There is Willie Nelson onefinancial covenant 65%

There is outline willie nelson stardust onefinancial covenant bobbie nelson fells in (65% debt to capital) in the credit facility. Fitchcalculates that NOC's debt to capital ratio at the end of September was 18%,leaving the company with significant room under the covenant even ifshareholders' equity were to decline at the end of 2008 because of possiblepension adjustments or potential write-downs of goodwill. NOC's solid cash generation is a key element supporting the company's creditquality. Cash from operations (CFO) in 2007 was $2.9 billion, including $200million of discretionary pension contributions, and NOC generated $2.2 billionof CFO in the first nine months of 2008. Free cash flow (CFO less capex anddividends) in 2007 was $1.7 billion, and in the first nine months of 2008 FCFwas $1.2 billion. Going forward, Fitch expects the company's cash deployment tobe skewed toward share repurchases, although acquisitions and discretionarypension contributions could increase. Share repurchases in the first nine monthsof 2008 were $1.46 billion.

NOC's annual dividend payments were $504 million in2007 and $395 million through September 2008, and Fitch expects additionaldividend increases Willie Nelson . In early October NOC closed the acquisition of 3001International, Inc williw nelson . for $92 million, and Fitch expects NOC to continue pursuingacquisitions in the areas of C4ISR, Tech Services, and government IT willienelson . As a result of the financial market declines in 2008, NOC's pension situationwill likely deteriorate significantly as of the end of 2008 pancho lefty willie nelson . Fitch believes thecompany has the financial capability to manage this, and NOC's status as a Dept.of Defense (DOD) contractor provides additional mitigants to the pensionsituation. NOC's pension was overfunded by $822 million at the measurement datein 2007. The final funding position for 2008 will be driven by actual returns in2008, the discount rate (currently 6.25%), and whether the company made anydiscretionary pension contributions in the fourth quarter.

Most of NOC's pensioncontributions are recoverable through government contracts because they qualifyas allowable costs under government Cost Accounting Standards (CAS) willie nelson always on my mind . Also, themajor DOD contractors have been given the opportunity to delay implementation ofthe PPA of 2006 while ERISA and CAS accounting standards are harmonized.Non-cash pension income is likely to turn to pension expense in 2009, loweringNOC's operating margins willie nelson dell diamond . Most of NOC's thousands of programs are performing well and are well-funded inthe DOD budget always on my mind nelson . However, NOC has had a noticeable number of programs that haveexperienced problems due to execution, technical issues, or cost growth on the road again nelson . Themain program that worsened in 2008 was the LHD-8 amphibious assault ship, whichrequired significant amounts of rework, leading to a delivery delay and a $326million pre-tax charge. The program appears to be on track with the planmanagement laid out in April NOC continues to win new business at a healthy rate. The 'book-to-bill' ratiowas greater than 1x in the first nine months of 2008, and backlog rose to $70.1billion from $64.1 billion at the end of 2007.

Key contract awards in 2008included the Gerald Ford Carrier; BAMS (Broad Area Maritime Surveillancesystem); and a $14 billion multi-year contract for Virginia class submarines,split with General Dynamics willie nelson honeysuckle rose . Teams on which NOC is a member also won the JTRSAMF and a contract to manage the Dept of Energy's Savannah River Site willie pancho . NOC andits teammate EADS (European Aeronautic Defence and Space Company N.V,BBB+/F2/Stable) also won the USAF Tanker competition, but this contract wasprotested and ultimately set aside for consideration by the new administration.Key losses in 2008 included NASA weather satellites and JLTV highwaymen nelson . Important contractcompetitions in 2009 include the Aerial Common Sensor and the USAF Tanker highwayman nelson .

High spending levels for national security continue to support NOC's creditratings, with approximately 90% of NOC's revenues coming from the U.S.government . DOD spending levels are high after nearly 10 years of substantialgrowth, but Fitch believes the spending upcycle has ended and going forwardthere will be modest core budget growth and gradually declining supplementalspending waylon nelson . The core defense budget is the most important for NOC's outlook giventhat the company gets only a modest amount from the supplemental budgets thatfund the War on Terror stardust nelson . Any defense spending impact from the 2008 elections willlikely be delayed due to the timing of the budget process and other federalpriorities such as the economy . Despite the possibility of trillion dollardeficits, Fitch believes large cuts to the core budget are unlikely for severalreasons including a high threat environment, the expense of cutting largeprograms, and the impact on defense employment in an economic downturn. In August 2005, facilities at NOC's Ships segment suffered substantial damage inHurricane Katrina, with required repairs, clean-up, and business delays totalingapproximately $1.1 billion before insurance proceeds.