Good day, ladies and gentlemen, and welcome to Northrop Grumman's Second Quarter 2017 Conference Call. Today's call is being recorded. My name is Kara, and I'll be your operator today. At this time, all participants are in listen-only mode. I would now like to turn the call over to your host, Mr. Steve Movius, Treasurer and Vice President, Investor Relations. Mr. Movius, please proceed.

Thanks, Kara, and welcome to Northrop Grumman's second quarter 2017 conference call. Before we start, please understand that matters discussed on today's call constitute forward-looking statements pursuant to Safe Harbor provisions of Federal Securities Laws. Forward-looking statements involve risks and uncertainties, which are detailed in today's earnings release and our SEC filings. These risk factors may cause actual company results to differ materially. Matters discussed on today's call may also include non-GAAP financial measures that are reconciled in our earnings release. I would also note that we have posted an updated company overview to our Investor Relations homepage. On the call today are Wes Bush, our Chairman, CEO and President; and Ken Bedingfield, our CFO. At this time, I'd like to turn the call over to Wes.

Thanks, Steve. Hello, everyone, and thanks for joining us. Our business has continued to deliver solid results. Our entire team remains focused on strengthening our foundation for profitable growth over the long term. And I want to express my appreciation to our team for their great work. We're pleased with our results at the midpoint of the year. Second quarter sales totaled $6.4 billion, a 6% increase over last year's second quarter. Aerospace Systems continues to be the primary growth driver as we ramp up on Manned Aircraft deliveries. Based on our year-to-date sales and our outlook for the remainder of the year, we're increasing our sales guidance to the low $25 billion range versus our prior guidance of approximately $25 billion. Segment operating income also rose in the quarter and our businesses combined to generate an 11.8% segment margin rate. Our year-to-date segment operating margin rate was 11.7% and we continue to expect a mid 11% segment operating margin rate for the full year. Ken will provide additional sector level guidance later in the call. Total operating margin rate was 13.4% for the quarter, and we continue to demonstrate that we can grow operating income through a combination of sales growth and performance as we continue to succeed in bringing on new development work. Second quarter earnings per share rose 11%, reflecting higher sales, higher operating income and a lower share count. Based on the strength of our second quarter and year-to-date results, we're raising our full-year 2017 earnings per share guidance to a range of $12.10 to $12.40. Cash provided by operating activities totaled $507 million in the quarter; and after capital spending of $217 million, free cash flow for the quarter was $290 million. Capital spending during the quarter reflects our investment in support of long-term profitable…

Thanks, Wes, and good afternoon, everybody. I'd like to add my thanks to our team for a good first half of the year. As compared to last year, 2017 second quarter results included higher sales, higher segment operating income, solid margin rates and higher net FAS/CAS pension adjustment. Segment operating income includes the benefit of the cost claim. These improvements were partially offset by increases in our unallocated corporate expenses and our effective tax rate. These results, along with our lower share count combined to drive a 11% increase in second quarter EPS. Moving on to sector results and guidance, Aerospace Systems sales were up 14% for the quarter and 13% year-to-date. Manned Aircraft was the primary growth driver for both periods as we ramp up on restricted activities and had higher volume for the E-2D program. We also had higher volume in Autonomous Systems and Space. In Autonomous Systems, the ramp-up on Triton and other programs continues to more than offset lower NATO AGS volume as that program moves toward completion. Space was also higher as additional restricted activities are now beginning to offset declining sales in non-restricted programs like Advanced EHF. Based on year-to-date AS sales of approximately $5.9 billion, we are increasing our sales guidance for AS full-year sales to a range of $11.5 billion to $11.7 billion, largely due to our growing development work. Operating income at Aerospace Systems is up for both the quarter and year-to-date with operating margin rates of 10.6% and 10.7%, respectively. The trend versus last year reflects higher development volume for Manned Aircraft. We expect this trend to continue for the rest of the year. For 2017, given our increased sales outlook, we now expect AS operating margin rate will be in the high 10% range versus our prior guidance of…

Thanks, Ken. As we open the line for the Q&A, I would ask each participants to limit themselves to a single question. You are welcome to return into the queue, if you have additional questions. Kara?

