Good day and welcome everyone to the Lockheed Martin Corporation Second Quarter 2009 Earnings Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Jerry Kircher, Vice President of Investor Relations. Please go ahead, sir.

I would like to welcome you to our second quarter 2009 earnings conference call. Joining me on the call today is Bruce Tanner, our Chief Financial Officer and Executive Vice President. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of Federal Securities Law. Actual results may differ. Please see today's press release and our SEC filings for description of some of the factors that may cause actual results to vary materially from anticipated results. Please also note that we have posted charts on our website, which supplement our comments today. With that, I'll turn the call over to Bruce.

I would like to begin by stating that overall the corporation had a quarter of numerous operational and financial highlights, but also contained some areas that fell short of our expectations. Financial highlights included our Aeronautics business achieving strong revenue, operating profit and margin growth, Electronic Systems continuing its exceptional margin generation above 13% and the corporation generating cash from operations in excess of $1.1 billion. Financial and operational performance in IS&GS fell short of our expectations this quarter and caused us to reduce its full year financial outlook. Improvements from our other business segments and the benefit of our cash deployment actions enabled us to maintain and reaffirm our full year financial guidance for the corporation. Before I move into the specific elements of our second quarter performance, I want to provide an update on the budget deliberations on the core defense authorization bill, as well as actions taken this quarter by the Department of Defense to realign its program priorities. Congressional budget committees continued to propose revisions to the administration's $534 billion FY 2010 core defense budget target. Consistent with the revised program priorities outlined by the Department of Defense, the budget committees have shown strong endorsement of our F-35 Joint Strike Fighter program. The proposed 2010 budget contains over $10 billion in funding for continued development and low rate production activities, including funds for 30 new aircraft for the LRIP 2 Contract. Increased support of the Littoral Combat Ship was also evidenced with the budget containing funds to procure up to three ships. Other programs identified for potential budget increases included Aegis, THAAD, Advanced EHF satellites with a balance of our program portfolio remaining well supported. These program recommendations will be reviewed by the full Congress in the coming months as the budget deliberations are concluded later…

(Operator Instructions). We will take our first question from Peter Arment with Broadpoint AmTech. Peter Arment – Broadpoint AmTech: Could you talk a little bit about IS&G, just the been growth going forward, I think you’re looking for 10% growth for the year at least sequentially in the back half of the year. Can you just maybe give us a little more color there?

Yes. Like as we said here today, maybe what ought to do, I’m sure this going to be several questions on IS&GS, so just kind of give a rundown on a number of point, I want to make there. I’m going to start if you will, with the second quarter sales price in GS, which were up a $160 million over a last year about 6%. Most of that growth occurred in our defense line of business, within IS&GS as you recall, we operate in the civil, defense and intelligence LOBs in that business area. The other two LOBs besides defense were fairly flat. And really what's driving that flatness, especially in the civil side is protest and to a lesser extent some customer funding delays. I'll just give you an interesting stat out, looking at as I was getting ready for this call. We've had 88 awards within IS&GS this year, five of those 88 awards were protested and of those five, three of those would have been on the outlook at the start of the year, within our top 10 contracts for sales in 2009. So, although five out of 88 might not sound like a big number, they were three of the larger programs we're expecting to generate sales for the whole year. I'll talk to a couple of specifics ones there. DOE Hanford contract, I mentioned on the prepared remarks; we won in December of 2008, it's really just now starting up. Similarly the [FASTer] contract which we reported last quarter as a win, that's likely going to be a new competition. And expectation at this point that competition won't be solved or settled until the 2010 timeframe, which essentially says zero sales for that contract in 2009. Now on top of that, we've had some…

Within IS&GS? Peter Arment – Broadpoint AmTech: Yes.

Actually, I think we'll be fairly consistent with the first half of the year for IS&GS. Is my expected outlook, Peter?

And we will go next to Itay Michaeli with Citi.

Just going back to second half margin particularly for Aeronautics and Electronics, you talked about the Canadian solution you're expecting there, I mean it looks like revenue should be accelerating in the second half and just how you feel about potential upside there in the second half of the year?

