Ladies and gentlemen, thank you for standing by, and welcome to the Textron Third Quarter Earnings Call. [Operator Instructions] Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Doug Wilburne, Vice President of Investor Relations.

Thank you, Terry, and good morning, everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today. These forward-looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, Textron's Chairman and CEO; and Frank Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website. Moving now to third quarter results. Revenues in the quarter were $3 billion, up 6.6% from a year ago. Our income from continuing operations was $0.48 per share, up from $0.45 in the third quarter of 2011. Third quarter manufacturing cash flow before pension contributions was $153 million compared to $339 million in last year's third quarter. We contributed $16 million to our pension plans during the quarter. With that, I'll turn the call over to Scott.

Thanks, Doug, and good morning, everybody. Our third quarter results reflected strength in our helicopter industrial units, continued favorable liquidation activity in our financial portfolio and good execution at Cessna in what turned out to be a weak business jet demand environment, especially in July and August. The quarter also reflected charges associated with our new fee-for-service unmanned aerial systems programs, as well as lower volumes in the Systems business. As you know, earlier this year, Systems won 2 contracts associated with our Aerosonde platform to provide UAS services to the DoD on a fee-for-service basis. Cost estimates for these programs were based on our extensive experience offering Shadow Systems for the DoD under government-owned contractor-operated contracts. We thought most of the operating expertise would be directly transferable to the Aerosonde platforms, but it turns out, the operating know-how did not transfer well, and we had significant start-up issues during the quarter as we began systems deployment. To address these issues, we augmented training, procedures, added resources and adjusted our estimated costs to support the programs, such that we expect they will operate at a loss during the initial phase of the contracts. Consistent with contract accounting rules, in the third quarter we recorded charges of about $14 million representing the expected losses on these contracts. So we anticipate the Aerosonde activities will be recorded at breakeven through the next 3 quarters, having already booked the estimated losses. We are also experiencing some delays in our TCDL and SFW programs. Therefore, I think it is likely that we will miss our original full year guidance at Systems for flat revenues by about $100 million to $200 million. Looking forward, we will focus on improving program execution at Systems. Moving to our Finance segment. We had a successful quarter liquidations as…

Thanks, Scott, and good morning, everyone. Manufacturing segment profit in the quarter was $254 million, down $6 million from the third quarter of 2011 on a $154 million increase in manufacturing revenues. Let's look at how each of the segments contributed, starting with Cessna. Revenues at Cessna were up $7 million on a year-over-year basis, primarily reflecting higher used jet sales, which more than offset lower new jet and other product line sales. Aftermarket sales were up approximately 2%, which was against a tough comparison as aftermarket sales were up 13.7% in last year's third quarter. Segment profit was $30 million, down $3 million from last year's third quarter. At Bell, revenues were up $181 million primarily due to the higher deliveries of commercial units and V-22s. Segment profit increased $22 million, reflecting the higher volume. At Textron Systems, revenues were down $62 million, primarily due to lower volumes. Segment profit decreased $26 million, reflecting the fee-for-service charges Scott described earlier, and lower volume. Industrial revenues increased $28 million, reflecting higher volumes across most of the businesses, partially offset by unfavorable foreign exchange. Segment profit increased $1 million, primarily due to the higher volume, partially offset by cost inflation in excess of price increases. Moving to finance. Total finance receivables ended the quarter down $233 million from the prior quarter. Non-accrual accounts ended the quarter at $145 million, a decrease of $107 million from the prior quarter. 60-day delinquencies were $114 million, a $55 million improvement from the second quarter. Moving to corporate items. Corporate expenses were $38 million in the quarter, up significantly from the second quarter, primarily the result of higher prevailing share price, which increased compensation-related expenses. Interest expense was $35 million, flat with the second quarter. Moving now to cash flow. On a year-to-date basis, cash flow from continuing operations of the manufacturing group before pension contributions was $168 million versus $455 million at this point last year. The most significant drivers affecting the lower cash flow this year are lower advance payments on military contracts at Bell, an increase in Cessna used inventory, reflecting higher trading activities and the wind-down of our Citation air fractional program, plus an increase in inventories at Systems related to delayed program activity. For full year 2012 manufacturing cash flow, we are maintaining our target of $700 million to $750 million. To conclude, in anticipation of continued positive performance at Bell and our outlook for jet demand at Cessna in the fourth quarter, we are increasing our full year EPS guidance from $1.80 to $2 a share to a range of $1.95 to $2.05 a share. That concludes our prepared remarks, so operator, we can open the lines for questions.

[Operator Instructions] And we'll go to the line of Noah Poponak with Goldman Sachs.

Wanted to ask about Cessna demand and orders. In the past couple of quarters, you talked about cancellations still impacting the Cessna backlog. I wondered if you could speak to where gross orders and cancellations were this quarter versus last. And then in the context of that, I believe you've commented that Cessna book-to-bill could go above 1 before the end of this year or sometime soon simply by having cancellations come down if gross demand doesn't change. I wondered if you thought, if you still think that could happen next quarter or in the next couple of quarters.