Your first question comes from the line of David Strauss with UBS.

Afternoon.

Hi, David.

Hey, David. How are you?

Yeah. My question is so if I take a look at your guidance, it looks like you're guiding for sequentially flat Q3/Q4 with Q2. Typically, from a seasonal basis, you ramp up in the back half of the year. What is different about this year that we won't see some sequential growth in the back half of the year?

I would say, if I look at history, we are historically relatively flat in the second half of the year. We're also seeing a tougher compare in the second half as you look at 2016 as we were really starting to grow the business in the second half of 2016 as well. I would say that in terms of the guide itself, we may see some additional volume at the Mission Systems, essentially the legacy ES business on some of their units of delivery sales. But, largely, I don't see this as inconsistent with our historical pattern and relatively consistent with.

And, David, the one thing I would add, too, on that is – and I mentioned this briefly in my remarks. As we look at the September or October timeframe for the year, there is some uncertainty out there right now on the whole budgetary environment. And I think many in our customer community are of a mind that we are likely to have continuing resolution at the end of the year. And so we've seen a variety of customer behaviors in what will be our fourth quarter. And that would be the first quarter of a new fiscal year. We've seen a variety of customer behaviors over the last number of years as we've dealt with this budget uncertainty. So until we get a little bit better resolution on that, we factor some of that into our thinking as well.

I appreciate that. Thanks, Wes. A quick follow-up probably for Ken. The 10-Q, it looks like you went through and ran the rev-rec on 2016, and it looks like it was a positive for revenue, but a negative for EBIT. Can you just comment a little bit on that, Ken? Thanks.

Sure. Thanks, David. I would say, we did disclose in the 10-Q the impact – the expected impact upon adoption on the 2016 P&L. You did see that there was higher revenues of about $200 million. That largely relates to the change from units of deliver to cost to cost, as we pull some cost forward on some of the growing units of delivery programs. That would tend to increase the operating margin in 2016. We did have a couple other contracts that had some impact as we looked at 2016 that resulted in a lower margin in 2016 of about $70 million. And I'll just give you an example. On one case we changed the performance obligations of a particular contract to push back some profit prior to 2016. We also had another situation where a change in performance obligations resulted in some margin moving out into the future from 2016. So it's just one of the vagaries of the adoption of the rev-rec standard. I wouldn't take 2016 and assume that when we ultimately adopt in 2018 that it's going to be similar, that was relatively unique impacts of those two particular programs at that point in time. We will certainly keep you updated and be able to provide full information on our year-end call. But definitely don't read that situation into our ultimate adoption in 2018.

Ken, thanks a lot.

Thanks, David.

Your next question comes from the line of Jason Gursky with Citi.

Hey, Jay.

Very good afternoon, everyone. Good morning or good afternoon. Wes, I was wondering if you could just spend a few minutes updating us all on your supply chain strategy. Affordability is obviously key for duty at this point. I know you've done quite a few things over the last several years particularly with your centers for excellence. But I was wondering if you've had any further thoughts on the overall strategy and whether there's a greater inclination towards further vertical integration for yourselves and others in the defense world. And I appreciate the thoughts. Thanks.

Thanks, Jason. Yeah, it's clearly a really important part of our enterprise. If you just look at the mix of things that we do, I think this year, we'll probably acquire slightly in excess of $10 billion worth of our content from parties outside of our company. And we're proud of our supply chain. We worked hard over a number of years to drive on quality and to make sure that we're driving on performance in our supply chain the same way that we're driving on performance within our company. And at the end of the day, those are the kind of the biggest levers when it comes to making sure that we are getting the outcomes that we need in our programs for our customers. And I've seen great reaction across our supply chain to step up where we've identified some issues in that regard. And also to invest ahead with us as we are investing in our company robustly because of the opportunities that we see and the focus that we have on ensuring we're going to be there for our customers around the globe. Our supply chain has stepped up with us as well. You mentioned a really important aspect of our engagement with our supply chain, and that's affordability. And I want to be clear about our approach on this, because I know there are some different perspectives out there in industry on that equation. From our perspective, affordability is all about getting better designs that are inherently lower cost. It's not about squeezing the death out of our teammates trying to get them into a place where they might be even potentially unviable for the long term. We don't do business that way. We are focused on helping our teammates get to a place where…

That's great. Thank you.

