elements of Trump's defense policy is to make sure we have the appropriate readiness for our entire fighting forces, including the Navy, in this case, both the SM-3 and SM-6. So we're looking to see in terms of the overall readiness potentially some additional funds in the area of missiles to essentially replenish, but also to make sure they have enough of these systems to protect the fleet. On the other side of this, the other element you mentioned was the international. So, both the SM-3, for example, Block IIA has been co-developed with Japan. So, Japan will buy many of the SM-3 Block IIAs. On the SM-6, the U.S. government has authorized SM-6 to some of our coalition partners. And so we are working through that right now to determine how many they will buy over the next five years. Back over to your other question relative to THAAD, you're absolutely correct. We are a major player on THAAD. Our TPY-2 radars, for example, are a major element of that system. And there are multiple opportunities in the Middle East. For example, Qatar has said that they are interested in buying THAAD and also the Kingdom of Saudi Arabia. And, right now, in our, I would say, conservative outlook, we have those occurring in 2018 and beyond. So, I think, that's exactly how we have it set today.

And your next question – it comes from the line of David Strauss with UBS. Please proceed. David E. Strauss - UBS Securities LLC: Thanks. Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning. David E. Strauss - UBS Securities LLC: Tom, in the press release as regards IDS, you talked about a favorable change in program mix contributing to the margins. I think that's the first time we've heard that in quite a while with regard to IDS. Can you just give a little bit more detail on the mix, where we stand today and how that's going to progress going forward? And what that means for margin? Thanks. Thomas A. Kennedy - Raytheon Co.: Well, for example, IDS, right now has a significant number of Patriot orders being accomplished in the factory. So we always talk about that – the lifecycle. When you get the orders in, you essentially reestablishing the factory line and moving forward, but right now, that factory line has been reestablished and has been very productive. And that's what you're seeing in terms of that flowing down to the improvement in the margins on that. Anthony F. O'Brien - Raytheon Co.: And Tom or David, I'd just add the following from a big Patriot point of view with IDS. A lot of talk about their margins over the last couple years. I think as we closed out the back half of 2016, we saw the margins improving there as we had indicated they would. They are off to a solid start this year with regard to their Q1 margin. The rate they achieved in the quarter is just below the guidance for the year and they had strong sales. The margin – they did exceed in Q1, exceeded our expectations, primarily due to the earlier timing on some program improvements partly related to the mix. And when we look at the full year, at IDS, we expect to see margins improve a bit more because of the mix that you referred to and increased productivity. Recall as well that, in 2016, IDS did have the exit from the business venture. So when you look at IDS, excluding the impact, we would expect to see about 100 basis points of margin expansion that's reflected in our guidance for the year compared to last year normalized for the business exit. And we're pleased with the track that the business is on.

And your next question – it comes from the line of Robert Stallard with Vertical Research. Please proceed. Robert Stallard - Vertical Research Partners, LLC: Thanks so much. Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Rob. Anthony F. O'Brien - Raytheon Co.: Hi, Rob. Robert Stallard - Vertical Research Partners, LLC: Tom, in your prepared comments, you had mentioned Forcepoint. So I was wondering what your perspectives are on the progress that business is making and whether you've had any indications from your partner that they may be looking to sell out. Thomas A. Kennedy - Raytheon Co.: First of all, we are pleased with the performance of Forcepoint, I mean double-digit operating margins. Their growth was in line with our expectations. In fact, if you remove the web's filtering part of the business, which we're exiting, they achieved about 9% year-over-year growth. So, they're meeting our expectations. Because of some of the growth of that business, we are making some investments this year in terms of their infrastructure to be able to support an additional growth in the out-years. So bottom-line is that we're overall very happy with Forcepoint. We are seeing significant demand signal that's coming in that we've been preparing for, for the last two years. And that's in the area of insider threat, especially from the large and very large enterprises. And so we're very excited about that market, because we think we are the number one provider of solutions in the area of insider threat and data loss prevention. So, that's extremely good news for Forcepoint moving forward. Based on your other question relative to our partners, to-date our partners have not indicated any position relative to doing a put, for example, to exit the joint venture. Anthony F. O'Brien - Raytheon Co.: Yeah. And I think, Rob, just to kind of maybe complete and pile on a little bit what Tom said. From a margin perspective, the quarter was a little ahead of our expectations. It was at the high-end of our guidance for the year. One thing I would say the Q2 margin we do expect it to be down slightly from Q1, probably in the mid-single-digits, driven by a combination of some seasonality as well as, as I referred to in my opening comments, the timing of the investment that we see at the business there. So, I think that kind of sums up Forcepoint.

