Good day everyone and welcome to the Lockheed Martin Second Quarter 2020 Earnings Results Conference Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I’d like to turn the call over to Mr. Greg Gardner, Vice President of Investor Relations. Please go ahead, sir.

Thank you, John, good morning. I'd like to welcome everyone to our second quarter 2020 earnings conference call. Joining me today on the call are Jim Taiclet, our President and Chief Executive Officer; and Ken Possenriede, our Chief Financial Officer. Statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of Federal Securities Law. Actual results may differ materially from those projected in the forward-looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements. We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non-GAAP measures that may be used in today's call. Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I'd like to turn the call over to Jim.

Good morning, everyone, and thank you for joining us today. It's a pleasure to be here on my first Lockheed Martin’s earnings call, and I look forward to working with all of you. I hope this call finds you and your families safe and healthy. The world continues to combat the coronavirus outbreak while it is striving to recover and sustain economic activity. Our primary objective at Lockheed Martin is to ensure the health and welfare of our employees and their families, our teammates, customers, and communities. We remain vigilant taking the necessary steps to help protect our workforce while producing the products and solutions our customers need to achieve their important readiness objectives. Our business areas have taken actions including implementing alternative work schedules, health and safety checks at our facilities, and telework wherever possible. Most recently, our Aeronautics team established a rotational facility plan for our F-35 production line, allowing us to continue to manufacture the aircraft while practicing social distancing and completing regular deep cleanings. The corporation also continues to support our critical industrial base suppliers, frontline medical workers, and our local communities with COVID-19 relief and response. In March, the Department of Defense announced it would increase progress payment rates to large businesses from 80% to 90% accelerating payments for the completion of work in recognition of the challenges posed by COVID-19. The DoD’s expectation was that prime contractors would flow these accelerated payments to the supply chain. Through the second quarter Lockheed Martin has flowed all of the accelerated payments the corporation has received from the Department of Defense, $1.3 billion in total to our supply chain. In this process, we've given priority to small and vulnerable suppliers as we continue our efforts to promote a healthy and sustainable defense industrial base. We've also continued…

Well, thank you, Jim, and welcome aboard, and good morning to everyone. As Jim noted, I also hope that each of you are doing well and staying safe. As I highlight our key financial accomplishments, please follow along with the web charts that we've included with our earnings release today. So let's begin with Chart 3 and an overview of our results for the quarter. We saw strong results and year-over-year growth in sales, segment operating profit, cash from operations and earnings per share this quarter. We delivered $16.2 billion in sales, $1.8 billion in segment operating profit and $5.79 in earnings per share, which included a non-cash charge related to an international joint venture that we are now exiting. We generated $2.2 billion of cash from operations and we continue to execute our balance cash deployment plan for 2020 returning almost $1 billion to our shareholders. We achieved a new record backlog of greater than $150 billion exceeding our all time high for the corporation for the eighth consecutive quarter. We have updated our full year guidance increasing our estimates for sales, earnings and operating cash flow as COVID-19 mitigation plans and our outstanding performance and minimize our year-to-date impacts. Overall, it was a strong quarter for the business in challenging times. Turning to Chart 4, we compare our sales and segment operating profit this year with last year's results. Sales grew 12% to $16.2 billion led by volume in Aeronautics and Missiles and Fire Control, while segment operating profit increased 15% led by earnings growth and Aero and RMS. The resulting segment operating margin was a strong 11% for the second quarter. These results include the impacts caused by COVID-19 and reflect the proactive efforts of Lockheed Martin in our customers to mitigate these disruptions, particularly as they…

[Operator Instructions]. We ask you, please limit yourself to one question, if you have any follow-up questions, you can place yourself back into the queue. And first, with the line of David Strauss with Barclays Bank. Please go ahead.

Thanks. Good morning.

Good morning.

Hey, Jim, to follow up on some of your comments, I wanted to ask you how do you see Lockheed portfolio positioned to perform relative to peers, if you look out at potentially a tougher budget environment over the near term, and how you're thinking about sustaining the Company's peer leading growth into the longer term, if you could take this both from an R&D perspective as well as how you will evaluate investment decisions from a return perspective? Thanks.

