洛克希德·馬丁 (LMT) 2004 Q1 法說會逐字稿

Please stand by we're about to begin.

Good day, and welcome, everyone, to the Lockheed Martin 1st quarter 2004 earnings results conference call.

Today's call is being recorded.

With us today is Mr. Chris Kubasik, Senior Vice President and Chief Financial Officer, and Mr. Jim Ryan, Vice President of Investor Relations.

At this time I'll turn the call over to Mr. Ryan.

Please go ahead sir.

Thanks, and welcome to the call.

We have posted charts on our web page which supplement our comments.

Also, please refer to the Safe Harbor on chart 2.

Statements in today's call that are not historical facts are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Federal Securities Law.

Actual results may differ.

See today's press release and our 2003 Form 10K for a description of some of the factors that may cause actual results to vary materially from anticipated results.

Today's presentation and web carts contain non-GAAP financial measures as defined by SEC Regulation G. While we believe that these non-GAAP financial measures may be useful in evaluating Lockheed Martin, this information should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP.

Please refer to our Web site for additional details.

I will now turn the call over to Chris.

Thanks, Jim.

And good morning.

This morning I'd like to focus my comments on three areas.

First, our 1st quarter performance; secondly, our updated 2004 outlook and then, finally, our cash deployment strategy.

The 1st quarter performance was very strong, whether you look at it strategically, operationally or financially.

On the strategic front, we amended the Titan transaction, and it's currently an all cash offer with a lower price, and we provided clarity on the DOJ matter.

We also completed the integration of the ACS Federal IT business, and it is contributing positively to our results.

On the operational front, we had strong deliveries.

We delivered 15 F-16s and 4 C-130Js.

We had four successful launches, including our 70th successful Atlas.

We also delivered a commercial satellite in the 1st quarter.

The Lockheed Martin built GPS2R satellite was declared operational and, with the help of acquisitions, our Government IT business grew greater than 50% from a sales and an earnings perspective.

Financially, the performance was very strong.

Sales were outstanding, as our consolidated sales increased $1.3 billion or 18%.

All five business segments grew in the quarter.

Earnings grew 21% overall, with each business -- each business segment growing double digits.

On a earnings per share basis, we reported 65 cents per share, an 18% increase over the prior year, or 55 cents.

And from a cash perspective, we had $1.1 billion of cash from operations.

Very strong performance, and we expect to be cash positive for each of the quarters in 2004.

I will point out that this is the fifth consecutive year that we've been cash positive in the 1st quarter of a year.

Let me now focus on our outlook.

We increased our outlook for 2004 sales, EBIT, earns per share and cash.

Cash from operations after capital expenditures is tracking closely to net earnings adjusted for the non-cash pension expense.

We expect that trend to continue for 2004 and 2005.

I refer you to web charts numbers 8 and 9 for more details.

As we look ahead for the remainder of the year, there are several major near-term opportunities for this corporation.

With the Navy, we are awaiting their decision on the Littoral Combat Ship, the MUO satellite system, and the multi-mission maritime aircraft.

For the Army, we have submitted our proposal for the Aerial Common Sensor.

With the Air Force, we are working to definitize production lot 4 of the F/A-22, and we've also submitted a proposal for the MC2A battle management command and control program.

There are several multi-service opportunities that we are pursuing, including the Joint Common Missile, and the Airborne Joint Tactical Radio system.

We've submitted bids to the Department of Homeland Security for the U.S. visit opportunity and there are several Civil IT opportunities that the corporation is pursuing.

Finally, before we open it up for questions, I want to focus on our cash deployment.

We are likely to have enough cash on hand to pay for all or most of the Titan acquisition later this year.

If borrowings are necessary, our expectation is that they will be minor in amounts and it will be our intention to pay those down in a prompt manner.

I want to reemphasize our previous plan that a majority, meaning at least 50% of our cash from operations after capital expenditures, generated over the next few years is expected to be returned to our shareholders in the form of additional share repurchases and dividends.

Our ability to repurchase shares is no longer restricted after amending the Titan agreement and we have our Board of Directors' approval to purchase additional shares.

We will opportunistically repurchase shares and consider further increases to our dividend while maintaining a solid credit standing, financial flexibility and gross debt to capital in the 40-50% range.

So with that, Dave, I would like to open the call for questions.

And thank you.

Today's question-and-answer session will be conducted electronically.

If you would like to signal to ask a question, please press the star key, followed by the digit 1 on your touch-tone telephone.