Thanks, Jason.

Your next question comes from the line of Myles Walton with Deutsche Bank.

Thanks. Good afternoon. Thanks for taking the questions.

Hey, Myles.

Can I ask about your mix of business, and in particular your cost-plus development mix of business this year. I think if I've got the numbers right, about 58% of your total sales are in the cost-plus category that's up obviously 7 points or 8 points from where it was a couple of years ago. Is this the peak year for that mix? I know you want to start give 2018 guidance yet, but clearly, one of the concerns in the market is around margins and compression of margins. Do you feel comfortable that this is the peak year for cost-plus development mix, though?

So, Myles, let me start on that one, and I'll hand over to Ken. Let me just say, I know you'll hate this kind of answer. It all depends. We are out there aggressively pursuing some businesses, some new business opportunities that are development in nature that we believe represent good, positive, value-creating opportunities for our company. And to the extent that we are successful in capturing more new development work, that mix will continue to go up a bit. And as I've said in the past, I'm delighted to see that happening. We've been quite successful for a while in capturing the development work. And you're exactly right that would put pressure on margin rates. The test that we continue to apply to ourselves is, can we grow both the top and the bottom line? And if we're doing the right things taking on that development work that positions us well as it transitions into production, and we're growing our net income as we do it. That's really the way we're thinking about goodness here. Margin rates are important. We continue to use them in our incentive plans because we like that measure as a measure of goodness. We have a very strong, strong focus on that as we run a downturn environment because that's a really important time to make sure you're completely optimizing yourself around those metrics. But you'll notice that in our incentive plan, we've also added net income growth because as we're looking to ensure that we're building the right foundation for long-term profitable growth, we want to make sure that we're thinking about this equation through that lens. So, again, I apologize for having to tell you it depends, but it depends on how successful we are in capturing some of the new things that are in front of us. But, Ken, if you want to add some color to that?

Yeah. Myles, let me see if I can maybe add a little bit more to that. And I would say that if you look at 2016, it was a 2 points, maybe 3 points higher in terms of mix than 2015. And if you look at 2017, probably a couple points higher from 2016; could be the peak. I think to Wes's point, we've got a number of opportunities in front of us for growth, some of that being fixed price production and some of that being cost-type development work. I would also point out that not all cost-type work is the same. Certainly, in general, fixed price margins are greater than cost-type. But as we take on new programs, there are obviously a number of risks and opportunities that are identified. And the goal there is to burn down the risks and harvest the opportunities and make sure that we're able to drive the margin rate up. So more mature cost-side programs where we've been successful in that regard can be strong generators of margin. We do have some cost-type programs that are still in the process of getting through some of those risks and capturing some of those opportunities, and we'll work diligently to try to maximize every dollar margin out of those. But I think it's a nice place to be where we've got a growing set of opportunities in front of us for both production and development. And ultimately, we will see our mix come back to more historical norms. I'm just not sure I can predict if this is for sure the year for you.

Okay. Thanks. I also thought the rev rec adoption would also help that to some extent in 2018. But thanks for the answer.

Thank you, Myles.

Your next question comes from the line of Doug Harned with Bernstein Research. Douglas Stuart Harned - Sanford C. Bernstein & Co. LLC: Thank you. Good afternoon.

Hi, Doug.

Hey, Doug. Douglas Stuart Harned - Sanford C. Bernstein & Co. LLC: Hi. I wanted to ask about Mission Systems. If I exclude the cost claim in the quarter, the margins looked a little weak to us. Can you talk about what's going on there? You referred to the cost reduction effort in Advanced Capabilities, but what's happening there? And how should we think about the mix of that business going forward? And what are kind of the normal margin would be?