And your next question – it comes from the line of Sam Pearlstein with Wells Fargo. Please proceed. Samuel J. Pearlstein - Wells Fargo Securities LLC: Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Sam. Samuel J. Pearlstein - Wells Fargo Securities LLC: Tom, this is very helpful to beginning and talking about all of your sea and subsea business. But is there any way you can just put it all together and just tell us, I mean, what is the size of your business for the U.S. Navy and then if you can help us think about the timing as there has been a lot of discussion about more ships? And if we were to increase the rate of say destroyers, when does that actually affect you and when do you start to see that pick up? Thomas A. Kennedy - Raytheon Co.: Yeah, so real quick. I think a majority of our naval business – and I am going to just talk about the surface and undersea. Obviously, in the air part of the Navy, we have quite a bit of business relative to our solutions that we have on F-18s and other aircraft like the E-2D. But on the surface and undersea, on the surface side, it's the – our bigger contribution there is in the radars, in terms of AMDR, Air and Missile Defense, radar and the EASR. That's essentially going to be the two major radars for the entire surface fleet. Same on the missiles, the standard missile family, the SM-2s, SM-3s, SM-6s, the Tomahawks, the Rolling Airframe Missiles, the Enhanced Seasparrow Missiles, essentially all the protection for the ships and their entire capability. As you mentioned, there is a position on the Trump administration to increase the capability of the Navy. And there is the talks about increasing the number of ships from 275 to 355 ships. Obviously, if that happens, these systems I talked about are on those ships. We would see an uptick relative to requirements in demand signals for both the radars and the missiles if that went forward (31:48). In terms of total dollars... Anthony F. O'Brien - Raytheon Co.: Yeah. Last year, Sam, our Navy business in total was about 18% of our total revenue. Samuel J. Pearlstein - Wells Fargo Securities LLC: Okay.

And your next question – it comes from the line of Peter Arment with Baird. Please proceed. Peter J. Arment - Robert W. Baird & Co., Inc.: Thanks. Good morning, Tom and Toby. Thomas A. Kennedy - Raytheon Co.: Good morning. Anthony F. O'Brien - Raytheon Co.: Good morning. Peter J. Arment - Robert W. Baird & Co., Inc.: Hey, Toby, maybe this is just kind of a housekeeping one. But there was – in the backlog there was about a $1 billion adjustment in Missile Systems. Could you provide a little more color on what that was? Anthony F. O'Brien - Raytheon Co.: Yeah. So, I mean, it just effectively mapped, right, the relationship of their bookings in the quarter to the sales that they generated, nothing out of line there. At a total company level, as we indicated, the bookings in the quarter exceeded our expectations. But if you peel that back, Missiles' bookings were roughly that order of magnitude below their sales in the quarter. But for the total year, we expect them to be on track and have a slight increase on a year-over-year basis with their backlog. And just as a remainder, they've had some strong bookings over the last couple of years. Their book-to-bill, I think, last year was about 1.13, so nothing out of the norm there. Just the burn-off of revenue and lower than what they had been experienced – level of bookings, but nothing to be concerned about.

And your next question – it comes from the line of Myles Walton with Deutsche Bank. Please proceed. Myles A. Walton - Deutsche Bank Securities, Inc.: Thanks. Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Myles. Myles A. Walton - Deutsche Bank Securities, Inc.: In the release, in SAS, I think one of the biggest areas – product lines where you saw pickup in bookings was in AESA radars for Air Force, and I imagine that's F-15 but you can correct me if I'm wrong. And I was hoping though in terms of the real question is give us some clarity on where the Air Force is with their F-16 AESA strategy, kind of where you sit, where the competition between yourselves and Northrop are, and kind of timeline. And if you can give us some color there, that'd be great. Thanks. Thomas A. Kennedy - Raytheon Co.: Yeah. So, right now – and you're absolutely correct. That was an uptick in SAS relative to the F-15s and putting the AESA radars on the F-15. So right now, that's what we're pursuing moving forward is both the F-15s and the F-18s in terms of the AESA radars both domestically and internationally. Some of the uptick on the F-15 is due to the proposed buy in Qatar for the F-15s. And so we are obviously supporting that. One of the things that I'd also like to bring up in terms of Qatar and the F-15 buy is this is the first buy for Qatar for, I would call it, a U.S. fighter aircraft. And so along with that comes the whole support for all of the missiles that the F-15 uses. So not only do we get an uptick on the radars, but we also get a significant uptick in establishing a weapons program for Qatar to support the F-15 system.