Well, Noah, I would say that in terms of cancellations, the cancellation number continues to come down. It was down again in the third quarter. This issue for us, of course, is the third quarter was fairly light in terms of gross orders, so order activity, as I said, was very, very light in July and August. We did see it coming back in September. So if you look at the gross book-to-bill number for the quarter, was probably somewhere around 0.85. So obviously, for it to get above 1, we need 2 things to happen. We need to see a continued reduction in the number of cancellations. I feel pretty confident that trend is obviously going to continue. We expect the cancellations will continue to come down and are really at a point where they're becoming pretty de minimis here going forward. But we need to get better gross orders. And certainly, what we're expecting is that despite a pretty tough market here in the past quarter, that we'll see a more normal gross order level activities in the fourth quarter as compared to what we've seen in, say, '11 and even '10. So that's I think a reasonable assumption in terms of what we see going on in the market. And September was certainly better, but in terms of gross orders recovering from a very, very quiet July and August, just really wasn't in the cards.

Okay, that's helpful. And so I guess when you put all of those considerations in, anything you can share on the current thinking for where you'll put 2013 production versus 2012?

Well, I mean, we're certainly not at a point where we're ready to give guidance yet on 2013. We'll do that in January, but, I mean, I think it's obvious as you watch through the course of the year, and not knowing what's going on exactly in the market, at this point, you' probably think something that's going to be around flattish, but we'll give a more refined guidance for you when we get into our January call.

Okay. And then just one more on the Systems charge. Did you say $13 million, 1 3?

$14 million, sorry, 1 4.

So the margin would have -- I guess the operating margin would have been somewhere a little north of 8.5%, excluding that. That's kind of trending below where you've been the past few quarters. Is that sort of the run rate going forward? Or are there other reasons that should come back up on an adjusted basis?

Well, I think that if you think about next quarter, in particular, the revenues that we book associated with that program being in the 0 margin, that's probably not a bad way to think. But in terms of a longer-term run rate, no, I think we'll still expect to be higher than that. There were a couple of things obviously that hit us in the quarter. One was, as you know, the charge associated with these programs, which is, frankly, are just an execution problem and one that we have to go work on. But we also had delays in some volume deliveries of programs that are good programs and will deliver. But we have deliveries that were supposed to be in the third quarter, which are now moved into the fourth quarter and even into 2013 that are good, normal margin programs. And that was also a part of what was leading to the drag on the margin rates.

Next, we'll go to the line of Pete Skibitski with Drexel Hamilton.

Can you tell us how many used Citations you did deliver during the quarter and maybe the sales and earnings associated with that?

Sure, Pete. This is something that I think is important to understand when you do the analysis on Cessna margin rates. The revenues were roughly flat, but that's because we had an additional $30-some million of used aircraft sales. So really, what happened here in the quarter, is that as a result of the light orders early in the quarter, our deliveries, as we said, was down to 41 versus 47 on the new side, and that revenue or bulk of that revenue was made up for with used jets. Now it's good that the used jet market is moving and that we're able to start -- to move more used aircraft. But the way that we account used aircraft is basically we end up selling those at 0 margin. So that's a particularly bad mix when you see fewer new deliveries and more used deliveries. And so you effectively had $30-plus million of 0 margin business in there. When we bring used aircraft in, we book them at their market value, and generally, that's about where we sell them. So it's really a 0 margin mix.

Understood, understood. And then in terms of the gains on canceled jets, less than $5 million? Or was that any meaningful number?

Not a meaningful number.

Yes, not a meaningful number.

Okay, okay. And then I guess I just wanted to ask you, one thing I'm trying to get clarity on, could you update us on the status of the business jet depreciation rules as we go into 2013? Does accelerated depreciation end at this point? And if so, what kind of impact do you think that will have?

I think it's still 50% first-year depreciation.

Okay. So no meaningful change kind of going into next year?

No, no. and I think the one thing, other thing, Pete, when you talk about one of the dynamics in terms of these cancellations and forfeiture deposit gains, and the other dynamic, of course, is valuation of used aircraft. As we've said over the last year or so, these numbers have become small numbers, and they are still small numbers. But I do think you have to [ph] understand that I think if you went back to the third quarter of 2011, these were sort of mid-single digit number gains, primarily driven by the fact that what few deposit forfeitures you had left was greater than revaluations. You look at this third quarter, again, it's still a mid-single digit number, but it's a mid-single digit number the other way, okay? Because there are very few forfeiture of deposit gains owing to the fact that cancellations are way down. But there's also a little bit -- again, these are small numbers in terms of revaluations, but when you add a small number the right way and the small number the wrong way, you end up with a number that's sort of like a $10 million number.

Understood, understood. And if I could just sneak in one last one, I promise. The FAA denying the 429 weight increase. Can you talk about the impact to sales there going forward and the probability that you can work around that and maybe the timing? Because it does sound like that could be a catalyst if the FAA does approve it.

Well, we certainly would see it as a catalyst if they do. I mean, obviously, Canada, which is the primary touch [ph] certificate holder has approved it. We've had about, I think we're up to about 10 other countries now, have approved it, based on the Canadian approval. And so we have seen some sales. I mean, because we're able to market the full performance of the aircraft in those countries. As you know, the FAA has denied that extension. Obviously, we're appealing that, and we're working with the FAA to try to find a path to do that, whether that is through just a straight appeal on the exemption or whether there's some changes in how they view the part 27, part 29 certs. I think the FAA is trying to work with us and understand the situation and see if there's not a path to get there. But that will take, obviously, some period of time. But in the meantime, in quite a number of international markets, we're able to market and sell the full capability of the aircraft. And obviously, we hope to be able to do that in the U.S. as well.

