Northrop Grumman Analyst Meeting - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

GASTON KENT, VICE PRESIDENT OF INVESTOR RELATIONS, NORTHROP GRUMMAN: Welcome to the Northrop Grumman's 2005 Institutional Investor Conference. I am Gaston Kent, the Vice President of Investor Relations at Northrop Grumman. I think, in the room also is Dana McSweeney (ph), if she's not outside trying to run people in. I know you have a lot of contact with her as well. We're going to have about a three-quarters of the day of activity today; we'll be finished roughly mid-afternoon and then there will be buses running to the airport and back to the hotel, whichever you prefer to do.

Until we get started, I'll give you about 30 minutes to read this. Okay? You're fast readers. You should be advised obviously that we'll be talking about a lot of forward-looking information today. There are inherent risks when talking into the future. Please refer to the 10-Q's and the 10-K that we just filed, to talk about those risk factors.

But also note that this morning we put out our two releases, one, a guidance memo and the other, an increase in our dividend of 13%. The guidance memo includes an update to 2005 for all the numbers. It includes an increase to the earnings per share guidance that we had out previously of $0.15 per share on both ends of our band to account for the $0.12 increase from the sale of TRW auto stock a couple of weeks ago, so there's a small increase on top of that as well and then a 13% dividend increase.

Today, we'll go through this agenda, starting with Ron Sugar and then go through the sectors with Bob Iorizzo from Electronics, Jim O'Neill from Information Technology, Don Winter from Mission Systems and Scott Seymour from Integrated Systems, Phil Dur from Ship Systems.

We have moved Newport News down a notch in the agenda. As some of you heard last night, Mike Petters was stuck on the Eisenhower weathered in, but he did get off this morning, so he will be in later today and give his presentation at that time, and then Alexis Livanos from Space Technology, and wrapping up with Wes Bush for our financial overview. We will have Q&A after each speaker, and then at the end Ron and Wes will come back up for a final wrap-up Q&A.

Before Ron comes up to speak, we have a short video and then Ron, if you would just be prepared when we go. Please run the video.

(Start Video)

UNIDENTIFIED SPEAKER: When danger threatens, and Americans rise to the challenge, Northrop Grumman is there. We provide the innovative technology that enabled our armed forces to succeed in any battle space. When our fighting men and women put their lives on the line to protect freedom, Northrop Grumman is at their side, providing the most advanced technology, from undersea to outer space and into cyberspace. Our network centric systems link all elements of the battlefield from advanced (inaudible) that can see through sandstorms and detect enemy camouflage and relay the information to our forces on the ground.

Our cutting-edge technology provides our commanders total, situational ordinance (ph). When it comes to projecting force, our nuclear carriers provide 4.5 acres of sovereign U.S. territory, where it's needed, when it's needed. Our Stealth Bomber carries precision strike weapons to any corner of the world.

We are extending the boundaries of technology with systems on stealth and fighter aircraft, information technology network, radars and other sensors, next generation destroyers and aircraft carriers, lasers, unmanned aircraft and defense against ballistic missiles.

We are advancing the reach of science into space with satellites that will help protect the environment and to see back to the beginning of time. At home and abroad, Northrop Grumman leads the way, applying advanced technology to keep our nation and its allies safe. We deliver high-tech expertise to keep our homeland secure, protecting aircraft, modernizing our Coast Guard, protecting all men and equipping America's first responders with the most sophisticated information technology systems.

Northrop Grumman's 125,000 employees are dedicated to keeping our country safe and freedom secure. Northrop Grumman, advanced technology is our business, protecting freedom is our mission. Northrop Grumman, we are defining the future.

RON SUGAR, CHAIRMAN, CEO AND PRESIDENT, NORTHROP GRUMMAN: Well, good morning everybody and welcome to Northrop Grumman Space Technology presentation center. This center is a facility that is on the campus of what we call Space Park, which was the first facility, actually built for the purpose of building spacecraft back in '50's.

The whole Southern California area, I think many of you are familiar with, really has a rich tradition going back to the very earliest days of aviation in the teens and twenties because of the weather conditions going into rocketry and missiles and then into spacecraft. So you have here in an area of about a 3 to 4 mile radius around the L.A. Airport, a remarkable, historical and present set of capabilities and technology and products.