And your next question – it comes from the line of Seth Seifman with JPMorgan. Please proceed. Seth M. Seifman - JPMorgan Securities LLC: Thanks very much and good morning. Anthony F. O'Brien - Raytheon Co.: Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Seth. Seth M. Seifman - JPMorgan Securities LLC: Tom, some – good morning. Tom, some of your peers this quarter have talked kind of broadly about the tradeoff going forward between growth and profitability and some of the competitions that they see out ahead maybe inhibiting margin expansion going forward, but would obviously be important to win. I wonder how you talk about – if you could talk about how you see that tradeoff for Raytheon going forward from here. Thomas A. Kennedy - Raytheon Co.: Yeah. Let me talk about that, because it's something that we discuss quite a bit in the company. And just like with our capital deployment, we take a balanced approach in terms of growth and profitability. The bottom line is we need both. We need both top-line growth and margin expansion. And so, we have the whole company focused on both of those elements. On the growth side, I think you've seen what we've done here over the last several years, especially relative to our international expansion. It turns out that international also is our – a lot of our higher margin business is international. So those two things, the growth in international business and the growth in margins goes hand-in-hand with that. We also look domestically. We look to participate in growth in these new programs, especially ones that are, I would call it, new franchises, programs that have long legs that we can infuse technology in over the years to keep that franchise moving, but also has legs into the international market. And so for programs that have both a long lifecycle and also international, we do support ensuring that we make the right investments to go in those programs moving forward.

And your next question – it comes from the line of Howard Rubel with Jefferies. Please proceed. Howard A. Rubel - Jefferies LLC: Thank you very much. Tom, possibly to follow up on the last question, one of the hotspots in the world is also air defense systems, as we've seen with Patriot in Australia and in other markets, and Qatar to some degree. Could you talk a little bit of how you manage risk and how you see other opportunities, especially with respect to there's more (37:41) in Australia and also upgrading of Patriot? Thomas A. Kennedy - Raytheon Co.: Yeah. Let me talk about that. We are, in terms of demand signals, we're getting demand signals from three different areas on our Integrated Air and Missile Defense Solutions. First is Europe and you've heard about the demand from Poland. There is two other countries in Europe that are seriously considering a Patriot buy that we are working. Once we move into the MENA region, obviously, we're completing work with the Qatar on the Patriot, but also the early warning radar to Integrated Air and Missile Defense type systems. But also, in Qatar, we're also doing something called an ADOC, Air Defense Operating Center (sic) [Air and Missile Defense Operations Center] (38:21), which ties together all of the Integrated Air and Missile Defense capabilities of that nation. And it's also a new product line for us that we will be taking into the rest of the MENA region and also back into Europe. And as I – and the next region I'm going to talk about is the Asia-Pacific region. Now, obviously with the North Korean threat there's been a significant uptick in demand signal from multiple countries, obviously, South Korea, Japan and then to a certain degree Taiwan, Taiwan for a little bit of a different reason with another country. But, in any case, it's all about Integrated Air and Missile Defense. It's all about protecting the sovereignty of these nations and keeping their citizens safe. And the Integrated Air and Missile Defense Solutions that we have do that.