For Electronics and Aeronautics you said?

Yes, Bruce.

Let's start with the Electronics came in with a fairly flat to down quarter in the second quarter of this year, compared to the second quarter of last year. Last year, second quarter was a bit of tough compared with this one, because it was the largest quarter of the year for Electronic Systems and there were a number of timing deliveries particularly in missiles and fire controls. They happened in the second quarter of last year that we don't expect to be replicated in this year second quarter. Although, the Electronic Systems is down just a THAAD from second half last year, other than the missile and fire control being down, the other two lines of business within Electronic Systems, the MH2 and PMT, LOBs are both up in the second quarter. As I look towards to the second half of the year, I honestly think the third quarter is probably going to look very similarly to the second quarter. And then, we are expecting to have very strong growth in the fourth quarter, and a couple of things are driving that. One is, we do expect to have a much higher level, just as we did second quarter of 2008, a much higher level deliveries in the fourth quarter of 2009 compared to third quarter. Think of this is PAC-3 Missiles, HELLFIRE missiles and [the alike]. We also have and I know you guys have read about this. We also have had delays in getting the JASSM missiles accepted because we haven't completed the acceptance testing on that. We hope to have that complete later in the third quarter or fourth quarter and when that is complete, that will free up a lot of the JASSM backlog has been waiting to be booked from a revenue perspective if you will. I should also point out that with the T for C, the Termination for Convenience on the VH-71 program. That program probably had about $300 million of sales in the second half of the year outlook prior to the termination. So, my guess is that, our Electronic Systems will probably come in closer to the lower end of the range as we currently have it than even in the middle part of that range.

A quick follow-up on Space, in the past you've talked about a flattish top-line growth outlook beyond '09. Was that the backlog is coming in? It's growing pretty nicely. Do you think there might be some upside to that or you still looking more of a flattish top-line outlook?

I didn't answer to your aerial question, so I'll come back to that in a second. I think there is probably some nominal upside, particularly on the classified areas, where we have some potential for growth there. In the second half of the year for Space compared to the second half last year is actually going to have very strong growth probably about 8% range, we're just looking from a guidance perspective. Most of that because we have two satellite and a launch vehicle in the second half we had none in the first half of the year. I’d also think margins are likely going to be a little bit up in the second half for our Space as well. I’d like to go back if I could, Aeronautics US about the question on Space, just what the outlook is for the second half, is that right?

Correct.

Second half of the year in Aeronautics, is going to look very strong, we believe. Now, I think the total for the second half is probably going to be at the 10% sales growth or so over the second half of 2008 and what I’d expect to see is that we’ll have sequential growth quarter-to-quarter. So, the fourth quarter will be obviously, above 10% and the third quarter maybe little below or probably little bit below 10% in the third quarter. What’s driving that? We have three additional F-16 and four additional C-130s in the second of the year as compared to the first half of the year. So, I think we’re going to see some growth there along with the continued uptick in the growth on the F-35 programs in the second half of the year.

We’ll go next to Brian Ruttenbur with Morgan Keegan.

I have some housekeeping questions. So, I going to ask two at once, I think is the plan. First of all, on the repurchase of stocks, if you could tell us what you base your estimates on along with the tax rate on the year? So, those are both my question and my follow-up is about the stock share count that you plan to have at yearend and the tax rate you have to have in the second half of the year to be in guidance?

Yes, our guidance on the share count is essentially flat from where we are now about $391 million and tax rate probably within again somewhere about a little than lower 31, 31 to 31.5 for the entire year what we are looking right now.

Right, so you don’t plan to purchase anymore stock in these numbers, right?

On the guidance that's right.

We will go next to George Shapiro with Access 342.

I want to go back to IS&GS, I mean it looks to me like you released some high expectation about $50 million short in profit and you took down an effectively the second half of the year by $80 million. So, most of what you saw in the second quarter you’re expecting to recur in the third and fourth quarter. So, if you could just go through a little bit more rationale than you did is to why that occurred?