We do ask that, in the interest of time, we ask that you do limit yourself to one single part question.

And again, that's star one for any questions at this time.

And we'll pause just a moment to assemble our roster.

We'll take our first question from Joseph Campbell with Lehman Brothers.

Please go ahead.

Good morning, Chris.

Andy Capawitz (ph) and Joe Campbell.

We wanted to just make sure we understood the share repurchase numbers.

So we -- we're going to spend something like 50% of $1.6 billion for dividends and share repurchases, so the dividends are about $400 million, so about $400 million worth of share repurchases?

Is that -- is that right?

Yeah.

Good morning, Joe and Andy.

Over the next few years that -- that -- that would be the correct math, that the -- at least 50% of the cash after - cash from ops, after capex, would be distributed in one of those or a combination of those forms.

So your -- your math is correct.

So if we -- if we just -- just making sure we -- we -- we're going to -- we're going to -- we have a share repurchase authorization I guess for 30 million shares, which at, you know, today's price of $47 is sort of $1.4 billion.

But we're going to execute maybe $800 million worth of share repurchases.

So apparently it -- it will take you three -- more than two -- more than two years to work through the -- the 30 million share repurchase?

Is that -- is that right?

Well, at -- at --

I mean, given the -- the assumptions about the --

Given your assumptions that -- that would clearly be the -- the correct -- the correct math.

But, as we said, we're going to be opportunistic and, you know, remain flexible.

So we're not going to telegraph the exact timing on -- on these repurchases.

But, you know, I can't argue with your math.

I guess I wanted to understand that we have no -- we don't have any intention now that, you know, of going out and buying 30 million shares in the next -- you know, in the next 12 months.

It's going to be -- I guess the question really comes down to what are you going to do with the other $800 million and why can't the shareholders have it?

Fair question.

I didn't say we weren't going to buy the 30 million in a year, and I'm not going to say we're not going to either.

I me, we're going to see how the market reacts and we've got to clearly close on the Titan transaction.

We'll -- we'll review the dividend later in the year, like we do each year, and we'll keep you abreast.

But we did buy back over 10 million last year, which, I think, was more than -- than most people had expected and we'll remain opportunistic.

And, like I said, we have to keep an eye on the credit standing, maintain some financial flexibility and keep an eye on the debt to cap ratio.

But we'll -- we'll let you know each quarter what we've accomplished towards that goal, and update it as appropriate.

Thank you very much, Chris.

Okay, thank you, Joe.

We'll go next to Steve Binder with Bear Stearns.

Please go ahead.

Good morning.

Good quarter.

Just a follow-up on Joe's question, just -- therefore by changing the terms of the Titan deal from a part stock, part cash deal to an all cash deal, that will not be included in the -- in the return of cash strategy, and if the mandate of returning a majority of your free cash flow in the next few years?

Yeah, thanks, Steve.

Clearly that's -- that transaction being all cash now, I think, was a significant improvement given the current value of our stock, as compared with issuing the 20-some million shares.

We're -- we're in a much better position to be buying back shares.

So exactly as I stated in my opening comments.

There -- there -- there's no change to what we've previously talked about.

And we'll -- we'll move forward.

You also said that -- that cash -- that economic -- cash earnings should be a good barometer of underlying free cash flow.

Your '05 guidance for free cash flows has been greater than $2 billion in cash from operations and roughly greater than $1.2 billion of free cash flow.

That guidance is still well below cash earnings.

Any reason why you don't increase that further?

Yeah.

What I said in my comments was that I expect that trend to continue for both '04 and '05.

So I would read into that that our '05 cash from operations after capex will in fact correlate to our adjusted net -- net earnings.

So.

So I would read that as an increase in '05 cash.

Last thing.

Your -- in the -- in the quarter, your payables performance, if you go back for the last five years in the 1st quarter, payables have historically been down.

And this quarter they were up.

It looked like, you know, clearly better, you know, payable management.

I'm just wondering, is there anything fundamentally going on there that is a reversal from prior periods or is that a -- just one quarter of benefit?

Yeah.

I don't think there's anything fundamentally -- anything fundamentally different.

A -- a lot of our payables, as you can imagine, are payments to -- to our teammates and subcontractors.

We have a routine basis for -- and cycle for paying those.

And it probably was more a -- a function of the calendar and timing than -- than anything else.

So nothing unusual there.

Chris, one last thing, the F35 accrual rate, profit accrual rate.

Did you change that at all in the quarter?