Let me start on that one, Doug, and I would say that we certainly had the cost claim, noted that it was partially offset by some provisions for cost reductions as we always look to make sure that we are able to run our businesses as efficiently as possible. I don't see necessarily any major mix changes at MS. I would say that we have seen in the last 18 months or so a bit more in terms of some cost-type work at MS. But I don't see a major change necessarily this quarter. We've talked about some additional space restricted opportunities there that we're performing on and a couple others. But I don't think there's anything particularly huge from a mix perspective. I would say that as we look at that business, we'll work hard to have a strong second half of the year. And we continue to think of that business as one that compares to its peers, and we've talked about kind of the 12% range as a benchmark for that business, and we continue to incentivize the team to perform better, and they have, and we'll certainly work hard to continue to do that in the second half.

And, Doug, I would just add this is a business that's our highest performer in terms of margin rate. We see a very strong performance trajectory there, and I feel good about seeing that continue. So I don't have any concerns at all on that. Douglas Stuart Harned - Sanford C. Bernstein & Co. LLC: Okay. Very good. Thank you.

Thanks, Doug.

Your next question comes from the line of George Shapiro with Shapiro Research.

Yes. Just to quickly follow up on Doug's question, if you could tell us, Ken, what the cost reduction provision was there so we could net that out and get a better picture of what the underlying margin actually was in Mission Systems?

Yeah, George, I don't think I want to get down into that level of detail. Obviously, the cost claim impact at MS we discussed was in the range of $30 million, and this was a partial offset to that, and to be honest, I don't have the number in front of me. But we look at MS as performing well, and certainly we'll continue to focus and make sure we maximize that as we look forward.

But let me ask another one then, can you give us what the overall classified growth was in the quarter? You had mentioned how that was a big contributor.

I don't think I'd be able to go there, George. I would just say certainly a big contributor, certainly a big contributor at Aerospace, but also a contributor as we look at the MS business as well.

Yeah. And, George, just along those lines, as we go forward, and we see our customer very appropriately become a bit more sensitized to the security environment and the nature of the threat profile that we're addressing, we do see the possibility, and I would say we framed it a little bit more strongly the likelihood that an increasing fraction of our business may become restricted. And as you might imagine, there are some sensitivities to how much information, even when it comes to percentage types of information, that we can discuss along those lines. But we do see our customers increasingly thinking about how they classify their programs.

Let me ask an easy one that you probably can answer then. The F-35 growth in the quarter and what kind of growth are you (34:26) for the year?

Regarding F-53, George, I would say I don't have the quarter numbers in front of me, but from a full-year perspective, we're looking at AS being relatively flat from an F-35 perspective. Last year had some EMD volumes still in it. We don't see that this year, and the units are largely starting to ramp in 2017. And I'll remind you that certainly the price per unit has been coming down nicely as well. But at Mission Systems, we are looking an F-35 increase and probably $0.25 billion range and that's across all three of its F-35 contracts, the radar, the DAS, and the CNI. So nice growth at MS and we see that trend continuing at both sectors. And to Myles' point probably something that will be impacted by the rev-rec standard as we look at the 2018 and beyond.

Okay. Thank you very much.

Thanks, George.

Your next question comes from the line of Seth Seifman with JPMorgan.

Thanks very much and good afternoon. Wes, I wonder if you could talk a little bit about the IBCS program. And I know it's not necessarily the biggest turning driver of the company, but it's one that got singled out a little bit in the Authorization Act and – in some of the articles about the development of Patriot and the ability to sell it to foreign customers. What's your feeling on where you guys stand on that program and how much risk there is around it?

Yeah. I appreciate the questions, Seth. IBCS is a program we've been working with the Army for some time. It addresses some really tough challenging problem for the Army. And so inherently, as the effort has moved forward, the view of the capabilities that's required and the way that it needs to be tested and implemented does evolve a little bit. So we're partnered closely with the Army on this. I see today from the Army a strong conviction of its importance and the need to continue move forward with it. And over time, there are likely variants of this – of interest to our international partners around the globe. And so we are absolutely committed to this program. It's getting many of our best and brightest in the company in terms of its focus. And I believe we're going to see over the longer term, it will take a little while to get all this aligned with where the army and then ultimately the international market will want it to be. But I see over the long term a really nice opportunity here.

Great. Thank you.

Thanks, Seth.

