NOC
#<UNK>, let me start off on that one.
We do plan to finish our 60 million share repurchase that we announced a few years back.
We are looking, market conditions permitting, to finish that out this year.
I will say that we have not made a decision on what we are going to do after that.
We've got some upcoming Board meetings and that will be something that we discuss with the Board on what the future capital deployment looks like.
But I will say that we've been repurchasers of our stock since 2003.
Since that year we've repurchased, I think, about 47% to 48% of our outstanding shares.
Can we continue to return capital to our shareholders at the same rate that we have been this quarter and last year.
Probably not sustainable over the long term.
But you can think of us as a Company that does return excess cash to shareholders.
I'll just add a perspective as well.
When we think about this, we do take a long-term view of the Company.
And we take a look at our ability to generate cash and how we best deploy that cash.
And we take a very positive view of that.
We see ourselves as an enterprise that should be able to generate healthy cash flows as we look into the future and, to <UNK>'s point, if you look at our history, we have been a very proactive returner, if you will, of cash to our shareholders, both in the forms of share repurchase and dividends.
So I think you should think about us in terms of our history.
We are a Company that tends to continue to act in the way that we have been acting, and I think that's probably the best way of thinking about our future here.
And we'll have to figure out the exact rate, as <UNK> pointed out, as we go forward, but if I turn the clock back to 2013, that was sort of an interesting opportunity for our Company.
We saw a place in the market where we could go and access the debt market and take advantage of that for our shareholders and that's what we've been doing.
So that type of thinking on how we look at our overall capital structure and our use of cash proceeds, I think, characterizes the nature of the decision-making that we have as a Company.
<UNK>, I would say that as we look at our performance in the first quarter of 2015 at AS, it was what I would characterize as strong performance for the AS sector, it's simply stacked up against a quarter in 2014 that was particularly strong.
And we continue to think that our margin rate targets for the year at AS, the segment margin rate in the high 11%s continues to be appropriate.
I think this is a good solid start to the year at 12.6% in this quarter at AS, so we're off to a solid start.
As you compare to 2014, it doesn't compare as favorably, as we started off the year, really, really strong last year.
Thank you.
<UNK>, just to clarify at Aerospace, the double-digit increase was at unmanned systems.
And the largest driver in that, as we mentioned, was NATO and Triton, but the space business, again it's a healthy business.
It's growing in the single-digit range in the quarter, largely driven by restricted.
I believe that as we look at the space business, that clearly was the driver for the quarter.
In terms of ES, I wouldn't want to get into specifics on a product-line basis, but the lower volume at ES is in combat avionics and I probably wouldn't want to dig any deeper on that.
No.
I would say that the 60 million shares is our target repurchase number.
As far as creep, I think we try to manage that pretty carefully.
But the 60 million does not reflect offsetting creep.
But we certainly take a look at that and manage that carefully.
Essentially if you think about it in round numbers, we were around 240 million shares at the time we announced it.
We said we were going to repurchase 60 million shares, which was about 25% of the then outstanding shares.
It's a great question and I very much appreciate your asking it because I think it's indicative of the thinking that we all have to go through as we go through these cyclical processes in our industry.
And to the extent that we see meaningful opportunities in front of us, and indeed we do, it is incumbent on us to take the actions to invest, to ensure that we can approach those effectively.
We have that responsibility, both to our shareholders and to our customers, to make sure that we are making the prudent investments.
And we want to be very disciplined in how we make those investments, the prudent investments to position us well to both capture and, of course, to execute on what we see in front of us.
And I'll go back to some of the announcements we made last year and even a little bit earlier with respect to the investments that we've been making in our Centers of Excellence.
We see those as fundamental investments for our long-term, to really get much of the promised benefit out of the acquisition of the various companies that we did over the years, to really consolidate our footprint down, to co-locate our specialists who are working on these different opportunities, and to get the synergy that comes from having them really working these things together, and it takes money to do that and those are investments that we've been making.
With respect to managing the risks on these, we have a multifaceted approach to doing that.
First and foremost, we work hard to create a culture in our Company where everyone feels not only the opportunity to put their hand up if they see a risk that we haven't been addressing aggressively, but they also feel the responsibility to put their hand up.
