Good day. And welcome everyone to the Lockheed Martin First Quarter 2014 Earnings Results Conference Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Jerry Kircher, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Stephanie, and good morning, everyone. I’d like to welcome you to our first quarter 2014 earnings conference call. Joining me today on the call are Marillyn Hewson, our Chairman, President and Chief Executive Officer; and Bruce Tanner, our Executive Vice President and Chief Financial Officer. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of Federal Securities Law. Actual results may differ. Please see today’s press release and our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. We have posted charts on our website today that we plan to address during the call to supplement our comments. Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I'd like to turn the call over to Marillyn.

Thanks, Jerry. Good morning, everyone, and thank you for joining the call today. We are pleased to have you with us to review our first quarter results. As today’s release details we had an exceptionally strong quarter, financially and operationally. The Corporation continued to operate at a very high level and returning value to stockholders while delivering critical solutions to our customers. Our Lockheed Martin team delivered broad-based results across the Corporation and I am extraordinarily proud of their focus and efforts. I want to highlight a few key achievements in the quarter and then Bruce will follow my remarks and cover the balance of the financial metrics in more detail. Financial results for the first quarter of 2014 were higher in almost every metric than the first quarter last year, other than a slight decline in sales. While sales decreased in the quarter, they were better than our plan and we remain on track to achieve our full year sales guidance. Noteworthy financial accomplishments were securing new order bookings significantly above last year's level and a direct reflection of our portfolio alignment with customer requirements. This strong program alignment is essential, as customers allocate resources in today’s constrained budget environment. Beyond our solid order bookings, net earnings and earnings per share each increased over 20%, while segment operating margin matched the high point in our corporate history at 13.4%. Through our continues focus on cash generation, we delivered over $2 billion in cash from operations in the quarter, strong and growing cash generation is a hallmark of our Corporation and a key differentiator in returning value to stockholders, while enabling continued investments in the future of our business. I’m very pleased that strong year-to-date financial performance enabled us to increase full year 2014 guidance for segment operating profit, earnings…

Thanks Marillyn. Good morning everyone. As I highlight our key financial accomplishments, please follow along with web charts that we included with our earnings release today. So let’s start with Chart 3, an overview of the quarter. Sales in the quarter were $10.7 billion, down slightly from last year but in line with our expectations for the start of this year. Segment operating margin was very strong at 13.4% and this performance along with the improvement in our FAS/CAS Pension adjustment increased earnings per share by 23% to $2.87. We generated $2.1 billion in cash from operations, the same amount as in the first quarter of last year and returned $1.6 billion to shareholders. And we increased our outlook for operating profit, EPS and cash from operations. So we’re off to a good start in 2014 extending upon our strong performance from 2013. Turning to Chart 4 and comparing our sales and segment operating margin results for the first quarter of this year versus last year, overall sales were down 4% compared with last year. But as I just noted, this was in line with our expectations and we expect to have sequential top line growth for the remainder of 2014. Segment operating margin matched our highest level ever at 13.4% and was broad based across our business areas as we’ll outline on the next chart. Chart 5 shows the segment operating margins improve significantly over our results from a year ago. Four business areas had higher margins this quarter compared with last year with the increases for missiles and fire control and mission systems and training leading to our increased segment operating profit outlook for the year. As expected, aeronautics margin was slightly lower than last year due to a change in the program mix. On Chart 6, we’ll…

(Operator Instruction) Our first question comes from Robert Stallard with Bank of America. Your line is open.

Thanks so much. Good morning.

Good morning.

Good morning.

Bruce, I hate to kickoff with pension but I will. I was wondering if you could give us an update on what you expect to see from the CAS side over the next say two to three years and also what’s your expectations for pension contributions? Thanks very much.