Your next question comes from the line of Howard Rubel with Jefferies.

Hi, Howard. If you're there, we can't hear you.

Kara, why don't we move on?

Your next question comes from the line of Peter Arment with Baird. Peter J. Arment - Robert W. Baird & Co., Inc.: Good afternoon, Wes and Ken.

Hi, Peter.

Hey, Peter. Peter J. Arment - Robert W. Baird & Co., Inc.: Hey. Just on Technology Services, the guidance there for mid 10% margins, you're running north of 11% now implies obviously a high-single digit in the back half of the year. Is there anything unique there? Or is that conservatism or just timing? Maybe just a little more color there on how we're thinking about that.

So, I would say, Peter, part of this goes to Wes' remarks earlier about the second half of the year in terms of CR and funding and things like that and impacts that could have on the shorter cycle business as well as customer challenges and behaviors and things like that. TS has done a really, really nice job of managing the business in the first half of the year and finding ways to generate some additional margins. And we're continuing to look under every rock to see if we can find more in the second half of the year. But this is a business that performs very well relative to its peer group. And I would say looking at the second half performance, what we're looking at now is not shabby but we'll certainly work hard to outdo it. Peter J. Arment - Robert W. Baird & Co., Inc.: Got it. Thank you for that.

Your next question comes from the line of Robert Stallard with Vertical Research.

Thanks very much. Good afternoon.

Hey, Rob.

Hey, Rob, how are you?

Great. Thanks. I thought I'd just follow up on your comments about SABR and then some idea from how big this market could be for you over the next few years and how the margins on this might compare to the rest of the division that it's in.

That's a great question. SABR is specifically right now targeted to the F-16, and as you know, there's a lot of F-16s out there. So the question obviously is how far this goes. How many of those would be aligned on this type of replacement and it's kind of hard to tell. All I could say is if I were an F-16 pilot and I was offered the opportunity to go up against the adversary in an aircraft with a SABR versus an aircraft that didn't have one, I know which one I pick. So we'll have to see how many of the services that are deploying F-16s are aligned on those types of upgrades versus other alternatives of a different aircraft they might be looking at. And obviously, there's a budget (40:29) affordability side of this. So it's a little hard to call right now. I would just say that the adoption that we've seen so far has been great, both domestically – primarily domestically, but the international interest on this is significant. We have a good partnership with Lockheed Martin on this, where both companies are committed to continuing to make the F-16 a very strong capable platform for a long time. And we just have to see where this goes. You also asked about the overall profitability, and like most of these things, volume improves with the profitability on that program over time. And over time, it's certainly our desire that this demonstrates a level of profitability in excess of what MS demonstrates in aggregate. But we need to see the production volumes move in that direction over time.

I would just add to that, Wes, that we were excited to be awarded the NORTHCOM G1. (41:31) That will certainly help from a volume perspective. We're moving out of the EMD phase, and moved in to production late last year. So that is an exciting phase of the program as we move into full-rate production. And some of the international customers Wes referenced and the NORTHCOM contract are certainly helpful towards that volume ramp that we're looking for, and we look to continue to support Lockheed on future opportunities.

That's great. Thanks so much.

Thank you, Rob.

Your next question comes from the line of Cai von Rumohr with Cowen & Company. Cai von Rumohr - Cowen & Co. LLC: Yes. Thank you very much. So excuse me if you've already answered this, but $54 million was the cost claim, $32 million was at MS. Where was the rest of it? And in addition to the cost reduction at Advanced Cap, were there any kind of one-time items in the Q2?

Cai, let me see if I can run through that. $54 million was the cost claim, $32 million at MS, the rest of it was at the other sectors and across the corporation. I think if you saw the 10-Q, there is a reference to some of the impact at TS, not largely material to any other part of the organization, and to be honest, don't have the numbers in front of me. In terms of the cost reduction initiatives, that is a – I hate to use the term, but a one-time effect that should be behind us, and as we look forward an opportunity to run that particular business in a more efficient manner and generate stronger margins in that regard. Was there any other piece of your question I didn't get to?