Look here very perceptive. If we just had the 10% growth in sales in the second quarter that we were hoping for and maintain the margin that about the level of last year, you are spot on it about $50 million miss from what our expectations would have been in the second quarter. And you are also right that says about $85 million is what left for the second half of the year. I think hopefully I explained the first half well enough to kindly understandable. The second half again is, this is kind of get a little bit of accounting stuff, but this is on our service contract accountings what which this business area has probably 55% of its total sales is in service contract accounting. When we record an issue on a contract it’s not like your standard accounting, on say last 16 contracts where we take a provision for today and you take a provision for future issues as well. This has to play out overtime. And so we expect the impact that we're seeing in the second quarter to also occur through the rest of the second half of the year, just because of that accounting nature. And as I said in the response to the earlier call, we had two contractual items planned in the second half that we really thought we were going to get some fairly sizeable improvements on. Neither one of those now looks like, it's going to happen in the year. So, we pushed those out. Both of them, as I said earlier are a little less in value than we'd expected them to be, at the time we set our guidance up in the first place.

And Bruce, just in general sense, it seems like most of the issues they are more in the civil side versus the defense side. I mean obviously, some of the delays are on the defense side. Does it make you think a question, the kind of the strategy of growing in some of the civil areas, and I guess is anything changing as a result of that?

No. Look, I still think civil is where we're going to see some of our strongest growth within this business area. And I think, I don't want to loose track of that fact. I mean if I look back to the 2006 timeframe with this business area, we've grown this business area by $3.5 billion in sales since that time and over $300 million in EBIT. I mean it was an important part of Lockheed Martin then, it's become an even more important part now and I suspect that will be the case in the future as well. So, no, I don't regret that we're in the civil business. I think again that's going to be a big part of our business going forward.

And then just one quick one if I might. On the first quarter call you actually said that you saw some margin in IS&GS would be a little higher than average this quarter to make up for the relatively weak first quarter. So, given as that call occurred three weeks into the second quarter. I mean is this an area then that you don't have the same degree of predictability, as you would like or is it just unusual that something happened to occur from when you made those comments in Q1?

It's probably the most heavily dependent on award fee, within many of the four business areas. Most of those award fees tend to happen in the second and fourth quarter in this business area. When I made that comment in the first quarter, I had expected us to kind of have the normal award fee scoring that we would expect to have in the second quarter, as we did last year for instance. And it was until late in the quarter, and those things typically come in the May, June timeframe. It wasn't until late in the quarter that we saw those materializing at the lower levels there. So, that was probably the surprise from my perspective, George.

And we'll go next to Troy Lahr with Stifel Nicolaus.

On the lower award fees, is this you just kind of missing some milestones, or do you think the customers getting a little tougher in paying out some of those award fees?

I want to be real clear on this. This has nothing to do with the tougher scorecard. This has nothing to do with acquisition reforms, some one, challenging the high level of award fee. We didn't perform as well we are capable of. The customer reflected that in there scoring through us. And we've got to fix that on our side. There is nothing else than that.

And then, so you had some executions issues. You have the startup issues there also. I mean, what changes are you implementing and how much confidence do you have that these are just kind of some near-term issues that you can't get your hands around, so that they don't become this problem quarter after quarter after quarter?

Yes, no it's fair question. Let's see, we've really kind of brought in, I can speak for my own organization, specifically our finance organization. We've kind of thrown subject matter experts from the other three lines of business, along with some corporate staff and kind of descended upon IS&GS to take a look at some of the practices there to make sure, yes the business that, as I said earlier has grown up very quickly in the last few years. We want to make sure all our process are very sound, so this doesn't happen going forward. This is an interesting business and that if you take a look at the backlog for IS&GS, it's just a little more than the sales for IS&GS. So literally this business kind of reinvents itself practically on a quarterly basis, definitely on an annual basis. So, one of the good thing or bad things given that scenario is, we'll get a chance as these contracts kind of play out very quickly to bid new contracts, and see if we can start off on a better foot with those new contracts. I mean I'm looking for more sizable orders in the second half of the year than the first half of the year. And given the rapid turnover of these contracts that's where we are going to see if this performance items are fixed or not.