Sure, David, good morning. This company to me is incredibly well positioned for any reasonable range of outcomes in defense spending in the economy over the next few years as well as -- as breadth of product and service that is really essential to the National Defense strategy. So when you put the two things together, I think the company, vis-à-vis peers is incredibly well positioned relative to others. The backlog of $150 billion is equipment and services that the customer needs, they've already signed up and budgeted for. And again, there are ways to solve both opportunity sets. One is if there's a rising defense budget or stable one, we can continue to deliver on that backlog just as it’s contracted, but if it changes, those requirements are still going to need to be met. And because of our platform position, David, we can extend and broaden the capabilities of existing platforms, make sure that their life can be extended while at the same time of being upgraded to whatever standard is required at that point in time. So, I think the breadth of the Company's portfolio of products, services, and domains that we operate in is going to position us well even at a downturn, frankly. Secondly, on long-term growth, that's -- the threats aren't going away. Defense is going to have to be supported, I think in any reasonable person's view going forward, especially if those people are in positions of responsibility no matter what party they may come from. So I view that defense has got to be an important priority for the country. Going forward, there may be a mix change, if you will, but it's still going to be an important priority. Again, the benefit of coming in the door here is the existing…

And Jim, just quick follow up there. How do you -- based on your time at American Tower, how do you measure success from a financial perspective? I think there you really emphasized free cash flow and free cash flow per share and return on invested capital, are you going to apply the same kind of framework at Lockheed?

Yes, I'm pleased to say that Ken's already applying it as we speak and before I got here, so I was really glad to see that that's a capital allocation decisions have historically been made here. I think that my experience at American Tower, we used a wide variety of vehicles to deploy capital, get others to do it on our behalf and in partnership with us. And maybe we can add some of those elements here, and some might be pre-existing relationships in the tech sector and telecom to join us in some of this investment profile. But, I do think that that we can continue to drive cash flow per share growth here and ROIC stability or expansion at the same time we did at American Tower over a 20-year period. And I think we can do it here too.

Our next question from Robert Spingarn with Credit Suisse. Please go ahead.

Well, good morning.

Hi.

Welcome, Jim. Very nice first quarter out of the gate. I have a couple of quick things for Ken on the guide. So Ken, MFC was the one segment where you didn't change the guidance, you had this good bookings quarter, and I guess growth declines a little bit in the second half. Is this a result of COVID? Is it just where the business is? When would -- might it re-accelerate to double-digits? And then just separately, I wanted to ask you what you've got embedded in the guide for F-35 production sustainment and development?

You bet.

Good morning, Rob. So yes, Missiles and Fire Control is the one that we did not adjust guidance. So, you're exactly right. Just to remind everybody, it is still our fastest growing business area, still most profitable business area. But going around the horn, and it's a little bit of what I talked about in the first quarter, our biggest concern from a COVID impact standpoint was clearly at Aeronautics and clearly the main driver -- main concern at Aeronautics is F-35, and we've done a good job of anticipating that in the quarter and hence the results you saw in the quarter. We had really strong results at Missiles and Fire Control in the second quarter frankly and in the first half. You're right, if you look at where we're going, we’re holding guidance. We do see COVID impacts. This is a very high-volume business, so we are starting to see some pressure on Hellfire deliveries and ATACM deliveries regarding -- and mainly driven by COVID. But, we're going to be up year-over-year mid-single digit from a growth standpoint in the second half, so still pleased with the trajectory of where the business is going. Let's see your second question on guidance for F-35. Yes, second quarter, we saw strong growth across F-35. Follow on modernization we’ve received some awards in the quarter that resulted in strong sales growth year-over-year. In fact, we'll see that into the second half of the year. Production, if you recall, we had a little bit of a slow start in the first quarter and that was basically timing of supplier payments to us that picked up in the second quarter, but really strong production growth in the second quarter and sustainment is up as well. And so for the year, we're looking at double-digit growth for F-35. Overall, we're seeing development up really strong, sustainment really strong and production mid single-digits, which is higher than what we thought.

Our next question is from George Shapiro with Shapiro Research. Please go ahead.

Yes, good morning.

Good morning.

Ken, I wanted to pursue a little bit more Aeronautics, F-35 you had an incremental margin of like 18.5% in the quarter. So obviously, it must have raised the margin if you can share how much the margin went up. And then my second question, if you look at your implied guidance at the high end, the second half of the year has only 3% growth in aero, way down from 15.5% in the first half. And the margin is implied at about 10.6%. So is that just being conservative or are we starting to really see some slow down there? Thanks.