And your next question – it comes from the line of Finbar Sheehy with Bernstein Research. Please proceed. Finbar Thomas Sheehy - Sanford C. Bernstein & Co. LLC: Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning. Anthony F. O'Brien - Raytheon Co.: Good morning. Finbar Thomas Sheehy - Sanford C. Bernstein & Co. LLC: Maybe we could talk about capital deployment just for a moment. You've said you're going to be buying back – retiring debt. You've talked about plans to buy back stock and you are raising the dividend. Can you talk to us about how you think about the tradeoff between in particular retiring debt versus returning cash to shareholders, especially given that your top-line is growing, which presumably would allow you to carry the debt? Anthony F. O'Brien - Raytheon Co.: Yeah. So, let me hit that a couple ways. I think given everything that you just laid out, what I think is important we're going forward with the early retirement of debt under our balanced capital deployment. And that still assumes, which has been our stated objective now for a couple of years of returning about 80% of free cash flow to shareholders. And I think in my opening comments I reaffirmed that. We did buy back the $400 million of stock in the first quarter. We're on track to reduce the shares outstanding by about 2% at the midpoint of our range. And as Tom mentioned in his comments, for the 13th year in a row, we raised our dividend this year by 8.9%. As it relates to the retirement of debt, the debt that we're retiring is out there at about 6.5%. We're going to finance that, if you will, with a combination of cash on hand and commercial paper and rates on CP around 1%. And we're doing this because this approach allows us to do a couple things, lower interest expense, clearly maintain our financial flexibility, especially ahead of potential tax reform and what that could mean for us. I think, overall, more importantly, it doesn't change our philosophy around our balanced capital deployment, including the 80% of free cash going back to shareholders. And it also does not reflect the change in the view of how we view our balance sheet, which, as I mentioned earlier, remains very strong and gives us flexibility.

And your next question – it comes from the line of Pete Skibitski with Drexel Hamilton. Please proceed. Peter John Skibitski - Drexel Hamilton LLC: Yeah. Good morning, guys. Anthony F. O'Brien - Raytheon Co.: Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Pete. Peter John Skibitski - Drexel Hamilton LLC: Hey, Tom. On Patriot, I was just wondering on the Poland one, the schedule and the sizing. When you say up to $5 billion to Raytheon, how many barriers does that include and is there kind of optionality built into that contract? And you mentioned the other two European opportunities, I'm pretty sure Romania is one of them. I was wondering if could size those other two opportunities as well. Thomas A. Kennedy - Raytheon Co.: Yeah. Let me talk about the Poland Patriot first. So, right now, it's going on as Poland has submitted an LOR for something called LOA. It's essentially to get approval for to buy the Patriot system. That is going through a negotiation process with the U.S. government. But in case of the total impact to Raytheon, it's north of $4 billion. And then it also adds another member to the Patriot family. So it takes us to 14 countries that have Patriot, which is – actually is good for us in terms of expanding the Patriot market. The other element is you mentioned other countries. I'm not going to name any other countries, but there is two other countries that are working through a process to acquire a Patriot also. And we are obviously working with the U.S. government to ensure that we can expedite those as fast as possible.

And your next question – it comes from the line of George Shapiro with Shapiro Research. Please proceed. George D. Shapiro - Shapiro Research LLC: Yes. Just a comment I see it put in funded backlog. I assume that will be in the Q, Toby? Anthony F. O'Brien - Raytheon Co.: Yeah. I can give you that, George. Funded backlog at the end of Q1 was $24.6 billion. That's about 68% of our total backlog. And that's in the range that we typically see it out. It typically runs 60% to 70% of total. The reason we didn't put it in, as I mentioned earlier, we did adopt a new revenue recognition standard in Q1. And we've adjusted our reporting, including around backlog, to align with the new standard. But we're still tracking it and we'll provide it, if folks are interested.

And your next question – it comes from the line of Matt McConnell with RBC Capital Markets. Please proceed. Matthew McConnell - RBC Capital Markets LLC: Thank you. Good morning. Thomas A. Kennedy - Raytheon Co.: Good morning, Matt. Anthony F. O'Brien - Raytheon Co.: Good morning. Matthew McConnell - RBC Capital Markets LLC: Could you help me understand what drove the working capital build in the quarter? And one of your defense peers also had a little bit larger of a build here in 1Q. So is that something structurally you're seeing or what's the timing of working that down over the remainder of the year? Anthony F. O'Brien - Raytheon Co.: Yeah. Yeah. Let me kind of hit that from two or three different angles here to make sure I give it the right context. So, obviously with the guidance we'd given in January of zero to $100 million, we were expecting our overall operating cash flow to be relatively low – lower than last year. And that was all driven by the cadence around the working capital. For one thing, recall, we really exceeded our cash flow expectations for 2016 by about $300 million, which otherwise, from a timing point of view, all tied to collections, would have been beneficial to Q1. And we'll always take the cash earlier, right? So we saw what was lining up here for the quarter. It really is all due to the timing of collections that are tied to the timing of pre-determined or negotiated contract milestones with each of our particular contracts. And also, we're continuing to grow and we're ramping up to support some of that growth. If you want to think of it from a total year point of view, I'd expect that to continue to build over the next couple quarters into Q2 and Q3 and then we would come back down in the fourth quarter. And, again, to try to help you size that a little bit, we will come back down, it will below the levels we're at for – somewhere between the levels we're at at Q1 and where we were at the end of 2016. And, again, really tied primarily to the timing of payments related to executing contract milestones. From a – translate that to cash flow, I'll just throw in there, for Q2, we expect cash flow – strong cash flow, operating cash flow above $700 million. And as we said earlier, we feel confident in the total year outlook of the $2.8 billion to $3.1 billion.