Next, we'll go to the line of Jason Gursky with Citi.

Scott, just a couple of quick questions again on Cessna. First, can you describe the pricing environment for new aircraft? And then secondly, what the fourth quarter's shaping up to look like from a seasonality perspective?

Sure, Jason. So I mean, pricing remains difficult in this environment. It's still a pretty thin market and very, very competitive. There are some models that saw some better price, and there some models that saw some worse price. And I think that's kind of been the story here for a little while, and I would expect it to be a still a bit of a struggle going forward given the market. In terms of the seasonality of the fourth quarter, again, what we're assuming in our plan is that we'll see a fourth quarter in terms of order rates and activity that was similar to what we saw in the fourth quarter of 2010 and '11.

Okay, that's helpful. And then just got one last one on Cessna. Can you just describe where we are in China from a market development perspective and just offer up some updated thoughts there?

Sure. So we are actively engaged. As you know, we signed a, sort of a framework agreement with AVIC. We are in active discussions on 3 separate -- with -- the structure of these is that you've got the AVIC and ourselves and then whatever municipal government associated with particular product lines, which are in different regions of China, which was part of the plan, was to have us be in several different operations. All those 3 negotiations are, I would say, progressing well. I think we're very close to getting the finalized agreement on at least one, perhaps, two here in the fairly near future. And the third, which was sort of on the back burner for a while, has kind of come back to a more active state of negotiations. And I think we'll get that done in due time as well, so they're all progressing as we expected. And as you can appreciate getting through these negotiations and setting up new operations in -- with 3 parties at the table is not easy. But we're -- been working through that, and I think we're making good progress.

Next, we'll go to the line of Carter Copeland with Barclays.

I wondered if you might talk about the -- I think you mentioned briefly what you saw on services. But I wondered if you could speak to Bell and what you saw in terms of spares in terms of commercial versus military, what kind of trends you're seeing there.

We don't usually break out the commercial versus military...

Were they directionally different? I'm just trying to get -- some other competitors have talked about weak military spares. Is that a trend that you're seeing in Bell?

It is not a trend that we're seeing, Carter. Year-to-date, we're up high-single digits, overall in aftermarket at Bell.

Okay, great. And briefly, you mentioned in Industrial some anticipated softness there later in the year. I wondered if you might talk to sort of the magnitude of that, what you may be seeing in terms of order trends, especially on the automotive side.

Well, on the automotive side, of course, I mean, fourth quarter seasonally is always a lighter quarter on the automotive side of the business in general, because they tend to shut down towards the holiday seasons. We're expecting it actually to be a little bit lighter than it normally would be, and it's really driven by 2 things. As we've gone through the year, Europe, which was supposed to be very soft all year, we certainly saw some softness in Europe, but some portions of Europe, particularly those models of vehicles, some of the large sedan, higher-end vehicles that are very export-driven, continued to be pretty strong through the year. And we've seen some softening of that here, and we expect some softness of that in the fourth quarter as the export market is a little bit slow and as opposed to most of the softness being sort of within the European consumption. So I think that will be a trend of some softening in the fourth quarter. And then the other, which is a very, sort of event-driven exercise, is that this latest flare-up between China and Japan has effectively led to sort of a unofficial boycott of Japanese product in China. And so the Japanese, still an export, but in particular, some of our larger customers in China are Japanese OEMs that have manufacturing facilities in China. And they're taking their volumes down dramatically as a result of Chinese people not buying Japanese-branded product, even those that are made in China. So I don't think that's necessarily a macro trend. And some of that share will certainly shift to other places, but it is a -- I think it'll be a bit of a problem in the fourth quarter.

And just one last quick one. With respect to the DoD contract environment and the fourth quarter activity, usually a big quarter for the government at the end of the fiscal year. Did you see anything that looked different, either better or worse, given sequestration sitting out there?

No, I can't say that we've really seen anything very different. It is still very difficult to get through the contract-negotiating process and the order processes. It's taking extraordinarily long periods of time to do that, but that's a trend that we've seen for the last couple of years. On the sequestration front, you hear sort of anecdotal things from different people about people either trying to accelerate getting something under contract or delaying something under contract, and everybody wants to attribute to sequestration. I'm not really sure you can do that. I think people are sort of trying to read the tea leaves or read things into different activities also, say, with sequestration. Our view on sequestration is, in light of the fact that the government has not guided DoD, DoD has not guided the contractors, that we need to just let this thing play out. Obviously, some of our larger programs, like the multiyear that we currently have with V-22, we would not expect any impact on sequestration on that. We don't see it as a huge issue for us in the very near term. And so rather than worrying a whole lot about it, I think we need to wait, and let's see what happens as we go through November and we go through the lame-duck session and get to where sequestration is either invoked or not invoked or how it's invoked. I would say the good news for us is we will give you our guidance in the mid part of January. And by that time, I think we're going to know a whole lot more about where this sequestration process is going. But for us [indiscernible]...