Thank you, George. So yes, in the quarter, F-35 was up very, very strong on the top line growth, there production was up strong sustainment of strong as I mentioned on the previous question. If you look at margins, from a production standpoint, they were strong double-digit. We had some risk retirements on a few of our production lots. So it wasn't just [blocked by] but it was a few of our previous lots that actually are still open. So we had some retirements, their development so FCD, the FCD has wound down. That was a low margin business for us. And now, we're embarking on follow on modernization with our customer. And we're seeing strong -- though its cost plus we are seeing stronger margins that we did on FCD think of those as high single-digit margins. And then on sustainment, we had a variety of risk retirement, not one single sustainment program that I could spike out, but there's a variety of sustainment programs that had some risk retirements in the quarter so, so you're right on that a strong quarter from a margin standpoint. Second half, we're not anticipating the risk retirements that we had in the -- in this quarter George and your other question was looking at the high end of the guidance. So though we think we have done a very good job with our customer mitigating a lot of the risks due to COVID in the second quarter, where we are starting to see risks specifically in Texas and specifically in our supply chain due to COVID. And we do anticipate seeing a couple of hundred million dollar impacts specifically on F-35 production, top line due to COVID risks. And so to your question is that being conservative, it's only conservative if COVID does not happen, but if it happens, we feel comfortable with our midpoint of guidance and our high end of guidance.

And next we go to the line of Jonathan Raviv with Citi. Please go ahead.

Thank you and welcome Jim looking forward to working with you hope everyone as well.

Thank you.

Just thinking about cap allocation, I know you guys have reiterated your balanced capital strategy. When I think back to the last time this industry faced the potential political change, high deficits, potential budget pressure, the capital allocation strategy looked to get a little bit imbalanced. So just any more further perspective on how capital allocation strategy can shift and flex, if the reality on the ground changed and what might be different today versus let's say 10 years ago, 10 years ago, you're having to repo pretty big dividend on a relative basis, CapEx fell a lot, whereas now CapEx is still at a pretty high level. So because we've been your -- very unlevered balance sheet as well, and to think about how capital allocation plays a role in a pressured budget environment? Thank you.

Thanks, Jon. Hi, good morning. It's Ken, I hope you're well as well. So I'll take that, Jon, we're committed to providing still significant portion of our cash flow to our shareholders that's regardless of, what happens, what this downturn looks like. But, I'll – I will start with cash. And we just took our cash up to the greater than or equal to $8 billion this year. We have some tailwinds. And frankly, this year we have some headwinds and with that balance in what we see, with our working capital improvements, we were comfortable doing that. One thing I'll say going out to the future, and it's based on our strong backlog and it’s what I'll call our culture of cash. I've mentioned in the past that we're comfortable right now even with the headwinds that we see out in 2021 of $7.7 billion based on what we see right now, we're comfortable taking that up $100 million to $7.8 billion. And then out to 2022 we talked about the pre-tax change for the amortization of R&D that we saw a path to roughly $7.8 billion in 2022. We're comfortable today taking that up another $100 million. So think of just cash that could be used for internal investments and for cash deployment up $400 million this year up $100 million next year, and up $100 in 2022. We've talked about capital this year and next year are probably the highest capital spends we're going to have think rough numbers, about [$1.07] billion this year, though, there is an appetite to spend more at the business areas, but right now, we're forecasting [$1.07] billion and probably [$1.07] billion next year, which gives us still very strong, free cash flow going forward. We're committed to the dividend, there's absolutely…

So Jon, this is Jim. Ken just gave you a great landscape picture of the whole the scenery here, and I can go ahead and pick up on one thing he did say about maybe something you were looking for in your question, too, is, what would we do different potentially in a downturn on capital allocation, and just to recap the dividends there it's going to be a growing dividend in our view at least Ken and mine and the Board I expect would agree with us. But in a downturn in my historical, recent experience, and my philosophy here is that may be also presenting an opportunity for us if there is a downturn, we're going to look at the silver linings that may be there. And whether it's M&A and other investments. So if you add together the scale of Lockheed Martin in the cash flow that comes from that, they can just define the backlog on top of it the extends out into time and the balance sheet strength that we have, there could be opportunities for us to act in a time period where asset prices are depressed for things that we may want to bring into the company or JV with or whatever. And so that's just another way to picture it, is it the strength and the breadth and the foundation this company allow -- could allow us as it did in my prior experience to get assets we really wanted. That might be even more available at attractive prices, which then drive the nice ROI that you want the cash flow growth to come with it?