No, I did not.

Okay.

Thank you.

Thank you.

We'll take our next question from Heidi Wood from Morgan Stanley.

Please go ahead.

Good morning, I'll reiterate the comments about a nice quarter.

Chris, you raised the guidance -- EBIT guidance by $50 million and yet, cash flow by $400 million.

Can you walk us through what the differences of -- of -- are there?

And also given that you had -- you know know, you've really basically done 44% of the full year cash flow in the 1st quarter, what happens across the next three quarters?

Why not raise cash flow guidance even higher?

Okay.

Well, thanks, Heidi.

And we -- we think a 20% increase in our cash flow is pretty -- pretty substantial.

But I do appreciate your optimism.

As -- as we do each quarter, I -- I did mention, this is our fifth consecutive year that we have been cash positive in the 1st quarter.

We -- we do not make any tax payments in the 1st quarter, the first two payments are made April 15th and June 15th.

And given our -- our debt portfolio, a majority of our interest is always paid in the 2nd and 4th quarter.

So that's -- that's why, you know, the $2.4 billion for the full year, even with 44% in -- in my opinion is -- is the right number.

Relative to what changed, you hit on one of those, was increased -- number 1, increased earnings.

We also are projecting that the advances probably are not going to burn off as substantially as we had initially forecasted.

That's mainly a result of getting new business and -- and more advances as we continue to negotiate.

And -- and the third item, somewhat subtle, was I think the way we may have communicating or portraying our guidance.

And we had talked about at least greater than or equal to $2 billion, I think that was understood to mean $2 billion which was not our intent so we've tried to give a little bit more of a point estimate to alleviate any concerns or confusion on that topic.

But very good cash management by all the business areas, and just an outstanding quarter.

Great.

Thanks.

Can I ask a couple -- a quick question on -- on space?

You mentioned a termination launch vehicle contract benefit.

Can you tell us how much that -- that helped?

And also this government support on Atlas seems to be kicking in.

Can you give us a little bit of color there?

Sure.

In space there were three items.

I'll -- I'll tell you that we talked about a inception to date adjustment or a reduced booking rate on a -- on a government satellite.

That -- that hit, if you will, pretty much almost washed completely the -- the benefit of the -- the commercial -- the -- so those two netted to zero relative to each other.

On the Assured Access, that's consistent with what we've been forecasting and projecting, you know, 65-$75 million in 2004 and that's what was in the budget.

And we -- we recorded the appropriate amount of that in the quarter, we would continue to expect to record that on a -- on a quarterly basis throughout the year.

Okay.

Great.

Thanks very much.

Thank you.

We'll go next to George Shapiro from Smith Barney.

Please go ahead.

Good morning, Chris.

Good numbers.

Thank you.

I want to pursue aeronautics a little bit.

If you take a look at your guidance of $11.4, even at the top end, and if you just annualize this quarter's revenues, you get a little bit higher than that.

It seems like since you only book sales on 11 F-16s and we know subsequent quarters are going to have a lot higher deliveries, even though you've offset that a little bit by the fact that 4 C-130s maybe go to 3 in subsequent quarters.

I mean, why won't you raise the aeronautics guidance some more, unless there was something unique somewhere else in there that I'm not able to see?

Yeah.

I'll -- I'll ask Jim to give you a little more detail on that.

I will tell you though that -- that we are seeing pretty much a -- a level quarter-to-quarter sales outlook on -- on aeronautics.

And at the highest level I'd say that, in 2003, a majority of our sales were back end loaded based on the deliveries, and compared to 2004 where they're a little more level.

So, you know, the $2.8 billion or $2.9 this quarter is actually down sequentially from the 4th quarter of '03.

But I'll have Jim give you a little more detail on the deliveries and some of the drivers behind it.

George, the F-16 program has some POC deliveries in the 1st quarter and, as the UAE deliveries increase throughout the year, you're going to see a higher percentage of POC deliveries in the mix.

Which, of course, would then, you know, not translate into 100% of the earnings since the POC sales were booked to some extent earlier.

So -- in fact, for the year, you're probably going to see something like 25-30 out of the 70-75 F-16 deliveries on a POC basis.

We'll take our next question from Byron Callan from Merrill Lynch.

Press go ahead.

Yeah, good morning.

Chris can we go through the breakout in aeronautics?

I assume most of the increase in sales was F35 related, but could we walk through the assumptions for 2004 and 2005 by major program?

Sure, be glad to do that, Byron.