Yeah. So, Rob, there is a couple of moving pieces going on with the pension discussion; I’ll try to capture in my response to your question there. So CAS is going to increase fairly significantly over the next couple of years. And I would expect that our cash contributions to our pension trust will probably be at a level close to what we’re experiencing this year and maybe drop off a little bit in the year what’s that 2016, the year after next. But importantly, within the discussion of pension in the near term is we do expect to see, we just had released a new mortality table that we’ve kind of teed up I think a few quarters back. And we would expect to incorporate that at the next re-measurement of our pension plans. And as at least as I think about the effects of that mortality table change sort of with current assumptions for the discount rate and asset returns, if those were held constant, sort of current course and speed as we usually do. We’d expect to see both FAS expense and CAS to be higher in 2015 than it would have been without the mortality change and FAS will actually increase by a greater amount than will CAS. So that alone would result in a slight reduction of FAS/CAS income than what it otherwise would have been. But you should think of this as still being significantly greater at the end of the day in 2015 than what we experienced in 2015 on the order of magnitude of maybe 2x what we are seeing in 2014. Cash on the other hand is likely to see some near-term benefit because we have been accelerating our pension contribution as required under ERISA. And so we are actually sitting pretty nicely even with the effects of the mortality table required cash contributions, those will come in sort of later years for us. But the CAS impact, the Cost Accounting Standards impact, will be updated prior to those required ERISA contributions, so we will actually get, as I said a bit of a near-term cash, net cash benefit. I’ve said a lot there, hopefully that all made sense to you there.

Our next question comes from Joe Nadol with J.P. Morgan. Your line is open.

Thanks. Good morning.

Good morning, Joe.

My question is on the share repurchase plan that you guys have been offsetting for two plus years, the options issuance, et cetera. In this quarter for the first time in over two years, you broke below that 319 level. I was just wondering if you could comment on I guess the strategy with share repurchase now, are you looking at reducing the share count going forward or is this just a quarterly timing issue? Thanks.

I will try that one as well, Joe. So good question. As I think about share repurchase, I will give you kind of a winding answer here. We’ve always said we are committed to offsetting share count creep by offsetting the dilutive effects, in particular by option exercises. But I’d remind you that we also, especially in the first part of the year, we also increased share count for the vesting of our restricted stock units. And all throughout the year, we make additional contributions to our 401(k) match in the form of stock as well. So those numbers tend to creep up throughout the year and what we’ve said historically as well as this year is that we intend to offset that dilutive effect as I said. We also try to be opportunistic. We will do the same this year. And at least as I think, of the next three quarters or so, Joe, we’ve offset most of the effect of both, well, clearly of the option exercise that took place in the first quarter as well as the RSU vesting. We will continue to offset those option exercises and the 401(k) matches as they occur over the next three quarters. There is some variability that might play into how much we buyback associate with any potential acquisitions if any, that we would make in the rest of the year. So sort of depending on all of the things I just described, the level of option exercises, potential acquisitions if any, we could see repos at a level that would bring cash on the balance sheet about back to the level we started the year with and we started the year with about $2.6 billion. I recognize that’s not what we have reflected in our current guidance but that’s kind of the way I’m thinking about it right now. And maybe just one final point. I think we started the year a little under 10 million options available to be exercised. We had about 2.3 million exercised in the first quarter, so if you sort of annualize that and that’s an assumption on my part that will be spread equally there over the next few quarters. We will be at about the same level of option exercise as we were last year, 9 million plus and that would leave us literally at the end of this year with less than 1 million options left to be vested. So clearly, our rate of dilution, if you will, will start to diminish pretty significantly at the end of this year.

Our next question comes from Myles Walton with Deutsche Bank. Your line is open.

Thanks. Good morning. Actually two questions, slide one as a clarification. MST, the implied margins for the remaining nine months, can you give us some color on why the step down, obviously outsized performance here in the first quarter, but even that looks like the step down the last nine months you can help with. And the other is the C-130 margins, I think they are pretty impressive in terms of the margin expansion in C-130. In ’13, it looks like you had more margin expansion here in the first quarter. When you transition to that next multi-year, is that something we have to think about a step down with? Thanks.

I'll give a shot at that, Myles, and see if Marillyn has any color she wants to add to it. So MST might look a little unusual for a couple of reasons. We did have a very strong first quarter of the year from an EBIT perspective and that kind of came in two flavors, one was we had some accelerated risk retirements that were actually planned for later in the year that simply because of good performance were accelerated into the first quarter, that obviously won't be a change to the year. But on the other hand, we actually had some just outright stronger performance than we had expected in the plan. And that's the amount if you will that we increased the full year outlook by for MST. The piece that might be missing a little bit in your thinking is, recall in the January call, we talked about the restructure cost and the phasing of some of the expenses. These are expenses for a number of things, accelerated depreciation, some of the facility's movement, personnel movements and so forth, personnel relocation I should say. And we talked about that being about $80 million for the year. MST was about $25 million of that and Space Systems was at about $55 million of that and we expected to hit EBIT. I think I described that as about $0.16 hit to EPS overall had it not been for that restructure charge. And nearly all of that $25 million is going to fall in the last three quarters of the year for MST. So, the same thing with Space by the way, well you didn't ask about Space. The vast majority, so I think probably of the $80 million, $75 million or so of that remaining restructure expense that we…

Our next question comes from David Strauss with UBS. Your line is open.