So, welcome again. I think we've got a very interesting day planned for you. What I'd like to do is to give you an overview of the company. Sort of, how we think in the broader sense and talk a little about the strategic perspective that we're involved in. The agenda will be pretty straightforward. I'd like to share with you our vision and strategy.

I'll give you a vignette of what we think Northrop Grumman is today because as you know, it's changed dramatically over the years. An outlook for the market, picking up where Bob Helm left off last night, and then really finishing with discussion of our focus in this corporation starting at the top of the corporation and running through the entire corporation on performance.

Our vision is a vision we've shared with our people, we share it with you and our customers and it's really to be the most trusted provider of the systems and technologies that ensure the security of this nation. To be the most trusted national security provider. By that, we want to make sure that our customers think of us first. We want to be our customers provider of choice.

We want to be our industry's employer of choice; that is, we want people in this industry -- the best and the brightest folks, the most creative folks, the most capable folks, to say that Northrop Grumman is a place I would rather work.

And finally and ultimately, at the end of the day, to be, you, our shareholders' investment of choice. We'd like the next dollar of discretionary investment to be put in Northrop Grumman because you think this is a place you could be sure it's going to be managed correctly and will create value.

Our objective here, in this corporation, is an assemblage of highly talented people operating in a very complex and exciting world of technologies is to create value through the combination of human talent and the technological capabilities that we have.

If you were to boil down the business strategy of this corporation, I would say it really comes in 3 parts. First of all, it's to perform and grow in our core defense and intelligence markets. This is where we live, this is what we're really good at, this is what we understand, this is where we bring enormous value.

Secondly, we do have an opportunity to leverage some of the core competencies of the corporation into a broader set of government markets and those are areas where they are not traditionally, the cores of intelligence or defense, but the market channels of distribution are not dissimilar and technologies that we have are not inappropriate. And we'll talk a little bit more of what we mean in that area.

And finally and most important, this is all the framework of driving the growth in the value of our shareholders' earnings. This is all about driving shareholder value growth.

So let me expand on each of these three elements of the business strategy. In terms of perform and grow in our core defense markets, I think it's important to point out that the fundamental, the bedrock of our focus is on performance on our current programs. We probably have something on the order of 30,000 contracts underway now. Many are large, many are small. But performance on every one of these is a focus throughout the corporation.

We're also anticipating the future. And particularly this year, in the form of the quadrennial defense review, the QDR. What's coming down the pipe? What is the potential change in directions that we might see, that would want to have us change our outlook and where we're making our bets?

The corporation has done this successfully for the last 12 to 15 years. That has probably created the Northrop Grumman that exists today. By anticipating the future, positioning the capabilities that we can do organically and adding to them the capabilities we had to go out and acquire, so that over a period of time, we've been able to put together what we have today.

We also think that as the market is becoming more competitive we need to improve our business capture process. We're going to see stiffer competitions, we're one of the 3 majors, we're going to see significant competition for the number of programs going forward.

We want to make sure that we don't come out second best in any of those if we can help it. We also want to see continuing investment in what we call enabling technologies. One of the unique things about Northrop Grumman is that we are not just a system integrator; we're able to provide technology, sub-systems, capabilities. We have people in lab coats, who actually invent things and innovate and we think that that's an important differentiator for this corporation. But putting the right investments in these technologies is important. We'll say a little about those later.

Northrop Grumman now has enormous scale and presence. Scale, of both financially, scale in terms of a workforce and political presence in, around the nation and other parts of the world. One of the things that we think is important is to leverage that scale and bring the best capabilities and talents to bear where we need to. We have an ethic in this company of collaboration between the various business sectors and we put a lot of energy into the social fabric of the corporation. As you think of us as an assemblage of 20 or 22 corporations in the last 10 or 12 years, we really come together very nicely.

One of the big issues you've heard about in past times, we always talk about the "integration risks", we kept telling you that we understood what we were doing here and the fact is, if you look at the track record, and you look at where we are today, the term integration risk doesn't really have a whole lot of meaning at this point in time.

In fact, we've gone very much the other way to create a networking of people with capabilities, moving people, sharing and creating a social structure, an incentive system, which really does bring the best to Northrop Grumman, any particular opportunity.

And finally, as part of that, putting a lot of energy on putting personal energy into it as is the corporate policy council, which is our top 13 executives. It's developing the leadership team of our company, the top 300 Vice-Presidents, followed by the next 1,600 director level individuals. These are the folks that will shape the future for the company and we believe that with human talent, this corporation as much as the property, plant, equipment and contracts, is what will make us successful.