Next, we'll go to the line of Robert Stallard with Royal Bank of Canada.

Scott, I thought I'd kick off with Cessna. You mentioned you had some, an increase in used sales this quarter. But I was wondering if you could comment on the broader used business jet market, how the inventories are looking, how the pricing is looking, and perhaps how financing is tracking as well?

I would say the used market, if you look at it, it has picked up. The number of transactions has increased across the whole market. Obviously, we see that in our business. In terms of pricing, it remains quite flat. And also when the books come out, each quarter, there's, obviously, there's normal depreciation of valuations, but we haven't seen big moves one way or the other. I mean, we've seen some models where they've ticked up slightly, and we've seen others where they've ticked down slightly in terms of how BRF and the Blue Book guys view the aircraft. But so I would say on the positive side, transactions are happening, the market is moving. But again, I think there's still -- even though the numbers have come down dramatically, it is still probably in all fairness more of a buyers' market than it is a sellers' market.

And on the financing, how easy is it for customers to get financing for used aircraft, do you think?

I'm not aware that there's any particular issues. I mean, again, most of the aircraft that we deal with, particularly the older aircraft, are probably at a price point right now where it doesn't take a whole lot of money to get a reasonable LTV on a note, and people seem to be able to get financing.

And secondly, on Bell, you mentioned that the civil helicopter market showing some good strength there. I was wondering if you could comment on how your market share has been tracking, and what your initial thoughts might be for where 2013 could go on the civil helicopter market?

Well, I think the market has remained strong. We feel pretty good about how our products are doing out in the marketplace. I would say that we believe we are still continuing to gain some share, and we'd like to think that we'll continue to do that. I think the 429 has proven itself to be an outstanding helicopter and is doing very well and competing and winning around the world. Things at the new 407GX that came out, is doing is ordinarily well, I think, and continues to pick up share in that segment. So when you look at some of those new products that are out there, and I think John and the team have done a very nice job of sort of doubling down on our sales efforts and increasing the number of resources we have out there to make sure that we're covering all the regions. We continue to do very well, and I think we'll -- I feel pretty good that we'll stay on the trend.

Next we'll go to the line of Jeff Sprague with Vertical Research Partners.

Just a couple of other things coming back to Cessna. Scott, just thinking about Q4, you characterized some more seasonality to 2010 and 2011, but those were actually very different years, right? In 2010, we had a triple in Q4 versus Q3 with that big back-end load, and then last year looked a little bit more normal. I just wonder if you can put a little bit more of a fence around this and give us some color on what to expect in Q4, what's anticipated in your guidance for Q4 for Cessna.

Well, look, Jeff, I think we have been sort of guiding for the total year to be up modestly. And I still believe that's where we're going to end up, is up modestly. As you know, we've tried to work hard all year to get this thing to be more level loaded. We certainly did not want to have the kind of a hockey stick delivery year that we saw, for instance, in '10, and to some degree, in '11. Obviously, we were successful at doing that in the first couple of quarters. We saw deliveries that were well ahead of the pace or deliveries that were well ahead of the pace of what we've seen in those previous years. I would be kidding if I didn't say I would've hoped the third quarter would have been a little bit stronger in terms of the number of deliveries, but the summer months were pretty tough. But again, as I -- seeing what happened in September and we look at what we need our deliveries to be to be up modestly over last year, I think that, that's still a reasonable plan. So it'll be a few more deliveries in the fourth quarter than I would have liked to in terms of trying to level load this thing a bit more, given a few deliveries light in the third quarter from where I would like to have been. But I think given the order environment and what's going on, I think that's still in the cards.

And then just thinking about the outlook going forward, and obviously, everybody's crystal ball is pretty darn cloudy. But you made the comment after kind of a slow summer, you see some return to kind of normalcy. I mean, is there something your customers, in particular, are pointing at? I mean, does the market get better in your view regardless of who wins the election, for example? Is it -- what kind of body language, if you will, to the extent that there is any, do you get from the customer base and the outlook the next quarter or 2 in order intake?

Well, Jeff, I would say that if you look -- and again, Cessna, our primary customers are small and mid-size businesses. And there's no question that a lot of these guys are looking at a very uncertain next few months, right? I mean, you've got an election coming up here in a few weeks. You've got the whole so-called fiscal cliff, you've got tax policy, you've got sequestration. There's plenty of reasons to right now and say, "Jeez, I don't know what's going on." I personally believe that -- well, okay, so a lot of these guys would probably prefer to see one outcome versus the other in November, but on the other hand, I think people will wake up the morning after the election, they may be happy, they may be unhappy, but to some degree, people are going to have to dust themselves off and say, "You know what, I got to get on with my life." Right? So I think that a lot of these things that are giving people pause right now will -- people will get over these things, right? I mean, so as I always like to say, it's -- you'd rather have good policy than bad policy, but at least have policy, know where things are going. And so I think that the election will play out somewhat like that. It'd be better to go one way than the other, but either way, I think it takes some uncertainty off the table and that's probably good for the market.

