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#Good morning, Rich.
The process that we go through and other companies go through with respect to credit rating agencies are, that you meet with them on a periodic basis, usually annually, and based upon those meetings and the way a company's results have been trending, I'm talking about the credit ratios and credit metrics in this instance here, and they look at what we've been doing.
Clearly, we have employed a lot of debt in our capital structure, which for our investment-grade credit ratings are near or above the limit in terms of what the rating agencies like to see, and that's what's being reflected in their outlook changes from stable to negative.
In both instances, the end of February and just yesterday, S&P, end of February was Moody's, they both reaffirmed our ratings, and they're essentially telling us they don't want to see any further deterioration in the credit metrics, and in some cases, some improvement.
We're mindful of that.
We think we have adequate cash flow and cash to continue to do what we're doing with the capital allocation in terms of the dividends and the share buybacks, and also manage the credit ratings effectively.
The way you do that is, if we make some acquisitions, and to the extent that we did, they would be profitable businesses, which would improve our EBITDA and lower the leverage.
That's one way to improve the credit metrics.
The second way is that we expect that we're going to have natural organic improvement in our business the next year or so, as we come out of the downturn, particularly with the DOD budgets.
And lastly, we could also repay some debt.
So we have the ability to use any of those items in order to manage the credit ratings, and that's how we're considering it.
Thanks, Rich.
Hello, Rob.
I think you said it.
It's going to [go through] this year and next year, but pretty much, I would say, the latter part of this year rolling into next year.
A lot of the ---+ the wild card there is to what goes into the OCO account, which is being driven by some of the geopolitical events that you see every day.
There is continued demand for ISR assets, whether they're aircraft, the Data Links or cameras that go on them, and as well as support on the ground, whether it be SOCOM or our Night Vision products and the like.
Certainly communication products, very strong demand.
So we have the event-driven growth.
We have the fact that the budget request is an improvement from where we've been, and the fact that we see real growth starting in 2016; even with sequestration there, there's growth.
The trends are changing as we look out.
I don't think it will happen overnight, but it should gradually improve over the next 18 months, is our view.
I'm sorry.
Our overall market share.
They're in a lot of different spaces so I don't think there's one composite number that can answer that question, whether it's cyber, intel support, IT support.
I don't know that we can give you a very clean, discrete number there that makes a lot of sense.
But Rob, clearly the federal government technical services market is several billions of dollars each year.
Multiple billion.
Multiple billion dollars.
So we have a small market share, which is the case for most companies, even the ones that are a lot larger than NSS.
There's no dominant player in federal services that we can discern.
I'm not sure if we're answering your question or where exactly you're going with the question, but is that what you're asking.
No, we're not necessarily walking away from work.
In fact, last year, we won virtually every recompete that we participated in, and they've done a very good job in the proposal process in winning business against bigger players that are bigger players, period.
The performance or the contract execution has been very good.
Their CPARS or their ratings have been outstanding.
The hesitancy on this side, which I'm sure you read, is that in the world that we're in, where there seems to be a cyber element in everything, whether it's a communication systems contract or, of course, anything in the IT domain, in many of the places [for the] diversified defense company wouldn't prudent to not after cyber element within the Company.
So that's something that we are paying a lot of attention to.
Since we do have some significant capability in that space, you just look at some of the recent wins that we've had with the NSA and other customers, they're well thought of and they do have a unique offering with a very dedicated, skilled workforce.
So they do well.
I've thought about in terms of Management, can we take more costs out.
We really are running a lean operation, and I attribute it more to the space that they're in and the dynamics in that space, more recompetitions, breaking contracts into smaller pieces, and the fact that there are just a lot of players there that are all scrapping for some top-line growth, and they're willing to bid lower and lower numbers.
And better buying power encourages that and the like, so it's a question of the space they're in right now.
You could look at this as a cycle also that this, too, will turn, because I don't know that going to the lowest priced bidder will save the day every time on the customer side.
It will probably be the most qualified bidder.
And we've been trying to gradually move to higher-margin work, and when you say walk away, yes, we would walk away from work at 3% or 4%, 2% or 3%, if we had to, but we'd like to still get in the DOD focused area of best value, which means putting out best proposal, if you will, or the best quality at the best price.
There's still time to be played out here in terms of whether this trend will change and we could see some improvement in the margins, but having a flat top line or a shrinking top line and shrinking margins at the same time is not a type of business that we would like to participate in.
So if that continues, you could assume what our answer is going to be.
Okay, Rob, thank you.
Hi, <UNK>.
I talked about the additional sales on Liberty, that's about $50 million.
So we have $50 million there that I put in the realized category, and now in the guidance update.
And your question of the timing of award fees at NSS, we're going to have our biggest award fee quarters in the third and fourth quarter, and on average, there's about $3 million more of profit in each of those quarters compared to Q1 and Q2.
Okay.
Okay.
To wrap up, we are confident that, as the DOD budget stabilizes, we are well-positioned to take advantage of the growth opportunities that will present.
Our strategy of expanding our international and commercial businesses will continue to dampen the effect of the DOD budget uncertainties.
Our operational agility and commitment of delivering value are the backbone of our performance.
We will continue to offer affordable and innovative solutions to address customer priorities.
We are making strategic investments that promote growth, while optimizing efficiencies, and we believe our business model is stable and well aligned with the current environment.
With that, we look forward to speaking with you again in July.
Thank you.