[Operator Instructions]. And then next we’ll go with the line of Richard Safran with Seaport Global. Please go ahead.

Thanks. Jim, Ken, Greg, good morning. How are you?

Good, Rich. Good morning.

So if you mentioned this in your opening remarks, I apologize. I missed it. Hopefully we have a fiscal ‘21 budget in place by starting the fiscal year. But, what I wanted to focus on was -- and what I wanted to ask you was about the global settlement you've talked about, and I'm sure you're aware that there's also been chatter about additional stimulus funding. So what I was looking for, is if there's any risk to your cash flows, and sales guide if there actually isn't a global settlement endorsed and or stimulus funding, I'm just curious about what assumptions are embedded in the new guide and what you're expecting from the settlement?

Yes, good morning, Rich, I'll take that. So you're right. We have provided [OSD] the Department of Defense [indiscernible] based on what we see as impacts to Lockheed Martin and its supply chain that go out to September. We just had a few internal conversations and we're starting to have conversations with the customer probably make sense since that is already stale, this is a fluid situation probably makes sense for us to update that rough order of magnitude and it may make sense for it to -- for us to extend it beyond September. We'll go through that with them. Regarding what, what we're assuming from a sales and margin standpoint, what we're generally seeing Rich, is these impacts are out farther than we thought the three months ago, and probably more in the ‘21 time period. And maybe a little bit in the fourth quarter of this time period. So if there is not a deal, the grand deal, I think, the next course of action would be for us to go work individually with our respective customers to negotiate on a case-by-case basis, what the impacts are to us. And what are not, the issue is going to be, the available funding for that. If there's not funding, these are all allowable costs. And, then the question becomes -- we put that into our forward pricing rates, and there might be some modest impacts to a couple of our programs but that would be probably more at the profit level, not at the top line. And right now we don't see that playing out as advertised. So it's fluid and we're working through this with our customers.

Seems like the summary is that the 2020 guidance is not greatly affected in either direction, whether the stimulus goes through or not.

Our next question from Cai von Rumohr with Cowen & Company. Please go ahead.

Yes, thank you very much. Jim you come from a tech background. You talked about, seeing opportunity to adopt some practices from commercial technology at Lockheed Martin, potential for partnerships A program you mentioned 5G.mil, could you expand a little bit in terms of how would you bring commercial technology into the company, and what would you expect to gain from it?

Sure, Cai. There's a number of approaches to this. Again, in my previous experience, we were embarking on this for commercial 5G applications, which is Internet-of-Things at scale including autonomous land and air vehicles. So that's happening in the tech sector now. So there's a 5G standards of that there's computing, which is storage and processing of data that's moving to the edge of the network and intermediate places from data centers to the edge. And there's the autonomous vehicle infrastructure and devices, we call them edge devices over in the tech side, that are being built, you think of them as the driverless car, et cetera, et cetera. So all of those elements are being processed a page, it's going to take time, by the way to do any of this in the commercial space. And those practices can be brought over, I think, to the defense industrial base. But only quickly if our customer comes along with us and changes some of the procurement practices, how we can get paid for things, there's a licensing regime that you may be aware of in the telecom space, particularly that enables global standards to be built. And then each participant or competitor designed to that global standard. That's how you can get 2G, 3G, 4G, 5G done in a space of 20 years when it takes that long to get one defense program done. So those are the kind of practices I think we can migrate over with some of those partners that are working on these things on the commercial side. Now, again, this is a long cycle initiative. Is it is on the commercial industry to it's going to require cooperation with our customer, and they're authorizing us to try some of these things. Because no one's going…

Our next question is from Seth Seifman with J.P. Morgan. Please go ahead.

Thanks very much, and good morning.

Good morning.

Ken, I wanted to just follow up quick, maybe on Rich's question about a settlement and the industry has been fairly vocal about this being important. You guys have mentioned that there's not very much impact one way or the other on the guidance for 2020. So should we think about it, then as you know, if it is important, and it's not important for 2022, so we think about it as being something that's important for 2021. And maybe if you could explain to us a little bit about the mechanics of, then there is a settlement sort of what happens is that, is that cash that the company has been missing out on this year, that will come at some point, perhaps next year, how should we think about the mechanics of how that all runs through the P&L?