Good morning.

Good morning.

Good morning, David.

On F-35, it looks like most of the growth that you're anticipating over the next couple years is on the international side. And Marillyn, you did address Korea coming into the fold, but how do you feel about overall the stability on the international side? It sounds like Italy's a little wobbly, Canada is obviously reevaluating things, just how confident are you that this backlog is pretty secure? Thanks.

Thanks for the question, David. And I would say, we're pretty confident. I mean, we look at the next five years, close to half of our orders in the next five years will come from international customers on the F-35 program. Each one of these customers, partners, they go to their process, they periodically look at their security and their defense needs and they have to go through a decision process that, we are confident when you look at South Koreans making their formal announcement. Israel, we could potentially see additional for Israel. Australia is they moved through their procurement plan. At some time in the future, we think Singapore will revisit the F-35 and determine when they want to buy. Canada is in their procurement process and working through that. So we feel confident that the unique capabilities of the F-35 is going to make it remain the best choice for these customers and expect it to see that go forward.

Our next question comes from Richard Safran with Buckingham Research. Your line is open.

Thanks. Good morning, everybody.

Hi, Rich.

I just wanted to ask a relatively simple question here about your outlook and your bookings guidance. So I noted that you didn't change it, I understand. But I thought maybe you could give us a bit of an update here on your booking guidance overall that you reported, when you reported 4Q. Can you tell us maybe for example, what has to happen to achieve or exceed the high end of the range and just how you're looking at it now?

Yes. So I'll fill it out, Rich. There is a lot of moving pieces. It's a simple question, but may not be the simple answer. There is a lot of moving pieces as you would expect at this point in the year from sort of on orders or booking outlook as you described it. So I think we’re actually pleased. I know the book-to-bill might have seemed a little light to some, but we’re actually pleased. We actually exceeded our estimate of what we are expecting to receive from an orders perspective in the first quarter, and a lot of that frankly was international content. So we are pleased with that as well. As I look forward in the next few quarters, I would think we should probably see a similar pattern to last year. I think if I was a betting person, I would say the next two quarters will probably receive about $10 billion plus or minus each in the next few quarters. The biggest single order in the second quarter we are expecting is closing on the Lot 8 F-35 proposal, which by itself is probably worth about $3.5 billion. There is also the FY '14 buy for the C-5 program, think of that as $600 million or so, and international PAC-3 for probably $0.5 billion -- $600 million, the FY '14 buy of the fleet ballistic missile, about $0.5 billion, and then several satellites, including our spacecraft 7 and 8 from the GPS III program and a commercial satellite that collectively is about $0.5 billion in total. So all of that collectively again as we say, I think it's about $10 billion a quarter, both in the second and third. And then somewhere until summer, we would expect to see a pretty good sized spike in the fourth quarter. If you just sort of back into the numbers from where we are today, that's probably about -- the numbers that I just gave you, that's probably about $16 billion or so in the fourth quarter. The biggest single item there is the C-130J multi-year, that's close to $5 billion, but that's really when we get all of our sort of new government fiscal year orders. So that's not an unusual pattern that we would expect to see there. We ended the first quarter, like I said a little higher than we thought maybe at just below $80 billion and we still think we've got a chance to be above $80 billion as we get towards the end of the year.

Our next question comes from Jason Gursky from Citi. Your line is open.

Hi, Jason.

Bruce, I’ve got a quick follow-up question for you and then just one quick one. On the follow-up, you talked about the impacts of the mortality tables, and there being higher FAS relative to CAS as a result of the change in the mortality table. Is there a way for you to quantify in some sort of range how much higher the FAS might be when the CAS is a result of the change of the mortality table? Then my question is, on CapEx, you came in at a run rate of only $400 million for the year, which would be down significantly year-on-year. So I was wondering if you could talk a little bit about the trajectory of CapEx to the rest of this year, the rate they will exit the year and what that production tied to the CapEx is in the '15 and '16?