Now in terms of leveraging the competencies to expand into broader government markets, here we want to capitalize on the rich expertise and talent in the company. We're looking at ways to extend our domain knowledge by collective hires of individuals and occasionally a bolt-on acquisition or two. And fundamentally, what we're trying to do is align ourselves with future market directions.

A couple of examples, and you'll hear about these later in the day, certainly, a government, the non-defense government IT areas is an area we have continued to expand in which we think takes advantage of some of our corporate competencies and secure networks, security, what have you.

Looking at things such as Homeland Security, biodetection systems to prevent biotoxins from invading both civil or even military applications. U.S. Postal Service, a whole range of these things. Putting directed infrared counter measure systems on commercial aircraft is not a diversification to commercial aviation, but it is a direct application of a core competency that we uniquely have. So when we have the opportunity to do that we are going to do that in addition to our principle focus on growing our core businesses.

And finally, driving shareholder value growth -- we're working very hard in this corporation over the next couple of years to expand our operating margins, to drive cash generation because after all cash is the measure of economic performance.

We're looking at operating efficiencies; we're leveraging the scale of the corporation now as we look at the procurements we do, both for critical mission, critical equipment and products as well as things such as desks and office supplies and papers. Enormous scale here that could be used to advantage IT services, et cetera where we can actually use the corporate scale as we get ourselves together.

We're working very hard to ensure that our credit profile remains strong and it has of course strengthened over the last couple of years and Wes will show you that. We have been actively pursuing share re-purchases as part of our strategy of balance to capital employment.

Dividends as witnessed by last year's 15% increase and this year's 13% increase. Last year was our first dividend increase in 10 years; I think it's an indication of our view of the future of the company. And finally, value-enhancing mergers acquisitions and divestitures where we think that by making those adjustments we can continue to tune our portfolio and add value to the shareholders.

The corporation today is a remarkable entity and one of the things that excites me every morning when I come to work is to think about what we are, who we are and what we're doing in terms of security to the nation and frankly also generation of value for our owners. Over 125,000 people in 50 states, 25 countries around the world. We are one of the top 3 U.S. defense contractors and if you take a look at our skill set it's pretty remarkable.

We are very strong in systems integration, C4ISR, a jargon I think you're all familiar with in battle management systems, information technology, networking technology, tremendous amount of capabilities in defense electronics, of course, our naval shipbuilding and our space business and our missile offensive and defensive capabilities really does comprise a significant and very attractive portfolio of businesses. Our focus in this corporation going forward and it has been for the last couple of years now since the acquisition of TRW has been driving the business to performance.

We believe we are very well positioned in the current environment particularly as we see the new directions of the QDR. We see that despite the widespread headlines that defense spending is being cut, recognize that the growth rate of the anticipated defense expenditures is slowing somewhat from previous plans, but it is still growing. The programs that we have are very nicely aligned with the national priorities going forward.

We see sustained organic growth and we gave you some guidance on that this morning in the press release and Wes will talk more about that. We're really working hard as a company to target best execution in class by every measure and we do hold ourselves accountable to metrics and again focusing on the total returns that we can provide to our shareholders.

This corporation's portfolio, we believe, is extremely well aligned with national security trends. Taking a look at the portfolio what you see is a very balanced and diversified portfolio. On the left side you see how the business starts out by sector which is how we manage internally and you can see a breakdown of that and you'll hear much more about this during the day from our executives. And on the right hand side the breakdown of business by customer, and there you can see a nice balance.

Other government includes intelligence work, NASA work and smaller agencies I might point out and while you can see the Navy accounts for a large portion of our business, ships is only about 20% so the rest involves a whole range of other capabilities for the Navy involving naval aviation as well as naval electronics and information technology.

We also believe that the corporation has significant visibility looking forward. As you look at our pipeline, this is a quad chart, which gives you a sense of how the business looks going forward. On the upper left hand corner we call that solid pipeline. What you have there is a scale; those are billions of dollars so starting with just a little under $30 billion for 2004 actuals growing in '05 and '06 according to our guidance.

What you see, as the dark blue represents, that business, which is fully funded; the light blue is unfunded but it is in fact business that's going to happen we believe. The green is follow on, very likely follow on, and the yellow is new business. It's important to note that 90% of our 2005 sales are based upon very solid backlog, it's 85% of the 2006 sales if you do the math looking at this chart.