And just finally from me and I'll yield the floor. Just can you give us any color on where the 2013 delivery of -- deliverability of backlog stands? In other words, how much long-tailed stuff is still in backlog and how much is conceptually deliverable in '13?

Jeff, we have not been given our sold-outs or anything like that. I think that -- I mean, you guys see the backlog number from a dollar basis continuing to come down. I think that the market, the way I would see it in 2013, at this stage of the game, is going to be very much a repeat of the 2012 market. So the bulk of what's out there, the bulk of the activity that has to happen in terms of selling aircraft, is going to involve getting orders for aircraft. So that's the way we've been playing here for a while and I think at this stage of the game, that would be my view of how 2013 continues to play out.

Next, we'll go to the line of Cai Von Rumohr with Cowen and Company.

How much of the $28 million in profit at Finance was gains on liquidation sales, sales of assets? And do you expect TFC to be in the black in the fourth quarter?

So Cai, I think TFC is probably closer to breakeven in the fourth quarter and kind of, there were the -- of the profit at TFC, about 2/3 of that profitability was non-captive in the third quarter, related to both kind of good liquidation activities at Golf, as well as some non-accrual returns in the timeshare business. So the captive business was about 1/3 of the profitability. There was kind of some good credit performance embedded in that, as well as just kind of more normalized profitability level out of the captive business.

Okay, terrific. And getting back to Cessna, Scott, could you give us some -- you've done a fairly good job, but maybe some more color with respect to strength or weakness by geographies and by product? I mean, certainly looking at your mix in the quarter, the big stuff was up year-over-year. The little stuff wasn't in terms of the jet. So give us some color on where you see the weakness.

Well, I think on the -- if you look at the deliveries of jets themselves, Cai, you're right, the mix is favorable, in that it's been tending more to the sort of CJ4, XLS Sovereigns and the Mustangs in particular. So that is good mix for us. In terms of the question around geography, our deliveries in the quarter were about 2/3 in the U.S. and about 1/3 international, and that's versus a trend we've had that's been more like a 60-40 trend for the last few quarters or so. So if you look just at the jet deliveries themselves, I think that was a positive for us in terms of mix. The issues that were a little more trouble was having a lot of used aircraft in there, okay, which is very bad mix, in that they're basically just a pass-through, so they're not a margin. A little bit of, obviously, I would say, net pricing continues to be a challenge. So even though you had some good mix in there, I think we continue to still battle a little bit with some loss of price. And then as I said earlier, while they're small numbers, they do matter in terms of the overall result at this point, just because the overall number is small in terms of percent of naught percent, are things like the residual and the fact that thankfully, as a result of cancellations going down, we're not seeing a whole lot of forfeiture gain. So those are sort of the primary issues that are going on in terms of mix, Cai, that sort of nets out to where the operating margin landed, good on the new jets, challenged by used and again, some relatively small numbers, but things that are headwinds associated with price and just sort of the other items like residuals, values and gains associated with deposit forfeiture.

If I look at the sales, it looks like either the prices were down or the parts and service were down, because given on those deliveries, I would have gotten a slightly higher sale, so is that the case for parts and services down? And secondly, was R&D up sequentially in this quarter?

No, R&D was not up sequentially, so that was not a headwind for us. Parts and services were up, but only by a very small, 1% or 2%. And again, we didn't see a real change in dynamic in the service business in the quarter, but we're just comparing against the third quarter last year, where it was up about 14%. So and I would expect in the fourth quarter, our parts -- we'll continue to see the rate of parts and services, which was healthy in the quarter, but it was just on a V basis, a smaller piece of it [ph].

And then you had the spectacular performance at Bell on strong V-22 deliveries. Can you comment on how large were your cum catch profits on that program in the quarter? And how much more gas is left in that tank?

There were not cum catch adjustments, or EAC adjustments, on those programs that had any impact on the numbers.

Next, we'll go to the line of Julian Mitchell with Credit Suisse. Julian Mitchell - Crédit Suisse AG, Research Division: I had a question on the core kind of gross margins in Cessna, because I guess it sounds like R&D isn't doing very much, some effect from the used aircraft which you've discussed a lot. But I guess overall, when looking at the gross margins in that business, do you feel that there's still a lot of room operationally to push that higher? Or now it's really a function of waiting for volumes? And I guess on pricing, you had mentioned on the last earnings call that your sales force had tried a couple of price increases. The rhetoric this time is very different. So I guess if you could give an update on how that went on the price increase efforts and when you think you'll next try those same efforts again.

Well, I think we made some moves on a couple of aircraft types where we saw demand that we thought warranted the market tightening up enough that we could get some price through, and we have seen that on a couple of models. But we continue to have some other models where we're not able to get price through. So it's sort of a -- there's definitely mix within each model type, Julian, it's not that we don't believe we can get the price through on each model. I mean, so, yes, we've had some success, but in some areas we have not had success in driving that price. And that very much has to do with just the dynamic of the market right now and the number of opportunities out there and what the competition looks like. So obviously, that's something we'll continue to work on, and I think that getting a little bit of stronger demand obviously would help that in the marketplace. In terms of our gross margins, we continue to work the gross margin side of the business. I think we have made some overall improvements in the total cost structure of the business, both fixed and variable, and we'll continue to drive that. So we're not going to wait for volume to save us on that thing. I mean, we continue to drive productivity across all sides of the business, and I think there's still some opportunity for us to get better at that even with flat volume. Obviously, our plan here is try to position these things with a cost structure so that we get very good leverage when the volume comes back into the business, which I think is inevitable. But we're not going to just simply sit and wait for that either. So the cost activities will continue regardless. Julian Mitchell - Crédit Suisse AG, Research Division: Got it. And then, just quickly, I wondered on the Hawker assets, I mean, you gave some update last time, if there was anything to add this time, in your thinking.