It wasn't really – And, Cai, you'd asked about it, were there any other big one-time moving things and nothing that was material at all. Cai von Rumohr - Cowen & Co. LLC: Got it. And then, just a quick one on foreign sales. You have less growth than some of the others. But it looks like the environment has improved for a number of your peers. Are you seeing any pickup in terms of discussion activity or likely sales?

Yeah, Cai, the international marketplace is robust right now for us and our peers. The question always is when does the discussion and the interest translate into sales. And it takes a little bit longer to get over the hurdle on a few of these things. But we're quite excited about what we see internationally. We're focused around the globe as you know. The three major areas of focus for us are Asia Pacific, Europe and the Middle East. Just from a longer term outlook and in terms of the growth rates, I continue to see Asia Pacific as having the higher long-term growth rate, just given the geopolitical dynamics of that region, the need to significantly enhance the security capabilities and the focus of the governments that – from a partnership perspective and our international partners, the focus of those governments that we see underway. But clearly, Middle East and Europe are going to be quite important as well. We see the NATO countries seriously re-examining their investments. And it's also clear that our allies in the Middle East are taking very seriously their security needs. So I do see this as an important part of the overall global security picture. We're actively engaged in it. And it's just – you have to play these things through on the timeline that they actually materialize.

And Howard, (sic) [Cai] (45:32) maybe just to add to that, I would say, we did see a growing international sales number in not only the second quarter, but also the first half of the year, both the quarter-to-date and the full year or the six months to-date up about 4% from an international perspective. But to Wes' point, we've got a growing domestic business. We've got a growing international business. And what moves first will determine how it looks forward. But we're excited to again have a nice robust and the first set of opportunities as we look forward.

Thanks, Cai. Cai von Rumohr - Cowen & Co. LLC: Thank you very much.

Thanks, Cai.

Your next question comes from the line of Pete Skibitski with Drexel Hamilton.

Hey. Good afternoon, guys.

Hey, Pete.

Hi, Pete.

I wanted to follow up on Seth's earlier question, IBCS, because I've seen some of the news there. And I also noted – I think there were some news on AOC 10.2 cancellation in the DOMino cyber loss. And so I started to get a little bit worried about the midterm outlook at MS considering some of that news. And so I'm wondering, Wes, whether or not the percentage of problem for (46:47) MS is on the rise. And also, from a sales perspective, the headwind that maybe AOC and DOMino may provide.

Yeah. As I mentioned on the IBCS, we continue to see a very good long-term outlook on that program. You mentioned the AOC. AOC was the case where the Air Force's request to the Congress for continued funding was not supported, and so the Air Force is regrouping and figuring out what it wants to do in that regard. And I think you also mentioned DOMino was another one of the moving parts. MS has a very broad portfolio. And as you recall, we put together two large sectors to make an even larger sector. So many of the elements of that portfolio are these medium or smaller programs that are going to have puts and takes over the course of a year. But when I stand back and look at all of those puts and takes, I see a nice growth trajectory for MS. You could see it in the quarter. It was growing well, and as we look forward, we continue to see MS as very, very well-positioned and growing nicely. I don't see any particular shift in the percentage of programs that might fit the label, I think you gave a bread. And there's always a mix in the portfolio of things we're having to put more attention on than others. But I think the sector is being managed exceptionally well. We have a team that is both very operationally focused as well as strategically focused. And I'm delighted with the portfolio mix that we have there, and the way that it's been integrated into this new sector. So I feel good about the outlook for MS.

Wes, I'll maybe just add that from a cyber perspective, with respect to the DOMino question, we do view cyber as one of the areas of business that should see some growth, and that's pure cyber business as well as cyber-enabled. And I think we're uniquely positioned from a cyber-enabled perspective, given our expertise both with platforms and systems and cyber. And that's certainly somewhere where we see – we should see some nice growth over the long term.

No, cyber continues to be a very good positive robust business for us.

Great. Very helpful. Thanks, guys.

Thank you, Pete.

Your next question comes from the line of Rob Spingarn with Credit Suisse.

Hi. Good afternoon. This is Joe (49:24) on for Rob.

Hi, Joe (49:26).

Hey, Joe (49:27).