On the right hand upper portion, we are U.S. focused. We don't see that changing a whole lot. We're going to see probably less than 10% of our business in international over time. The fact is that the U.S. defense market is still the market and we believe that's going to continue to be the market for us.

Lower left had side -- the risk profile of the corporation based upon the distribution of contract types is shown there and it is a balanced risk. It's not going to change a whole lot in the next couple of years between firm fixed price, fixed price incentive and the cost plus, or other such as time and materials.

And finally on the right hand side you can see that we do have a healthy long-term mix between production, which is dark blue and development, which is light blue. Some of the proportional increase in development, slight increase in '05 and '06, actually in our judgment does bode well for the future because it implies that there'll be future production programs that will mature over time and create additional revenues for us.

Let me give you an assessment of the market. This is a chart which some of you saw last night during Bob Helm's presentation, but let me catch you up on it and also give you some sort of my spin as well.

As I said, we see the defense market growing, but at a slightly slower rate than was expected last year. I would also tell you that some of the concerns about the out years are interesting, but as the saying goes -- nobody ever spent an out year dollar on anything -- because each year you will then recalculate what the next out year is going to be. What really matters is what's happening in '06, '05 to '06 budget appropriations and then indications of the trends of the future will allow us to get ready and prepare.

Our programs are adequately funded to support the plans we're showing you, certainly this year and next. There are some challenges I said in the out years, we have some time to work things and it turns out that the president's recommended budget this year will change next year and that ultimately it's the Congress that will authorize and appropriate the funds actually spent.

So a lot of things have to happen between now and those out years and that's one of the reasons we spent a lot of time thinking about that, participating in the political process as well as running our business. The DD(X) acquisition strategy is uncertain and that's something we'll tell you much more about today when Phil Dur stands up and Wes will show you some of the financial sensitivities around that, and we'll show you how we're approaching that.

That decision has not been made; there is a program of record. The plans we're showing you are based on the program of record, if there is a change we'll give you some indication of the sensitivity to our future guidance relative to that.

Our competencies really do match nicely to the evolving national security priorities and it turns out that there are an increasing number of non-DoD opportunities, which is in this adjacent space, which I referred to earlier.

I think my bottom line in all of this is that the threats to national security are not diminishing. If you believe that the world is going to get successively safer over the planning horizon for this corporation then I would argue that we have perhaps some optimism in our view of our performance.

Unfortunately, the world is probably not getting safer. If you can tell me what the threat is going to be perceived to be in 2008 or 2009, I'll have a better indication of whether the budget increases more or less and we just don't know this at this point in time.

Bob showed you this chart -- the message here again is that there is growth in the investment accounts which is where we live largely and you can see that even though the CAGR is not as robust as it was in the previous budget request it is none the less quite robust, and we believe within that there'll be substantial opportunities to differentiate ourselves in this market.

This is a slice of the intelligence funding, again a chart divulged from Bob last night. It is varied in multiple lines throughout the DoD and other budgets. So you can't really add this to the other but you have to look at it and you say this is a place where additional money is being spent for very obvious reasons and that has been the perceived short falls of the national intelligence establishments, to be able to do what it needs to do to inform the President and the nation, to protect us going forward. We anticipate being able to participate here very significantly.

The what's out, what's in? Again this is where we think transformation is headed. There was a lot of talk in the newspapers and the talking heads about, well, transformation was yesterday's newspaper; the new thing is we've got to get body armor and Humvees . The reality is that the administration and particularly the current defense department under Secretary Rumsfeld has a very consistent plan which is following -- transformation is in fact happening.

If you were to characterize what is transformation, you could characterize it a lot of ways, but one way you might do it is to say the infusion of information technology and electronics and everything involving the conduct of warfare, and that's fundamentally what has happened and what is going to happen and continue to happen.

And I would argue that even with a change of administration, change in Secretary of Defense, you're not going to see that trend change because, in fact, the judgment of most people that I think know what they're doing in this area is that the trend of information and electronics and warfare is going to continue, and is in fact the competitive advantage the nation needs.

I won't go through these again, but you can see that what's out and what's in view in the transformational sector. As I mentioned, there is a broader set of national security issues that we're all concerned with that goes beyond just the traditional arming of the military and that really gets into a full range of federal agencies and organizations that really make a difference in keeping us secure.