Let me, first of all start with the quarter.

Combat air, as we said, was up almost $750 million.

More than half of that came from the Joint Strike Fighter, you know, JSF, again, comparing the 1st quarter '04 to 1st quarter '03, almost doubled.

And, as you recall, we were still in the ramp-up stage 12 months ago.

F-16s pretty much made up a majority of the rest.

Again, almost a 50% increase on F-16.

Again, 15 deliveries compared to 3.

Or if you take out the POC, it's -- it's still 11 deliveries compared to 3.

So that was the main contributor.

F/A-22, a little bit of growth as that program continues and we get into production.

And C-130 is the main driver in air mobility.

I mean, that -- you know, $60 million higher, that is 4 deliveries versus 3.

Everything else is relatively flat.

So those -- those are the combination of underlying drivers 1st quarter '04 to 1st quarter '03.

I guess if we look at the -- the full year, just focusing on sales for a moment, combat air, again, should be -- should be up and -- and we'll have a majority of the -- a majority of the growth.

F-16 will probably be pretty flat year to year as -- as we've talked about, and as the majority of the increase again, coming again from the F35 JSF program and a little bit of growth on F-22.

Everything else, Air Mobility, the Arrow programs, Palmdale, again, just -- just flat.

And, again, we are seeing more -- more earnings for aeronautics also, $820 million to $860 this year, well above the -- the $690 from '03.

So hopefully that -- that helps Byron.

We'll take our next question from Jim Higgins from Credit Suisse First Boston.

Please go ahead.

Yes.

Hi, thanks, if I could broaden the question on revenues and shifting guidance.

According to my very quick calculations, it looks like you are looking for around 7% total revenue growth in the last three quarters of the year versus 18% in the 1st quarter.

Is there -- are there other factors beyond -- beyond the aeronautics that are -- are kicking in there that we should be thinking about?

Yeah.

I -- I would look at it more on the -- Jim, just -- just on the -- the fact that historically about 25-30% of our revenue is -- is recorded upon delivery, unit of delivery method of accounting, appropriately so.

And -- and that, you know, really does not cross not only the aeronautics business but the space business, the electronic systems business.

Each -- each of those would be in the larger business areas that have the unit of delivery accounting.

As -- as I look at it, we're still going to have 25-30% of our revenue accounted for on that method.

I look back last year, 2003, of that amount, only 20% was -- was recorded in the 1st quarter.

And over 30% of our revenue on a delivery basis was in the 4th quarter.

So again it's -- it's that ramp up, mainly driven by Arrow but, again, even the timing of space launches, Atlas's, Protons, satellites, commercial satellites contribute.

As I look at '04, I -- I really see that our unit of delivery revenue is going to be 24-26%, almost straight line quarter-to-quarter.

And it -- it really is the -- the difference between front end loading and back end loading as a result of -- of contractual commitments and milestones playing out.

So I -- I would say that's the main driver.

Jim, do you have anything?

Anything else on that?

I think you covered it, Chris.

Okay.

We'll take our next question from Cai Van Rumohr from SG Cowen.

Please go ahead.

Yes.

Could you tell us what impact if any, you know, the current state of the Iraq conflict is having?

I mean, we're planning, maybe, on sending some more troops.

Are you seeing more QRC business?

Or are you seeing any business, you know, maybe potentially slipping out?

You know, what's that doing to the numbers?

Yeah, Cai, thanks.

As -- as we look at -- at the 1st quarter results, you know, for -- for over $8 billion of revenue, we don't really see a -- a big swing item either way.

With over $75 billion of backlog, the ability to project out and work on our existing programs is -- I think is pretty -- pretty clear.

No doubt, there are occasional requests, and we respond to our customer in a timely manner.

But, you know, mainly in the Army, you know, the MLRS could -- could be an example, a little more on the C4S/ISR, but whatever is being accelerated versus what is being slowed down, for the reasons you mentioned, we do not see significantly moving the needle significantly this quarter or for the remainder of the year.

We'll take our next question from Howard Rubel from Schwab Soundview Capital Management.

Please go ahead.

Thank you very much.

Chris, could you go back to space for a moment?

You've won a number of important growth satellite programs, yet you had a problem in the military area.

Could you be a little more specific on what the problem is and how you've solved it?

Yeah.

Thanks -- thanks, Howard.

The item we referred to in our press release is a -- a major government contract, it's costs reimbursable and we effectively reduced our booking rate.