Jason, I'll try that one. So I should have said on the -- actually the first question, we probably shouldn't refer to it as the mortality table. We actually like the term longevity table. It just somehow sounds more appealing to us than we talk about mortality. So we'll start from now on calling it a longevity table. So I did try to tee up that we'd see an increase in both FAS and CAS as soon as that is included in our remeasurement. I did not mean to imply that FAS will be higher than CAS, simply that change in FAS will be higher than the change in CAS, if that makes sense. But even with that, and that was the point I was trying to get to, Jason, even with that, saying that our pension income, if you will, will be lower than it otherwise would have been without the mortality table, we would still expect to see our FAS/CAS adjustment more than double from where we are today. So where are we about $435 million or so today, that number is, and this again, as my usual caveat, current course and speed on the discount rate and asset return, but as we see the longevity table impact in 2015, that number is north of $800 million. So, and then beyond that, Jason, that number sort of continues to increase in the out years, at least for the next couple of years beyond 2015. So I look at CapEx in the first quarter, we're almost historically low. And I wish that were not the case frankly, but it just takes a while sometimes for us to sort of break the gears loose on the CapEx. Last year in the first quarter, I think we did just north of $100 million, like $103 million or something this year, believe it or not, we're actually a little higher, at a $106 million. So we do expect to see, just as we did last year to kind of close on the number that we included when we give our free cash flow for the year. We do have some pretty good size items, including some restructure capital for the facilities movements that we talked last year, or January of this year including the space systems consolidation that are yet to play out, but those are bigger than maybe some of the ones we would typically have in an annual year, and that is expected to happen in the next three quarters.

Our next question comes from Doug Harned with Sanford Bernstein. Your line is open.

Good morning.

Good morning, Doug.

On the F-35, we saw a reduction of quantities for the C-model in the President's budget, and there is the potential for further reductions in quantities if we see sequestration in 2016. Now, I know that your pricing for the program is volume dependent, but can you describe the impact if there is any on program margins related to the 2015 cuts, and what could happen to margins if sequestration goes into effect and we would see further cuts given the way you've structured these contracts?

So I'll take a shot at that, Doug. So it's not inconsequential, but it's maybe not as large as you might otherwise think. So clearly, we will price the current fiscal year offering Lot 8 in this case with sort of the known quantities and run those known quantities through our overhead rates, which is where some of the variability would come in from the quantity changes so that we would capture that in sort of the instant contract that we're pricing. Where we may have a bit of pressure is prior contracts, so Lot 6 and 7, for instance, would have been priced with an assumed higher quantity of F-35s going forward in Lot 8 and beyond. So sort of the overhead absorption impact of losing those quantities of aircraft will play out and hit, if you will, some of the performance of Lot 6 and 7. Obviously, we will try to mitigate as much of that as possible, but unfortunately not all of our overhead is 100% variable. So, some portion of the fixed cost will get spread in any event. So -- and the other side of that is not so much on 6 and 7, but some of the prior aircraft and some of the other businesses with our contracts within Aeronautics are flexibly priced, cost plus in nature or fixed price incentive in nature. So there will be some sharing of those cost increases result of that base deterioration. I should remind you that all this has yet to play out completely because for instance the program of record, which is what we've tied to on the F-35 program. So while it would have had higher domestic quantities of aircraft than what we’re pricing the previous few lots on, that program of record for instance did not include the South Korean aircraft quantities in it. So there is at least hopefully somewhat of a mitigating aspect of that in the not too distant future.

Our next question comes from Noah Poponak with Goldman Sachs. Your line is open.

Hi, good morning, everyone.

Good morning, Noah.

Bruce, going back to the margin conversation, I guess the company has realigned businesses is making changes with facilities, making changes with other costs that where the numbers are pretty large, but I guess we don't know what the starting point was. So I'm sort of curious if there is a way to categorize how much more can still change from a cost perspective to boost margins? And then forgetting about this year, forgetting about next year, just bigger picture, longer-term, is this low 13% segment operating margin in the realistic scenario analysis of what the long-term Lockheed Martin segment operating margin can be?