On the top the -- you see the Department of Defense, the intelligence service and the proper to homeland security, but underneath that you see a whole range of transportation, energy, law enforcement, public health, financial services, state and local, where in fact the capabilities are required to work together to integrate.

Again, this talks about information, information technology and other technologies. This is where we think there's an opportunity for a company like ours, which is focused on security, national security can play as well as the traditional military markets.

These are the priorities. The national defense strategy Bob talked about them last night, they are our best guess of what's coming out of the QDR's -- this quadrennial defense reviews term of reference and if you look at the national security strategy going forward these are the things that are going to be emphasized and the good thing from our perspective is that they are all aligned with Northrop Grumman's competencies.

If you were to take a look at those priorities, and I have the 5 of them shown on the left column, I've also added homeland security as a bottom line here because that is in some sense a complimentary piece to this and show you our pipeline and just pick out a few key programs.

The center column shows many of the current programs that we're involved in that line up against these set of priorities, and the right hand column shows you the very rich set of next generation opportunities which we are fundamentally pursuing now in advanced development stage typically. Most of these are programs we actually have that are going to mature over time into being a significant manufacturing or production programs.

I won't go through them in detail; you'll get more of a flavor from this as you hear from each of the sector executives. But one of the things that excites us is that both columns are pretty well populated with programs.

As I mentioned earlier, we do have opportunities to expand in, outside of the core defense area and we've been in this area for quite some time, so it's not as if this corporation has been in a non-DoD IT environment. Jim O'Neil, whose sector is largely the lead in this area, he'll tell you much more about it, but there is a lot of things going on out there where the skills and capabilities we have and our knowledge of how to sell to the government and to work with the government give us some competitive advantages even over commercial IT providers. And in many cases we'll team with commercial IT providers.

Healthcare IT, government healthcare, outsourcing at the high end, large scale enterprise integration work, integrated security systems -- a lot of attention on that, both cyber security, physical security, ERP implementation and a variety of other support services makes for a very robust business opportunities set for us going forward.

We talked about performance; let me kind of deal with the final topic, which is our focus on performance. I thought it would be interesting to put together this quad chart to show you how we've done, just to remind us of how we've done since we completed the acquisition of TRW in late 2002.

When we did that, we said to you that our focus would be on execution and integration and we're going to work to drive the financial performance of this company from a platform we've never had before which was the addition of, when you think about it not only TRW, but Litton, Newport News, Aero Jet and 3 or 4 others and more of the recent acquisitions which we accomplished right around the turn of the century.

Sales have grown substantially, some of that through acquisitions, but also significant organic growth embedded in that. The earnings per share as you can see on the right has moved up very smartly. Cash from operations has also increased nicely. If you look at the 2003, we did adjust that for the P2 tax payment of about $1 billion. I think you all remember that was essentially a tax-free loan, which we enjoy because of a contract condition for over a decade.

And on the right hand side when we completed the acquisition of TRW we inherited a tremendous amount of debt and we worked very hard to put ourselves in a situation where the corporate balance sheet is extremely strong; we have significant flexibility and we have the opportunity to work with you going forward on our balanced cash deployment strategy.

I'm really proud of the results of this leadership team. I think it shows you the kind of things we're capable of and the kind of thought process that we have in terms of performance. If you look at '04, this was the slide we showed you, what we would go off and do. On the left hand side we told you what our operating focus was going to be. As I said, we've about 30,000 programs in the company. They're all important programs, but the kinds of things that I and the leadership team focus on are the really big ones that could swing us one way or the other.

In some cases these are programs, which are cost plus programs, so as investors you don't see the immediate impact as good or bad performance, but our customers sure do and that's important to us. In some cases, we have a few fixed price programs where our customers don't see the immediate impact as good or bad performance, but you sure do. So we want to make sure we're doing everything we can on all these.

I think we did a tremendous job across the board on almost all of them. We took charges on 2 programs, Wedgetail and the F-16 Block 60. Bob Iorizzo will give you an update of status of we are there. Those are legacy programs; they've been around for over 5 years. They have been challenging programs that we're managing hard and I will point out that despite some of the charges we've taken, we have met or exceeded our guidance to you overall as a corporation.