The program was profitable, remains to be profitable and, as you know, under percent complete accounting, when we lower the booking rate slightly you do take a inception to date adjustment.

So on a comparable basis, 1st quarter '04 to 1st quarter '03, the net earnings on that are -- are down.

We continue to work with our customer and our teammates, and, you know, the -- the program's in the process of a replan.

And we expect -- expect it to -- to turn out favorably for all -- all parties involved.

Next we'll go to Joe Nadol from JP Morgan.

Please go ahead.

Thanks, good morning.

Chris, I'll ask the question.

On the F/A-22 could you provide an update, just program wide, where you are, where you think you are after the DAB, with reference to the upcoming IOT& E decision?

And where you are on lot 4?

Because I know that you announced that you were close, but you have not signed it yet.

All right.

Well, good morning, Joe.

Thanks for the -- thanks for the question.

I guess there -- there was a way that I would summarize the F/A-22 program going back at least 12 months, maybe 15 months, is we -- We think there's been significant progress in improvement in that program as -- as you look at all aspects.

I'll start with lot 4 negotiation.

Historically the production lots have been negotiated in the 2nd quarter.

I see no reason why that won't occur in the 2nd quarter of this year and fully expect that when we talk again in July that lot 4 for 22 aircraft will be under contract.

So there's -- there's no issue on that, it's just a matter of working through the normal process, the terms and conditions.

We have outstanding support for this program, not only from the Air Force, not only from the Chief of Staff of the Air Force, but the pilots that are actually flying the planes.

We're getting really good reports back.

There is a congressionally mandated requirement for five hours between avionics anomalies.

I can assure you that we're well above that five hour threshold.

We've loaded in some new software recently and that is running without interruption.

And the IOT& E, which is the initial operational test and evaluation process, is ready to start here in the near future and I can assure you that the whole team here at Lockheed Martin, and our teammates, are looking forward to demonstrating the capabilities.

I feel much better about F/A-22 than I did a year ago, and I think we've made great progress.

We'll go next to David Strauss from UBS.

Please go ahead.

Good morning.

Chris, could you talk about C-130J?

Apparently you start booking margin in the quarter.

Could you talk about what kind of margin you did book and what the RAM might be on that program?

Okay, David, as we projected probably six months ago, the return to profitability on -- on the C-130J program did -- did occur.

We did deliver 4 aircraft, you know, and we've talked that these are kind of in the 60-$70 million range on -- on the sales side.

And we're booking mid-single digit margins on the remaining in the -- the initial 119 aircraft program.

So mid-single digit.

And then when we start delivering the multi year C-130s, which should happen in the 4th quarter of this year, I would expect those to be in the 10% range.

So, you know, you do the math.

You probably get in the $20 million range give or take a little bit for the quarter.

And we'll go next to Sam Pearlstein from Jefferies and Company.

Please go ahead.

Good morning.

First I wanted to just make sure I -- I understood.

For 2005 are you changing guidance in terms of the revenue or earnings at all?

Because you mentioned the cash flow now should trend closer to net income after capital spending?

And then secondly, could you just explain what the $265 million of other benefit in the cash flow from operations in this quarter, what area that referred to?

Yeah, sure, Sam.

At this point we are only changing for '05 our cash for operations outlook.

For '04, and, as I said, we expect that trend to continue in '05.

The 2nd quarter of this year I mentioned -- I -- I'm not going to repeat all those opportunities, but clearly the -- the 10 or so multi-billion dollar opportunities, we'll have more clarity on that in -- in July.

And we've obviously made assumptions as to how we'll -- we'll be successful on those programs.

To the extent that there's a difference, we'll -- we'll true it up.

The $265 in "other" - the largest driver there is, you know, the FAS / KAS adjustments, the $150 million as a result of that.

And as I stated earlier, we do book, and obviously accrue, our tax provision and our interest expense, even though the actual cash did not flow.

So I -- I would think of those as the -- the two largest contributors to -- to the $265.

And then lots of cats and dogs, but FAS / KAS, taxes and insurance, would be the main items, Sam.

Next we'll go to Nick Fothergill from Banc of America Securities.

Please go ahead.

Chris, hello.

Could you give us a little bit more coverage of, if you were to aggregate your defense electronics businesses, you are showing a fairly pedestrian top line growth rate and reasonably flat margins going forward.

If you were to acquire Titan, how might that change?

And also, beyond Titan, may you be looking for other acquisitions of that kind of nature or do you think that is enough for you in the defense electronics field?