Yes so, whether it hits this year, next year or all years Seth it is important, it's important to the industry. And it's not just Lockheed Martin it would be across our entire supply base. As I mentioned this is fluid, it's got a lot of moving parts. It probably just for our financials, it will -- it modestly in the second half of the year, but then probably hit more and ripple through the supply chain in the first half of 2021 is our best assessment. Mechanically, the way this could work if it was a big settlement, we still have to go through the details, but I'm guessing that the expectation would be so pick the F-35 a brand settlement, I think the expectation internally just from a program performance standpoint and at the customer level, they would want those costs and those budgets if you will to flow into those respective programs. I'm going to speculate that there probably would be some kind of clip level, from a dollar threshold standpoint that we would utilize with the customer set of what gets flow to the program. So there probably is a point where it's going to be a diminishing return and cost more to implement that across programs and not. Assuming if there's not a grant deal I think what you would see is each program would deal with a case-by-case and then mechanically, that's how that would happen. And it would be a sales impact, a cash impact and an EBIT impact across each respective programs. But, what you're talking about ballpark -- whatever our number is, it's -- we're a $65 billion, round up to $65 billion company. It's not going to be that material to our bottom line specifically if it's over a multitude of years. So we'll see, we'll see where this goes. I think this has got to take some time to play out still.

Next we'll go to Noah Poponak with Goldman Sachs. Please go ahead.

Hey, good morning, everybody.

Good morning.

So you feel that a number of questions here on what your business could look like for your capital deployment could look like in the hypothetical that the defense budget declines. And so I wanted to ask you the question, do you think the defense budget will decline? And we all obviously can -- and have a view on that based on the inputs that are visible to us, but I'm assuming you all have more insight into the geopolitical landscape and then maybe what both sides of the [IO] are thinking right now and in the committee's, but also in the potential presidential platform. So maybe beyond just the standard, world a dangerous place so. What is your view on whether or not defense spending goes down and if it were to actually grow? What specifically could make that happen from here?

Noah, it's Jim. I tried to not speculate on the behavior of people that are going to make independent decisions that we can't predict. So we're just getting the company ready for either scenario frankly, if it's stable, slightly rising or moderately rising defense budget, we know how to handle that. But if it's a declining defense budget, we're planning for that too. So we can't predict one way or the other that the behavior of human beings, whether it's six months from now, or whenever they're going to make these kinds of decisions, but what we can do is prepare for both scenarios. And that's exactly what we're doing. All of our BAs are looking at all their programs and saying if and they're planning this under Ken's guidance, if there's a downturn in defense defending, which I've asked every BA to look at and get back into the integrated plan, if in that scenario, it's a red team kind of an exercise, what would we do? It's a contingency plan that says, okay, we would offer with -- to our customers to say, look if your budget is x minus y. This is what we think you should do with our products and programs for extending lives and other things like that. And with the backlog we have in the orders in track and the production lines that are going into supply chains that operate is going to be two to three years before those defense budget cuts actually flow into the defense industrial base production line. So we've got time to work with a customer to make sure that that they can have their contingency plan and we're behind and we're working with them 100%.

Next, we'll go to Myles Walton with UBS. Please go ahead.

Great, thanks. Good morning.

Good morning.

Jim, I'm curious. If you look at from an operating segment level, where do you think your leadership might have the most impact from what you're bringing to the table, which are your technology partnerships, lessons learned that vertical integration from an M&A perspective? And how would that manifest would it be, faster growth, better margins, maybe just, where you think you could have the bigger impact, maybe one level down at the organization?

So by operating segment, each of those businesses with the corporate support they've had, they're great at what they do, I'm probably not going to make a better missile design than people in MFC can make so, what I think my benefit or add value added might be as cross cutting those BAs in a way that hadn't been done before here or anywhere else. And then linking them with a customer to do what the customer is literally asking us for, which is how do we connect equipment, systems, communication networks, across what they call domains. So how can I have satellite, get a signal from an F-35, then goes back to a ground based Missile Defense System to hit incoming threat to, up one of our installations? That's what they really want. Not any single one of our business areas or any other companies, frankly, I think could give them that, that solution. So we're working with, our recently hired CTO who was previously running DARPA to look horizontally across what are the missions that the DoD and our allies need to do? And what BAs and what BAs do we have the assets, resources and time technical capabilities to provide them that horizontal solution. So our typical backlog, we're providing what I call vertical solutions, we're providing products, platform, services, generally to one service, the F-35 and exception of course, but to one service, maybe just the one country, but we're going to need to link across services better we're going to need to link across our allies better. And we're -- and that's what this network solution is really about in my mind. So that's what I think Myles we can bring our tech world partners and, and U.S. and other allied countries, companies into this to make us better horizontally. I'm not sure they can even make us all that better, vertically, all that often, but horizontally, I think we can. And that's where you bring in the AI the 5G, the distributed computing, things like that. Some of our vertical technologies like hypersonic, we're going to do just fine in that, now we may buy individual M&A opportunities or targets to be able to fill ourselves in or do more mission system work in a technology like that, but I think it's more horizontal than vertical Myles to be answered quickly.