Hey. If I could follow up on David's question from earlier on the implied sales targets for the second half of the year specifically in Aerospace Systems. I know you're limited in what you can say about classified, but B-21 funding went up from the mid $700 million level in fiscal 2016 to about $1.4 billion in the fiscal 2017 budget. So we would have expected to see some of that come through in the third quarter and fourth quarter of this year. So can you just help us think about the timing on the ramp in B-21 sales given the ramp in funding there?

(49:59).

We can't say anything about that at all. But just to say that things continue to go well.

Yeah. I won't comment on the B-21 specifically, but if I can just talk about maybe AS at a broad level for a second, I would say that we've seen a nice growth trajectory in AS over last year. It was at 14% this quarter and 13% year-to-date. Again, it's a business that historically flattens out a little bit in the second half of the year and particularly if you think about development work that largely tends to be driven by a large engineering workforce, we do see that we'll have a lower number of work days in the fourth quarter. You've got Thanksgiving. You've got Christmas in there, and that does tend to have an impact on the late year sales. Not a ton of units of delivery work that's driven out of Aerospace where you tend to see maybe some additional units toward the end of the year. They do have a couple of units of delivery contracts F-35 and F-18, but the preponderance of their business is on cost to cost. And so we look at it – there's the possible for some upside there. But as we look at it given the work days, we think the guide is pretty squarely in the middle of the fairway.

Great. Thanks.

Kara, I think we have time for one more question.

Your next question comes from the line of Howard Rubel with Jefferies. Howard A. Rubel - Jefferies & Co.: Thank you very much. Sorry about before. Wes, it's really a risk management question

Yeah. Howard A. Rubel - Jefferies & Co.: And there's two parts to it. Thank you. First, what we've seen recently is that you enter into a number of competitions, and then for a variety of reasons you step aside and let somebody else use price as a way to win or something else, and what I've seen is you'd be very successful where you are. Could you talk about that a little bit, and how you go through the program selection, and how it's integral to your core? And then just to finish the question, the other part is you've got a balance sheet that you've used very successfully over time to leverage earnings, but now you're at a point where – what other tools can you use to enhance earnings growth?

Thanks, Howard. Two great questions and glad your connection worked. Sorry for the earlier issue there. Let me first take on your first question about how we think about the program selection process. It's a process that we have continuously refined over the years. We have a set of areas that we see as those that are most likely to be areas where we can add value to our customers, and that the programs will actually be sustained and supported over the longer term. So we start with that and do a very comprehensive assessment of what it takes to be in a position to really add value and our participation in those programs and sometimes early on that means getting ahead on the investment curve a bit to position ourselves well for that. We interact extensively with our customers through the development of the request for proposals, and give them a very candid feedback both on the capabilities that they're asking to be created as well as the business terms. And sometimes the customers are eager to engage on all of those aspects. And in other cases, and this is not a negative towards the customers, they see the marketplace offering them so many alternatives that they elect to take business terms or pursue business terms that we find unfavorable. And so there are times when even though we believe we're well-positioned technologically and the program is likely going to be supported that we'll decline to bid, because we simply don't see the business terms to be aligned with our view on how we create value over the long term. And we've been selective in that regard. I believe our customers would tell you that we've been very candid with them around that, so that we're not surprising our…

If I can just add, Wes, to the second part of the question, we talked about the capital and investing in capacity and the capability, but I would also just point out it's beyond the balance sheet, but also down to the rate structure, our ability to invest in R&D for the technology and the capabilities and we invested in that R&D through the downturn and we continue to find ways to enable us to invest as much as we can into R&D. And I think that's a big component of it that – it's a little bit nuanced from the balance sheet side of things, but really that goes to how we manage our rates and our total cost management and really getting to managing every dollar of cost that we run through this business.

Yeah. Absolutely. Howard A. Rubel - Jefferies & Co.: Thank you, gentlemen. I get it. Thank you.

Thanks, Howard.

So, Wes, back over to you for final comments.

So let me wrap up by again thanking our team for their focus on performance. It's certainly serving our company, our customers, and our shareholders well. Thanks, everyone, for joining us on the call today and thanks for your continuing interest in our company.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.