Thank you.

Thank you, Nick.

I think when we -- when we look at defense electronics, I guess I would refer to three of our business segments and in the aggregate, the electronics business area, the IS&S and the I&TS business.

And I think that the guidance that we've provided is a relatively wide range of -- of a minimum of 4 and a maximum of 10% growth.

So we'll -- we'll know more on that as we -- as obviously we get through the year and we see the outcome on some of these new opportunities.

So I would think that 4-10% growth is -- is pretty good growth rate on the top line.

I think on the margins, we've -- we've talked about margin improvement, you know, the -- the -- the drivers there, well, you refer the to them as them being relatively flat year to year is, again, we've been very successful in new business.

In fact, last year, 2003, we had $38 billion in new business and a majority of those tend to be development programs which, by their very nature, are a little lower on the margin side.

We obviously look at things on a return on invested capital, the -- the cash dynamics on these types of programs is very strong.

I think when you look at those three business areas together, you know, we're in the 9% margin range.

I guess once we get Titan in, and distributed amongst our differ segments I don't see that significantly changing up or down the -- the margins for the organic growth rate.

So we look forward to -- to getting that in, and we'll obviously update the guidance once that transaction closes.

We'll now return to Joseph Campbell from Lehman Brothers.

Please go ahead.

Chris, somebody asked about the F-22.

I wondered if you could give a, sort of, similar update on Joint Strike Fighter, just with regard to sort of remind us where it is?

And what, in the program rather than just financially, is supposed to be happening as we look at '05 versus '04, and '04 versus '03, just what is actually going on out there?

And what are the critical things that have to happen in the consideration of the budgets on the Hill to allow the program to stay in the same sort of ramp that you expect or curve that you now expect going forward?

Okay.

Joe, a majority of the -- the effort by -- by ourselves our customer, and our teammates is really in the near term, focusing on -- on the affordability and the design of the aircraft.

Risk reduction and early -- early -- early identification of -- of potential issues and -- and predicted weight.

And I think the weight has received a fair amount of press.

And -- and really need to reemphasize that that is projected weight.

And it's -- it's utilizing some of the advanced tools that we have.

The -- the big milestones actually just -- just last week, the -- the customer completed what's known as a Air System Design Integration and Maturation Review, known as a DIMR.

And all -- all feedback from that we expect to be on the positive side.

Relative to -- to the budget, I think it will be subject to the annual budget cycle and -- and review.

I think, as you may know, there is a replan occurring.

And ourselves and our teammates are making pretty good progress.

Jim, do you want to supplement that?

Well, we -- we certainly are -- are focused on meeting our milestones and working on the weight issue.

And -- and getting the F35, you know, progressing forward in a meaningful way.

We have time for one more question, David.

And, thank you, our next question will come from George Shapiro from Smith Barney.

Please go ahead.

Yeah.

Chris, if you go back to the space business for -- for a minute.

In that area, the sales actually were a little less than what I was figuring, given the -- the rocket launches that -- that you had.

Was there anything unique that didn't occur there that happens later in the year, so we get up to, you know, closer to say the higher end of your 6 to 6.5 guidance?

Yeah, George, I don't -- I don't really see anything -- anything that - that unusual.

I guess if I look at the -- look just at this quarter, compared to 1st quarter '03, you know, last year we had two commercial satellite deliveries versus -- versus one and, you know, those -- those are usually in the $100 million plus range, so that -- that might be a little bit of the variance that we had to overcome.

But other than that, you know, it's -- it's -- it's pretty -- pretty straight forward.

Year-to-date deliveries in -- in the form of launches, we've talked about 7-10 Atlas and Protons, you know, we have 3 already completed here in the quarter.

So nothing -- nothing unusual.

I mean, the launch vehicles, you know, are -- are -- are progressing.

A majority of this business is -- is on a percent complete business.

The Titan program is ramping down, the Titan 4 program as we've talked about, the Titan 2 completed last year.

But nothing unusual.

And, you know, we -- we would expect their -- their sales to be, you know, kind of in that 1.5 to 1.7 range, billion, each and every quarter without a lot of ups and downs.

Well, with that, I just want to thank everybody for taking time to -- to listen in today.

I think we had a very strong quarter.

And we're off to a great start.

As we talked about, we did increase our outlook across the board, and I look forward to talking to everybody again in July.

Thank you very much.

And ladies and gentlemen, this does conclude our conference today.

We do thank you for your participation.

You may now disconnect.