And so we have a culture inside the Company that is quite transparent in terms of folks at all levels focusing on risk management and also making sure that we are thinking as broadly as we can about both the risk and opportunity side of all of the things that we are taking on.
So in addition to the culture, we also have a very disciplined approach to doing risk management in the enterprise that encompasses management at all levels making those risk assessments and communicating them forward.
And our operating rhythm in the Company is essentially based on reviewing both the risk and opportunity framework that we see across each and every one of our businesses.
So it's a baked-in part of how we do business.
And to your question of who do I rely on.
I rely on our whole team.
It is a core part of the way that we think about running the business, managing the risks.
And I would point out, because sometimes I am concerned that when I talk so much about risk management, people will hear in there risk aversion.
It is not risk aversion.
It's risk management.
We know that to generate great returns, we've got to take prudent risks, but we also know that we have to manage them appropriately.
So it is a key part of how we run our Company.
I would say that in terms of the additional workdays this year over last year's first quarter, we did have four additional workdays.
Essentially 66 days versus 62.
I would point out that we will have 365 days in the year and we'll give up those four workdays on the backend in the fourth quarter.
In terms of identifying the amount of sales that came from those four additional workdays, we don't have a system that calculates revenues on a daily basis.
I would say it probably had a larger impact on IS and TS as they are more labor driven, but certainly could have had an impact on AS and ES if certain material receipts came in, but likely higher impact on the IS and TS business.
Again, we don't look at revenues on a daily basis, so I can't give you a precise number.
Let me touch on each of these and I'll ask <UNK> to provide any other commentary that he may have on it.
With respect to our future outlook on share repurchases, clearly budget has an impact on the overall financial state of the Company.
The difference between the actual budget levels isn't going to necessarily suggest that we turn off all of our ability to return cash to shareholders.
It's more a matter of degree.
And as I said earlier, we really do look at our approach to share repurchase over a long period of time.
And we take a look at our future cash flow projections and see where that puts us and how we think we can best deploy that.
With respect to the cyber business, we always are looking at the full set of opportunities.
We have for some time, and I see us continuing to do this, been very focused on ensuring that we are, first and foremost, supporting our US government and, to a lesser extent some of our International governments, in cyber.
So that focus of ours that tends to be on the high end of the cyber capabilities does not lead us down the path, typically, of looking at some of the properties that have come onto the marketplace that tend to have a little bit more robust component towards the commercial sector.
So I think this is really about portfolio philosophy and where we are focused and we like our focus on the government side of it.
We believe that is helping us to continue to stay at the forefront of this technology.
And as I've said actually over the years in this regard, where we find something that appears to have real commercial applicability, our first instinct is to go to look to find the right partner, to use whatever capability we have in an approach that has a real channel to market and is operating within a Company that's focused on commercial channels to market.
We're a Company that's focused on serving our government customers, both here in the US and around the globe.
<UNK>, I'll just add on the corporate allocation, I think I would simply say we haven't made a decision on what is beyond the 60 million, certainly I wouldn't want to get ahead of the Board, but we do expect to be long-term generators of strong cash flows.
<UNK>, on the floor space part of it, I would say that what we were able to do over these last few years was to actually not only reduce floor space but drive efficiency.
We've taken a very careful look at how we are populating the floor space we've had in the Company and have used the current environment as really the opportunity to take a set of actions that, in hindsight, perhaps we should have taken years ago.
But we took those actions to get us into a place where we are more efficiently utilizing the floor space that we have today.
As we look at new program opportunities, we will have to look at how we increment, where appropriate, or even in many cases even better utilize the floor space that we have.
So for every one of these new opportunities we actually have a strategy that goes with the ability to use the floor space we have as well as oftentimes nearby or adjacent floor space.
But what I think is nice is when we're looking at those strategies today, we are looking at them through the optic of the efficiencies that we're operating with today versus where we were some years ago.
On headcount, this is, I would say, oftentimes the most challenging part of any activity that we take on in the Company.
The headcount, the employees that we hope to find, the new employees that we go to find in the space, are traditionally some of the most talented individuals in our country.
And now, as we're becoming more International, some of those talented folks in each of the countries where we operate.
So we have to have a continued focus on making sure that we are bringing that talent in and retaining that talent.
I will note that even though, over the last four or five years now, our total headcount is down about 20%, because of the demographics in our Company and in our industry, we've actually been hiring at a high rate aggressively through this downturn.