No, there really isn't. We haven't -- we continue to sort of watch what's going on, and obviously, as everyone knows, they've been in sort of an exclusive negotiation period with the Chinese buyer, and to the best of our knowledge, that process is continuing. Julian Mitchell - Crédit Suisse AG, Research Division: Got it. And then finally, just quickly on Bell commercial, in a lot of industrial end markets, you're seeing some slowing in larger project CapEx. It sounds like Bell commercial, though, in terms of order intake, still very, very good. I just wanted to make sure that, that was the case, you haven't seen any slowdowns or deferrals there.

No, we haven't. Our order intake and strength in the market on the commercial side seems to be sustaining.

Next, we'll go to the line of George Shapiro with Shapiro Research.

One more on Cessna and then a couple of others. Was there any LIFO benefit last year or this year?

Yes -- there was not a LIFO benefit this year. There was a kind of mid-single-digits benefit last year.

Okay. And then actually one more on Cessna. And then, Scott, as you looked at September this year, how did it compare to September last year? And I don't know if this is -- you can say it or not, but if you got similar orders the rest of the year that you got in September on a month basis, would the book-to-bill be above 1 in that situation?

Well, before Scott answers, because I -- let me just say that trying to go down to a month-by-month compare [ph] is a very slippery slope, because when an order comes in one day to the next and so forth, I think that's a difficult thing. But obviously, you picked up September recovered. And if that continues, that would certainly be what we hope for.

Yes. George, I mean, I just, again -- Doug's right, I want to be careful here not to get into quarterly order flows, but let's say from an overall color standpoint, the third quarter this year was certainly very September-loaded. If you consider sort of that rate, then that's kind of the market dynamic we think we need to be able to meet our total year guidance of up modestly. So the answer is, kind of flat. Yes. Right? I mean, if we can maintain the order rates that we saw in September through the balance of the year, then I think we end up meeting our guidance of being up modestly for the year, and that's kind of our expectation.

September this year, Scott, compared to September last year was better, I assume?

George, I'm sorry, I do not have the month-to-months on this year versus last year. The third quarter this year was just slightly below the third quarter of last year, but I'm sorry, I don't know. I just don't recall off the top of my head the dynamics of the exact number of aircraft orders per month in the third quarter last year.

Okay. And then switch to the Systems. The charge that you took on those contracts, Scott, I thought those contracts were like 3- or 5-year contracts. Are they broken into yearly pieces, so you'd have a 0 margin for the first year and then the opportunity to make money in the second year of those contracts or...

Yes, that's correct. I mean, they're -- effectively, George, they're broken into options, okay, or task orders is the way they do it. And so -- but if you look at the task orders, they roughly break down to sort of 1-year duration task orders. So we have already been operating under the first couple of task orders associated with one contract. We've just begun the first task order of a second contract. And so these charges pertain to those initial task orders. And so we have effectively, we -- and the way we do our program accounting, the way we treat our EACs, all the stuff that we would normally look at, we treat looking at those on sort of a task order basis. So yes, the charge relates to our view of those task orders, the costs associated with those task orders and that's how we drive the charge. So you're right. These are, depending on those numbers of task orders that get exercised, they're probably more in the 3- to 5-year sorts of ranges. And so obviously, these can still turn out to be good programs. But our execution here in the initial phases of executing these first few task orders has not been good, and that's what's reflected in the charge, and obviously, we're going to do everything we can to work hard and be able to meet that even booking of the balance of these initial task orders and obviously to position ourselves in a way that we get the kind of profitability that we expected on those future task orders.

And then maybe one for you, Frank. I mean, just give us an update of what pension might look like for next year, if you had to mark [ph] them up today?

Sure. And obviously, it's -- there's a lot that can happen between now and year end, and we haven't kind of run any of the numbers definitively. If we maintained the existing assumptions from this year kind of going into next year, there'd be a slight headwind associated with next year's pension number, a kind of $15-ish million type number. Obviously, it remains to be seen kind of what the underlying assumptions are ultimately related to return and discount rate. On the discount rate side, we've given some sensitivities in our 10-K, but kind of for instance, a 50-ish basis point change in discount rate, has a $30-ish million kind of impact on pension expense, to give you some sensitivity around kind of those assumptions. So that's kind of generally the framework. And obviously, there's kind of fair amount that can happen between now and then in terms of what those numbers ultimately look like.

Next, we'll go to the line of Myles Walton with Deutsche Bank.

As you talk about Cessna being flattish into '13, I guess I would have thought you'd get some contribution from the Citation Ten and M2 coming into the market. Are those not going to be big contributors? Or is the rest of the core business more where you're seeing the kind of the puts to the gains on the Citation Ten and M2?