Our next question is from Peter Arment with Baird. Please go ahead.

Yes, thanks. Good morning Jim. Ken, can I ask you a question on just the order environment? You had a really strong quarter. I think Jim mentioned $22 billion in orders of 1.4 book-to-bill, but maybe you could just highlight some of the international pursuits that are still in front of you. And if you are seeing any kind of delays or chatter because of COVID-19, and maybe just how that -- will you expect to still come in this year in 2020? Thanks.

Thanks. Good morning, Peter. Thanks for the question. Yes, we still see some great opportunities out there specifically, internationally. We're not seeing that much slipped to the right, I'd say the only thing we may be seeing to the right, are the requests for proposal, solicitations we are moving to the right but they are holding firm to the end dates. But to answer your question specifically, a couple of things that we have out there that are quite large or we have a indefinite quantity and definite delivery F-16 order coming. The [indiscernible] key customer is Taiwan, and another country customer that should get announced sometime in this quarter. Think of that as an additional 90 aircraft for F-16 which we're quite pleased with. There is a C-130. Indonesia order that we're also anticipating happens later this year. There is some follow on work for the recently announced India Navy's MH-60R program that we got earlier, those are the main -- mainly the large ones we also have an [indiscernible], Japan order that we're anticipating later this year. And then of course there's a variety of F-35 production orders that we plan to book later this year that rough numbers 40% of those quantities will be of international nature. Going into next year, we see -- we also continue to see some strong demand for specifically F-16, our Integrated Air and Missile Defense. In parallel with our customer, we're pursuing a CH-53K order in Germany and in Israel that should get -- we'll shape that this year and hopefully get that award in a competition sometime next year. So there are a lot of international opportunities out there and really not seeing a lot of slowdown in -- from an order book standpoint.

John, I think we have time for one more question.

Great. And that will be from Robert Stallard with Vertical Research. Please go ahead.

Thanks so much, and good morning.

Good morning.

[indiscernible] I think is the way you guys describe it. I think just like to follow up on what Noah was asking about, not asking you to necessarily speculate on where the U.S. Defense budget could go to. But maybe to follow up on your introductory comments about the challenges in National Security, are these challenges around resources or is it around your folding the capabilities the U.S. will need to address national security threats going forward? And also could you elaborate a little bit more on that. Thank you.

I would characterize the challenges or the pursuits that China and Russia are taking to regain status as peer competitors, the United States in this field. And when you get into the depths of what's going on, it's concerning from someone who's been in this space, my whole career off and on. So that's the real challenges, we've got a country that in the form of China, which is getting very aggressive in their actions, their attitudes and their aspirations and they're investing in capabilities. Some of them are symmetric, and some of them are asymmetric to find our vulnerable spots in our traditional way of running our defense operations and trying to get ahead of us in those especially vulnerable spots. So there's got to be a lot of investment and a lot of technology investment to firm up those vulnerable places in our defense posture. And that's what I would characterize as the big challenge. And Russia on the strategic side, whether it's hypersonic missiles or other fairly strategic threat type elements is back in the game and investing too. So they may not be the great land army, they were in the 1980s and threatening Europe in that way. But they've gone to a technological threat posture, which allows them to do it from a greater distance. And we'll look with a much smaller military organization, if you will.

And gentlemen, just past the hour, so I think I will turn it back over to Jim now for some final thoughts.

Sure, as I conclude the call today. I do want to thank the employees of Lockheed Martin for their contributions and dedication during this time of global pandemic. They performed with excellent supporting our customers and their important missions. And I'm extremely proud of them and to be part of Lockheed Martin team now with 110,000 plus other teammates. So thank you again, everyone on the call today for joining us. We look forward to speaking with you on our next earnings call in October and have a great rest of the week.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.