And your next question – it comes from the line of Ron Epstein with Bank of America. Please proceed. Kristine Tan Liwag - Bank of America Merrill Lynch: Hi. Good morning. This is Kristine Liwag calling in for Ron. Thomas A. Kennedy - Raytheon Co.: We can't hear you. Can you speak up a little bit, please? Kristine Tan Liwag - Bank of America Merrill Lynch: Hey, guys. It's Kristine Liwag calling in for Ron. There was a slight uptick in receivables sequentially. Has there been any changes in payment terms from international customers, particularly in the Middle East? Anthony F. O'Brien - Raytheon Co.: No. We've seen pretty consistent terms here for the last year or two and from a terms' point of view not seen anything different. Kristine Tan Liwag - Bank of America Merrill Lynch: And also, maybe a different question, there has been discussion of a possible safe zone or a no fly zone in Syria. If we move towards this direction, can you discuss opportunities you would expect to see? Thomas A. Kennedy - Raytheon Co.: I think the tempo in Syria is pretty up right now. And we are seeing significant demand signaled to provide solutions and keep up with the replenishment requirements. So I think that's about it.

And your next question – it comes from the line of Rob Spingarn with Credit Suisse. Please proceed. Robert M. Spingarn - Credit Suisse: Good morning. I wanted to ask two quick things. Toby, first of all, if you could just give us the cadence for the free cash flow for the rest of the year. And then I had a question on GBSD, Tom. And with this major program and the primes getting set up for that, how are your teamed and what kind of capabilities will you offer? Anthony F. O'Brien - Raytheon Co.: Yeah. Rob, obviously, I'll take the first one. As I just said, we're confident in our outlook for the cash flow for the year. We do expect to see about $700 million in Q2 with the rest of the year playing out or following a cadence that is roughly in line with prior years but with the majority of the cash flow weighted in the second half and even then more into Q4 driven by the program milestones and deliveries that I just referred to. Thomas A. Kennedy - Raytheon Co.: On your second question, the Ground Based Strategic Deterrent, or as you said, the GBSD program, it will replace the Minuteman III missiles and the associated command and control systems and that goes all the way out to about 2028. And the program is structured right now so that there will be a risk reduction contract, two primes, and that's going to be expected sometime here in 2017, then followed by a final down select to a single prime in 2020. Right now, our strategy is we are engaging with multiple teams and seeing where our best solution is relative to being able to make one of these primes a winner. And so we're working through that process right now (49:30) to find who will be the person, or the company we'll be working with.

And your next question – it comes from the line of Jason Gursky with Citi. Please proceed. Jason Gursky - Citigroup Global Markets, Inc.: Yeah. Good morning, everyone. Thomas A. Kennedy - Raytheon Co.: Good morning, Jason. Anthony F. O'Brien - Raytheon Co.: Good morning. Jason Gursky - Citigroup Global Markets, Inc.: I just wanted to chat briefly about – have you chat briefly about the international contracting environment, kind of what you've experienced over the last couple of years, what you're experiencing today and kind of what you expect going forward, particularly focused on the contract vehicles or the contract types. And maybe give us a sense of the mix with regard to firm fixed price contracts, particularly on the development side. As you're probably well aware, we've had some of your competitors that have been struggling of late with some fixed price development contracts. So, I think it would be helpful for us to all get a sense of where you sit today with regard to international, and from fixed price development contracts, what percentage of your backlog, which is at about 40% international, is from fixed price development and how you guys are working your way through that. Thanks. Thomas A. Kennedy - Raytheon Co.: Yeah. Let me take that on, because some of your question was philosophy and some of your questions, I think, were percentages. So, first of all, we've been operating in the countries we're operating today in some cases for over 51 years and our overall type of contracts that we have break down into two parts. First of all, one is, some of them are foreign military sales and the other ones are direct commercial sales. And the foreign military sales – we treat that just like we treat all our domestic type contracts, because the terms and conditions essentially are the same as we deal with any domestic program. So, that takes us to the direct commercial sales. So on the direct commercial sales, we have a mix of essentially all the contracts. The majority of them are firm fixed price and majority of them are production type deliveries. So we are going back to the factory, the same factory line that we build our domestic products on and we're essentially just delivering product out of those production lines to these international customers. Some cases customers do have a request for some modification, something that's unique. For example, on the Patriot system, sometimes they want a different truck by a different manufacturer. And in that case there, we do the work that is – puts the gear on the different trucks. It's a usually fairly low risk. We've done it multiple times. And so, we have the playbook and we do very well on those programs. There are some other programs out there that we have which are, I would call, more on the development side. When we approach those, we do it from a risk position. We ensure we understand the risks. We try to quantify them and we work to essentially minimize any downside on those contracts. And they are – we monitor them on a very frequent basis.