In fact, last year we hired just about 5,000 people in our Company.
So our hiring machine is running and running well.
And as we go forward, we are going to make sure that we are continuing to focus on bringing in the very best talent and keeping that talent.
So we've been giving a lot of thought to where this takes us over the next few years, but I think, more importantly, we actually have systems operating within the Company which I have confidence are producing the results we are going to need as we take on some new opportunities.
<UNK>, thanks for the question.
I would say that the unfavorable adjustments in the quarter are spread across a number of programs with no adjustment being significant.
If there were a material adjustment in the quarter, we would disclose what that adjustment was and be discussing it with you.
So no major issues.
We are just continuing to work through the contracting process.
The FAS expense benefit that we receive this year generally would apply going forward in 2016 and 2017, but it depends on a number of other factors including our investment performance for this year including the discount rate at the end of the year.
So I don't know that it would be fair to take that benefit.
Essentially we had guided 290, now 320, so a $30 million benefit this year for nine months of the year after we've made the contribution.
I don't know that it would be fair to take that and simply carry it forward given the multiple assumptions that impact the analysis.
<UNK>, yes.
F-35 continues to go well.
We are delighted to see finally that we are beginning to come up the production ramp because ultimately, at the end of the day, coming up the production ramp is what brings the costs down, makes the aircraft more affordable, and enables all of our partners around the globe to actually acquire the quantity that they need for the F-35 to become the cornerstone of their force structure that they envision it to be.
As the production ramps up, it is our expectation that the F-35 margins should have the opportunity to improve over time.
To your point, yes, they are typically below our average margins on the program, in part because of the place we've been in now for a number of years of relatively low rate production and, quite frankly, contracting that matches that lower rate of production.
But as we move on into real rate, we would expect that that rate and the approach to contracting it should enable us to have margins that are more traditional in terms of production rate margins.
<UNK>, thanks for the question.
If I can talk about the Q1 number, I will say that if you look at our CapEx timing during the year, we do tend to start off a little bit slower as budgets are released.
And I will say that last year, as an example, I believe in the first quarter we spent $60 million in CapEx towards a full-year number of $560 million.
This year we started out Q1 at $117 million towards what we think is going to be $700 million, so I think we are still comfortable with our $700 million target for the year.
In terms of beyond 2015, I'll tell you that we don't give guidance beyond that point.
We have talked about the fact that it will stay ---+ capital is likely to stay elevated from where it was historically for a few more years.
Let me be clear.
The 11% is a long-term benchmark that we talk about that is reflective of how we see industry performing over a long cycle in the Aerospace sector, just as we've given benchmarks for our other sectors.
Our team is performing above that benchmark and is incentivized to perform above that benchmark.
So you can see in the quarter, for example, we're performing better than the 11%, the 12.6% that we demonstrated in this quarter is an example of that.
The point that we've been making on the F-35, and because we have F-35 in each of three of our sectors, Aerospace, Electronics and Information Systems, when we look at that in the aggregate, and compare it to our aggregate margin rate, that's where we see that offset.
So it isn't so much a sector-by-sector view.
It is more of an aggregate view that the F-35 program isn't quite yet carrying its weight relative to delivering the margins that we have across the Company.
So when will we get there.
Hard to call.
As I said, we are delighted to see the ramp-up in the production as we go forward into the LRIPs nine and 10, but we really need to get to, I think, probably the place where we are really more routinely operating in what we would envision to be full-rate production before we are able to see the types of margins that we have historically seen in aircraft production programs.
I don't believe that we generally discuss restricted sales on a quarter-by-quarter basis.
And in terms of international, I think what I'd be comfortable saying is that we believe full-year sales for international are going to be around 15% of our total sales.
And we're not discussing the quarter-by-quarter impact of that, but we continue to believe 15% of our total sales that we've guided in the range of for the year, that 23.4 billion to 23.8 billion, is about where we see 2015 international.
This concludes our Q&A.
So, <UNK>, final comments.
I'll just wrap up by again thanking our team for a very strong start to the year.
We continue to drive our focus on performance, ensuring our capabilities are aligned with our customers' needs for the long term and executing our cash deployment strategy.
Thanks, everyone, for joining the call today and for your continuing interest in our Company.