Let me think about that for a second, Noah. You asked a lot of detail there. I have got to get my head around it, but how much sort of my summation and how much more cost takeout potential is left. I always believe and Marillyn has engrained this in my thinking and probably the corporation's thinking, but we try to get to as much of -- as I have said this in the past, there is much of a variable cost mentality as possible. And so a lot of that is sort of environmentally dependent and not all of our business areas are sort of created equal in that regard. So one of the more flexible businesses we have for instance is our short cycle IS and GS business, where we have a lot of facilities that are leased in nature and not owned, not all of them by the way but a lot of them are. So we've been able to flex pretty dramatically, if you just flip back to last few years at IS and GS and look at the unfortunate headcount reductions we've had to take, we've been able to maintain margins throughout that period with a pretty sizable reduction in our overall workforce. So that’s for instance one business area that has the ability to flex to match this environment. Some of our longer cycle businesses as you would expect like Space Systems, our Aeronautics they have higher capital cost content and therefore that’s harder to remove, but one of the things we've been trying to do is take a look at our total square footage and optimizing our square footage around the corporation. So the moves that we just announced in November were to take out another 2.5 million square feet on top of…

Our next question comes from John Godyn with Morgan Stanley. Your line is open.

Hey, thanks for taking my question. Bruce there is a lot of debate among investors on how to really think about these pension tailwinds and what they mean for the stock. I was hoping to focus in a little bit on the cash part of it. The cash tailwind from prepayments for CAS harmonization and better understand how the management team thinks about it for capital allocation of future. I guess at the extreme, some would argue that a temporary tailwind should be returned to investors in I guess above normal buybacks or something of that nature. That might be too simple but it also seems like too simple that a tailwind that’s not going to last forever has no impact on how you think about capital allocation going forward. So I am just curious if you could kind of focus then in on that and maybe help investors understand how they should treat it for the purposes of allies in the stock? Thanks.

Well John, I appreciate the question. I think it's a very well thought out question. So let me try to address everything you described there. So in years past and not this year we've tended to whenever give the EPS performance we've given adjusted EPS try to take into account the fact that we thought our GAAP reported earnings were probably understated relative to the valuation of the company. And that wasn’t necessarily good measure for our investors to be basing their valuation of the stock upon. And so now we've got the flip situation that were our reported earnings are actually getting a tailwind as you said because of the FAS/CAS adjustment. So what I have been trying to preach for a number of years is that the real valuation upon which the stock should be valued is the cash flow and sort of the cash flow per share to be specific with that. So at least as we look at even with the substantial conversion from expense to income this year, as I said, I think $430-ish million or so of income added to our segment operating profit that takes us to the current outlook again of about $10.55 to $10.80. I think our free cash flow per share this year is somewhere north of $11.30. And so when I think of cash deployment in particular and I look at the payout ratios from a dividend perspective or in the cash available for share purchases, I'm very much focused on our sort of free cash flow per share. And I think that number grows over the next couple of years, potentially pretty significantly as we start to finally recover some of this $9 billion or so that we've had pre-funded into our pension trust that we've yet to recover via our billings to the government. Now the mortality table that I've just described has some longer term implications that I've described. Obviously as people live longer that will require additional contributions over the longer term that should get reimbursed on our CAS contracts. But as I said earlier and I forgot who asked the question, in the near term, that actually is an upper to cash flow because we don't expect to have near term much of an incremental increase in our required contributions but our CAS to our government customers will reflect that mortality table change earlier. So this is -- that's the way I think of it. Very much looking at it from sort of a free cash per share basis and on that basis I think we still got some upside from both the dividend potential as well as share repurchase potential going forward.

Our next question comes from Ron Epstein with Bank of America Merrill Lynch. Your line is open.

Good morning, Bruce and Marillyn.

Hi Ron.

Good morning Ron.

Just want to ask maybe a question on -- a broad question on capital allocation. So when you think about Lockheed's stock at current levels and buying it here. Do you think there's other places that the corporation can invest for growth? Right, arguably buying back the shares helps the earnings per share, but it's not really a strategy to fuel growth for the future, right. I mean, are there other things to do and really contemplating it. Can you talk about that?

I'm going to give a shot and I think Marillyn -- may actually probably here as well. But so we're not -- this is not an idle conversation that we have. We don't automatically drop to the fact that we need to be buying back shares and that's the best use of capital. We actually do look at growth opportunities for the corporation. We did two small acquisitions in the first quarter as we described. We did those because we do believe that there is growth potential in both of those acquisitions. And so the other thing we try and do is invest internally. So as you think of some of our independent research and development, if you take a look over the last two years, we're up some $100 million or so and just the level of IRAD. So we're trying to do what's right from a -- supporting our shareholders as well as supporting internal growth. I mentioned we just invested in a terrific facility in Palo Alto in California to create a new lab for our -- one of our organization out of Space Systems that's sort of forward-looking piece of that business. So I think we're making those right decisions, but honestly as we look at the environment right now there's not enough of those to justify the ample cash that we are throwing off right now as a very mature business and in an environment that we're in from an overall budget perspective. And probably the last thing you would want us to do is to go chasing growth and overpaying for growth. So given those prospects, I think what we're doing is is what most investors would hope us -- for us to do and we're doing that in a very thoughtful and hopefully prudent manner.