Well, we will see some Ten activity, although that is very more sure as the latter part of 2013. We will have, we think, a reasonable volume of M2s as that comes into production. But we're still -- and then this is why -- I mean, I'm trying to be careful, because I'm really not trying to guide a number, okay? But I mean, just given the overall market dynamic, there can be some positive contribution by the fact that we have some of the new product getting out there, but we're also seeing not a market recovery through the course of this year that we would necessarily have liked to have seen building the kind of momentum into '13 that we would have hoped for. Now maybe that'll change as we go through the fourth quarter, right? So fourth quarter is always a very important quarter and we'll get a lot of these other issues around elections and fiscal issues and whatnot, out of the way. I think we'll be able to provide you a lot more visibility into our thoughts and rationale for how we get into 2013 guidance.

The other one, Frank, you talked about the reason for lower manufacturing cash flow year-to-date. And I think you cited Bell advances, higher Cessna use, Systems inventory growth. I'm just curious, 4Q looks like it'll have to be as good as what was last year's 4Q, which was really quite impressive. I'm just curious, are there any of those things that you talked about as being weak points in the first 9 months that are the triggers for reverses to get you over the hump in the fourth quarter? Or just what's the put and take to kind of get you where you need to go?

Yes. I mean, as you kind of do the numbers, essentially, we're looking at a fourth quarter this year that was similar to fourth quarter last year. And that's -- we always have a seasonally very strong fourth quarter. Obviously, the seasonality at Cessna, some seasonality at Bell, contributes to that, the timing of some of the kind of group payments coming from the military customers in terms of performance-based payments and just other contract activity, and we generally see significant inventory liquidation because of that seasonality. And kind of other seasonality with some of our other businesses result in the fourth quarter. So kind of we do expect that we will see similar cash performance this fourth quarter as we saw last fourth quarter.

Is there a big tick up in Bell backlog in the fourth quarter?

So Bell backlog, remember, there's always a couple of things that happen with Bell in the military side because we take things into backlog as they're funded. The one issue that I think we should be sensitive to is that last year was the last year of the funding of the final year of the multiyear one contract, okay, which generally goes into our backlog in the fourth quarter. Given that the next funding increment to go into backlog will be associated with the next multiyear contract, which I don't believe will be definitized and completed into -- some time in the first, even second quarter next year, that will come to backlog, but I don't believe it'll come to backlog in the fourth quarter like it generally does.

But that's not a big year-on-year headwind to cash?

No, no, no. That wouldn't be calculated [ph] at all, in terms [ph] of the order. I thought you said -- the question was order, so...

It was, yes.

Yes, okay. The order seasonality will be a bit different just because of the dynamic of the next multiyear, but that should have no impact on cash.

Next, we'll go to the line of David Strauss with UBS.

Scott, back to Cessna, a lot of questions on what your guidance was for the fourth quarter, but I think last you had out there, you had Cessna revenue guidance for the full year of $3.4 billion. Does that still imply? Because if it does, it seems like it implies a fairly big delivery number in the fourth quarter.

Yes, David, Doug here. I think that our guidance will be more around a $3.3 million [ph] area plus or minus depending on where the exact deliveries come in.

Okay. And then while we're on that subject, because I think you said Systems now $100 million to $200 million lower, what about Industrial and Bell relative to the prior guidance?

I think Bell will come in maybe just a little bit higher than its original guidance of $4.2 billion, and obviously at this point will probably exceed the top end of our range of margins maybe by about 50 basis points. With respect to Industrial, I think that we had originally guided to an approximately flat revenue of $2.8 billion. That'll probably come in about $100 million greater, even with the softness in the fourth quarter. And margins there should be at the top end of our range of 6.5% to 7.5%.

Okay. And on Systems, if -- taking your full year guidance, it seems like it implies a fourth quarter that's flat to up versus last year, as compared to this quarter, that was way down. I mean, what changes in the fourth quarter relative to what we saw in the third quarter?

Our catching up with some deliveries, David.

Yes, there were some deliveries that were pushed on the volume side from third quarter to fourth quarter. Some of those actually will go all the way into 2013, but certainly, there's some of that delivery that moved from third to fourth is what contributes to that.

Can you tell us which program, Scott?

Primarily around our TCDL program for the Shadow, data link updates.

And then last question, thinking about 2013 and cash, obviously, you have a fair amount of debt that matures early in the year. But thinking beyond that, could maybe Frank talk about pension contribution next year, and then maybe addressing the dividend and what you're thinking on potential share repurchase for next year?

Yes. Certainly, on the pension front, we, first of all, obviously, kind of will give guidance in January and we'll talk about that. We're still going through our budgeting cycle. We will continue to contribute to the pension plan in 2013, and we will continue to prioritize, as you mentioned, cash towards debt pay down early in the year where we have a significant amount of maturities coming due. But we certainly have cash on the balance sheet and cash from operations to satisfy that. And then, from there, we'll look at other applications of cash. And kind of we're just going through our planning cycle right now, so it's too early to kind of talk about what that looks like. And the focus, certainly, for the first part of the year, will continue to be on that debt reduction and contributions to the pension plan. We talked in our disclosures about kind of over the next number of years, continuing to prioritize some amount of cash towards pensions in the amount of kind of $50 million to as much as $400 million a year to continue to fund those liabilities. And that all depends around, in part, the interest rate environment and the discount rate environment, and therefore kind of the funded position as well as the performance of the portfolio. So we'll continue to look at that as we plan out next year as we go through the next couple of months.