And your next question – it comes from the line of Noah Poponak with Goldman Sachs. Please proceed. Noah Poponak - Goldman Sachs & Co.: Hi. Good morning, everyone. Thomas A. Kennedy - Raytheon Co.: Good morning, Noah. Anthony F. O'Brien - Raytheon Co.: Good morning, Noah. Noah Poponak - Goldman Sachs & Co.: Hey. Just wanted to go back to this working capital topic, because I thought you guys have been talking about a few hundred million dollar improvement in working capital pretty recently for the year. And it sounds like you're now saying actually maybe a few hundred million dollar use. So, it seems like a pretty big reversal. Do I have that correct? And is it a commentary on being able to find improvements or is it a commentary on your growth profile changing since you last saw that (53:37)? Anthony F. O'Brien - Raytheon Co.: Yeah. So again the profile – as I just described a little bit a while ago, not anything really new than what we were counting on. By year-end, as I said, the absolute balances from where they are here in Q1, they will be lower, okay. But part of it is – a little bit of it is the growth aspect of it and the growth profile. And we're going to continue to work to drive down working capital. There is always kind of the things that fall December versus January. So there are some opportunities that we're working on that we're looking at that could potentially get accelerated into 2017 and provide a better outlook, similar to what happened at the end of 2016. Noah Poponak - Goldman Sachs & Co.: But, Toby, do I have it correct that you were previously saying working capital would be $100 million plus source of cash? Anthony F. O'Brien - Raytheon Co.: Yeah. I think when you go – if you go back to the outlook for January – and I know we gave a range right for just using cash as a surrogate for the working capital to $2.8 billion to $3.1 billion. What we were saying is that when you normalize for the discretionary contribution that we made last year, free cash last year would have been – I'm sorry, operating cash last year would have been $3.4 billion. The decrease this year was driven by the net pension effect of higher required contributions. And we said that we thought working capital could be flattish to maybe nominally favorable. And we still could end up in that range there, but because of the growth that is maybe a little bit more pressure. But you're thinking of it relatively correctly.

And your next question – it comes from the line of George Shapiro with Shapiro Research. Please proceed. George D. Shapiro - Shapiro Research LLC: Yeah. Tom, I just wanted to look at Forcepoint a little bit. I mean the last quarter really organic growth that we had was the third quarter. The fourth quarter was week. This quarter is weak. And obviously that reflect your comment that you'd start investing in the fourth quarter. So my question is what technology – or what happened to slow the organic growth? You must have lost to a competitor and now you're figuring out how to fix it with more investment. If you could just provide a little more color on that. Thanks. Thomas A. Kennedy - Raytheon Co.: No. I'll hit first and then Toby can come in with some more detail. So, first of all, the year-over-year growth was about 4%. But if you take away the web filtering which we are exiting, the year-over-year growth is 9%. And what we're doing now is we're trying to drive that growth into double-digit margins. One of the areas in terms of that was to support the infrastructure. So there is an investment this year on that infrastructure and also in some enhancements to a couple of products. The one product that we're getting significant demand signal from is our insider threat data loss prevention software capability. And so – and it's really relative to a draw from the VLEs and LEs. And that's kind of the overall picture how I look at Forcepoint. I believe they have significant upside potential. We're driving that potential and we're making the right investments this year to go get there. Todd Ernst - Raytheon Co.: Okay. Great. All right. That's all we have time for today. Thank you, everyone, for joining us this morning. We look forward to speak with you again on our second quarter conference call in July. Shelley?

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