Lot of new opportunities are on the plate, I would like to have won every single one of them, we didn't, we won most of them that we were going after. The checkmarks are the ones which were successful. I'll say more about them in a minute. The minuses are the ones that got away from us and there's 3 that have not yet been decided. They're still open and they're still under consideration or they may be reformed. But overall we think it was a pretty good year in terms of business capture.

This again would expand that list slightly. This shows you the joint unmanned combat air system. A $1 billion program to define the future of combat aircraft without humans in them. Battle management command and control, a very competitive win against the 2 other major contractors.

A NATO air to ground surveillance opportunity which would team with the AVS to provide a Joint STARS like capability in Europe. Net Sense which is a Air Force network centric management program, Prometheus JIMO which is a case of a wonderful synergy example of taking the nuclear skills of this corporation from Newport News and aggregating with the space skills of the people here at Space Park. Again, we took on the 2 other majors and won on that one.

We've had a number of restricted program wins that we're extremely proud of that we can't tell you anything about. But I will tell you that that's an important part of our business and will continue to be. And finally a command post program in Don Winter's area, a very important program, he'll probably have a few words to say about that in the future really dealing with the moving forward of the Army, a major additional play for us with the United States Army.

I did mention that collaboration is a key element of what we drive our business to think about, our people to think about. What we have here is an aggregation of the 7 sectors' names on the top and an example of each one, where they are leading something that has extraordinary cross-sector participation for value-add.

One of the things that excites me is that with Northrop Grumman we've been able to create a corporation where the whole is greater than the sum of its parts. And that all requires the people to work together, to be able to take the best talent and capabilities and move them to the biggest opportunities or occasionally when we're challenged to have an issue, take the best talent and put it where we have the biggest problem and get that fixed.

And these kind of agility if you will, the kind of mind set that exists within this corporation leadership team is something of which we're quite proud and we think we can do even more going forward.

I think that the key thing here is that the corporation allows itself internal access to all the technologies and capabilities of the main knowledge necessary. I would also tell you that we're not stuck just on going internally for things, we operate in 2 significant ways.

We will go to the outside to team with a different company if we have better opportunities to serve our customer win and we allow the businesses which provide systems and technology and sub-systems to be a merchant supplier to other companies if that in fact makes most business sense as well.

So, for example, in our radar business we are today not only providing space base radar technology to space technology sector here in Redondo Beach we are also the principal teammate of our principal competitor, Lockheed Martin, on the space base radar program and we understand how to do that, we firewall it. Our judgement is that's a win/win opportunity, it allows the government to get the best technologies and it also gives us a much more robust business model.

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Our operating priorities for 2005 are pretty straightforward. Program our financial performance is how we are driving the place. We're putting more attention on competitiveness in terms of capture, as well as cost structure competitiveness and growth. We put a lot of energy and people development and diversity of our workforce. I would point out that last year 37% of our vice president appointments were women or minorities and we had a very, very rich talent pool to do that from, and 54% of our new hires, professional new hires, were women and minorities coming out of college.

And finally, something which I think must be said over and over again is a focus on integrity across the Corporation, but we all understand the times we live in, not just the world of Sarbanes-Oxley, but the unique dynamics which are currently affecting our defense industry. We're only as strong as our weakest link, and we put a lot of energy into making sure the systems, the processes, and the climate inside the company promote this view.

Looking forward for 2005, our operating focus will be on the programs on the left. In addition, as I said, to the other 30,000 we don't list there. And on the right hand side we have a rich set of new opportunities coming as well. And I won't go through these in any detail. I may point out one, the crew exploration vehicle; this represents an interesting expansion from an area where the company has traditionally operated. Here we are going to team -- we have agreed to team with Boeing to go after the shuttle replacement, the crew exploration vehicle, and we will be leading the first wave of this, which will be the initial efforts, with them as our trust a partner, and downstream in the next stages, as we go to the moon and Mars we will reverse roles. Here's a tremendous opportunity for the company outside the defense budget, and we know that there's going to have to be a shuttle replacement.

The other examples on here will try to be dealt with by the sector presidents, so I won't dwell on it, but the point I want to leave you with is that there is an opportunity space ahead for the Corporation.

One of the things that we've done as part of our focus on operating excellence is to put in place a very broad top-down driven effort called Achieving Competitive Excellence. We use the moniker Ace and the whole intention here is to leverage the strength of the entire company's portfolio, drive a more competitive cost …