Next, we'll go to the line of Steve Levenson with Stifel. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Could you give us figures, what percent of the fleet at Cessna is available for sale? And within that, what percent is current models?

Steve, I have to get the numbers out here, because I don't want to quote an incorrect number, but there has not been a huge change, really, since last quarter. We were still sitting in the 12% total fleet, but I don't know that we give it on a model-by-model basis, but of the in-production models, the number has really been sitting down around the 6% or -- kind of range.

Mid- to low-single digit depending on the model. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: That's good enough. And do you find yourself any closer to potential orders for V-22 internationally?

I would say that the international V-22 opportunities are, in my view, still looking very feasible. There are several that are in process with customers that appear to have a very high level of interest and are requesting information and sort of initiating that process. These are all FMS programs, so they have to go through the LOA/LOR notification -- going through that whole exercise, but they are in various states of making progress.

Next, we'll go to the line of Sam Pearlstein with Wells Fargo.

You -- on the last call, you had talked about R&D ticking up in the second half of this year at Cessna and just -- I know you don't want to talk about specific dollars or percent of sales, but can you just talk a little bit about how the R&D profile looks now with Latitude, Longitude, Ten and others? And then, year-over-year, how should we be thinking about next year's growth in R&D?

Well, as you said, we don't like to get into the numbers on a business-by-business basis. I would say that, like everything else, one of the things we're trying to do is make sure that we're being productive and efficient in our R&D spending. So it is still a very high level of spending compared to revenue. But I do think we've reached a point where it's probably not a headwind when we think about our percent of sales on a go-forward basis.

And then I know we've talked a lot about Cessna, but just as you look at the fourth quarter, there's really only 10 weeks to go, do you have unsold positions remaining this year in this fourth quarter? And is in the Cessna, all of the variance between -- in the $0.10 between the low end and the top end of the EPS guidance?

Yes, there are unsold positions and that's been sort of typical as we've gone through the last few years. There are obviously a lot of discussions going on with customers. And so the process we go through to determine what we think the deliveries will be is, in fact, based on some orders converting to sales within the quarter. In terms of the variability of the range -- I mean, there's a couple of moving parts in there. Certainly, Cessna is part of that. If we were to come up light on deliveries that would obviously be part of that. There are still a lot of things on the systems side of the business that have to deliver in the quarter. And that drives part of that variability. That's probably the bulk of the range. But for sure, Cessna is always, in the market that we've been in, a significant piece of the variability of our range.

Next, we'll go to the line of Pete Skibitski with Drexel Hamilton.

Just to follow up on the used aircraft sales at Citation, I was just wondering, is the majority of that related to trade-ins on the large NetJets order that you guys had? And if so, I'm just wondering what the profile is going forward. Should we assume that, that $30-something million is kind of constant over the next couple of years? Or do you expect that to come down? Just any kind of color there if you're able to.

So, as Frank said, I mean there's a portion, maybe 2/3 of the used that's going on in inventory in terms of our increase in sales that's associated with trade-in aircraft. And I think that trade-in aircraft is a bit of the reality of where we are in the market right now because when you talk about relatively short-cycle sales, the ability for people to go out and externally market that aircraft, wait for it to sell before they take delivery, is challenging. And so as a result, we've been doing that and then we take it and turn those aircraft over. The other part of the used in terms of inventory, and obviously some of the sales is, the unwind of our CitationAir fractional business. So those aircraft are put back and we unwind those fractional transactions, those also go into our used aircraft and then we turn around and need to go market and sell those aircraft. So I don't know -- I mean, I would say right now that we probably have had more trade-ins on a per aircraft, new aircraft transaction than we typically do, and we would expect over time to see that number start to come down again. But yes, there are certainly...

You'd expect it to be less of a headwind in 2013, is that a fair statement?

We would like to see [indiscernible]...

Marginalized?

2013. Yes, we would like to see fewer trade-ins.

And just to be clear, that $30 million was the year-over-year change in used. That's not the total used. The total used is a larger number than that. Total used...

Right. That's a -- when I gave the $30-some million number, that's a year-over-year comparison that we had, in -- greater, $30-some greater, in used aircraft sales as opposed to new jet sales.

We'll go to the line of Cai Von Rumohr with Cowen and Company.

Just a quick one. What is your year-to-date return on your pension plans approximately through September?

Cai, I think we are kind of low-teens type number.

All right, ladies and gentlemen, that concludes our call today. Thanks for joining us.

Ladies and gentlemen, this conference will be available for replay starting today at 10:00 a.m. and going through January 17, 2013 at midnight. You may access the AT&T teleconference replay system at any time by dialing 1 (800) 475-6701 and entering the access code 225827. For international participants, the number is 1 (320) 365-3844. [Operator Instructions] That does conclude your conference call for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.