I'd just add to that as well, Ron, that if you look at the things that we are investing, and as Bruce said we were up on our R&D expenditures last year. Over the past five years, we've invested more than $3 billion in the research and development, things like advanced materials, advanced manufacturing, we're doing things in autonomy and robotics, so the acquisitions remain in the unmanned space, quantum computing, cyber, energy. There is a lot of areas that we're continuing to invest in. And importantly, we're also continuing to invest in our current portfolio to keep it relevant. So making sure we're listening to our customers, extending the range, for example, on the PAC-3 and THAAD and JASSM and some of the key capability, LRASM are opportunities that we look at it offering different variants of the LCS to the international marketplace. We are definitely continuing to maintain that portfolio and look for opportunities, advanced concepts and things that we can do to stay ahead of what our customers' needs are. You saw probably the SR-72 that we rolled out, which was a capability we've been working on for a number of years and we've got a ways to go yet and demonstrate it. But having an intelligent surveillance reconnaissance capability with the potential for strike platform, which is very interesting. That's just one example, but one that I think makes the point if we're going to continue to do what we do as a corporation to be focused on being a technology leader because that is the value that we create for our customers.

Our next question comes from Carter Copeland with Barclays. Your line is open.

Hey good morning. Almost afternoon.

Good morning.

Hi Carter.

Bruce just one clarification and then a question if I will on the longevity table as you stated. The dynamic for 2016 and '17, if you look out beyond '15, presumably it's the same sort of impact in terms of FAS being revised up more than CAS on a relative basis in those years similar to what you're seeing in '15. Is that correct?

Yeah, it is Carter, but I'll make the -- hopefully the same point that I tried to make on the 2015. Even after that adjustment, we would still expect to see increasing pension income even after the longevity table is implemented from '15 to '16 to '17.

You're still expecting a pretty sizable step out to the contribution out there and I guess, its '16 or '17.

So we've got a fairly large contribution required in '17 that we've also got a fairly large CAS recovery as we kind of get to the end of the CAS harmonization timeline there. So I would expect -- I'll say net-net cash from our pension to actually increase over those same years that you just described.

Okay. And then with respect to the DoD or the domestic versus the non-DoD or international growth. And with respect to the 4% decline this quarter, how would that have looked on a domestic versus international basis? And if you could do the same for bookings, that would be helpful as well?

Yeah, so I think -- and I'm doing this with little at top of my head Carter, but at the discussion we had with the media earlier today, I made the point that if you just take a look at our DoD sales on a standalone basis, they dropped 4% from the year 2012 to the year 2013. And then we expect pure DoD sales to drop another 6% from the end of 2013 to the end of 2014. So a 10% drop year-over-year from '12 to '14. What's lost in some of that discussion though was we actually expected 2014 before sequestration to actually have an increase in sales amount. So arguably from a planned perspective, we're actually down more than the 6% that I talked about just now because that's sort of going actuals to the end of the year expected actuals and not recognizing what it otherwise could have been without sequestration. Hopefully, that made some sense to you. In the quarter itself, so in the non-DoD or the international content specifically, we're looking at something like a 13% increase year-over-year in our total international sales, and that's -- and as a guess, from a total perspective we're going from roughly 17% to right at or just a little bit below 20%. So but for the international growth, we would have seen a much larger impact because the DoD is again decreasing about 4% cliff. So the reason we're sort of down only the 1% or so that we're guiding towards is because of the mitigating effects of the international sales.

Stephanie, this is Jerry, I think we're coming up on the hour, so maybe we'll just turn this over to Marillyn for closing comments.

Thanks Jerry. As we conclude today, I want to restate that the Corporation had another outstanding quarter and is well positioned to deliver even higher value to stockholders and customers as we progress through 2014. Our robust cash generation, strong backlog of domestic and international work, a solid balance sheet and the exceptional execution of our employees will continue to propel our corporation forward in 2014 and beyond. I'm confident in our future and because of the outstanding innovation, performance and integrity of our workforce. We will continue to support our customers in their essential missions. Thanks again for joining us on the call today. We look forward to speaking with you on our next earnings call in July. Stephanie, that concludes our call today.