So the added resource you're talking about, that's just putting more people on the program?

It's putting people and I'll say much more focus at a fairly senior level including Bob Stevens.

And we'll go next to Noah Poponak with Goldman Sachs.

Last quarter, you were asked about where you see red programs. I realized you guys have thousands of programs. But your answer to that question alluded to some things in space and to some things in ES and you didn't even touch on IS&GS. So how was it that this was kind of not on the radar screen and really snuck up on you?

Yes. I think we have a pretty thorough process by which we evaluate. We literally categorize all of our programs, we kind of put them into piles based on similar sized programs and we grade them, green, yellow, red, just like the stoplight chart, as you would expect us to do. IS&GS, I don't believe since IS&GS has been created that we've had a red program within IS&GS. In the second quarter, we had two of them pop up very surprisingly. One was in the classified area in the Intelligence business, as we’ve talked about previously and the other one was a fairly large contract within our civil business. So, while we had yellow indications on a number of programs, none of them turn red until the second quarter, whereas the others as I alluded to in the previous call, I’d say we already characterized in the red category.

You guys obviously had this very differentiated Aeronautic story, when we look at what's going on in the budget environment, what kind of two to three year growth rate can the non-Aeronautics part of the business see, particularly as we re-calibrate for this pressure on IS&GS, which you guys had been previously highlighted as the next best segment after Aeronautics?

For the next how long did you say Noah?

Next two to three years, as the administrations priorities really start to flow through the budget.

I think I have said on many occasions, you excluded Aeronautics, but I'll hit that in anyway. The Aeronautics we expect to be driving the growth of the corporation of the next year driven predominantly by the F-35 program in that period of time. IS&GS, even at the outlook we are looking at now is 8% growth and that is good growth I think by anyone's measure and we still think that is sustainable. Again, for a top-line perspective, the reason we had came up that is not because we are losing contracts, because contracts got protested. I think that environment will improve going forward. I still think as I look at the marketplace that IS&GS participates in, we still think that marketplace is expanding. Because if you remember that marketplace goes well beyond the DoD marketplace. So, those two business areas of the four, I still think it grow at fairly rapid clips, much faster than the DoD budget. I would think Electronics is still probably mid-single digit growth for the foreseeable future and one of the reasons it will potentially go higher than that because of the international growth primarily on air missile defense. Space, as I said earlier, I think we are going to have some nominal growth there. The wild card there could be some classified growth, but I'm not sure, I know enough at this point to tell you how much more that could be. Total Corporation, we still think it's somewhere in the mid-single digit, maybe a little higher than that for that period of time you’re talking about. I’ll also say, it's probably a little premature as you might expect, we are going to provide the 2010 guidance in October, I’ll give you hopefully a whole lot more detail picture at that timeframe.

When we look at what F-35 is doing, does that imply a very close to flat total growth for the non-Aeronautics part of the business?

Noah, I'm actually expecting some fairly significant growth in the C-130 program during that period of time as well. So, you've got some mitigating, probably two programs. One is the C-5 program with the re-engineering on that strategic airlifter and the C-130 program, both going to grow.

Yes, so I'm asking for the three segments that are not Aeronautics.

I'm sorry. I missed out your question.

So, does what are you saying imply that the non-Aeronautics part of the business, the other three segments in aggregate are kind of a flattish business over the next two to three years?

No, not at all. That’s not, what I'm saying at all. I said IS&GS is going to go faster than probably the corporation in total. I think Electronic Systems will probably go pretty close to the corporation's average and I think Space will grow little bit lower than the other three business areas, but any of that I still expect to see some nominal growth.

We will go next to Rob Spingarn with Credit Suisse.

Question on F-22, with the seven aircraft up for vote, is there anything significant about that number, clearly $2 billion is a sizable number, but is this a figure that allows you to bridge to and export program perhaps to Japan and where do you see that standing at this time?

I think the short answer to your first question is no. It would not allow us to bridge to a Japanese sale or any other international sale at this time. I’m not sure we’ve got a good answer for you as to why seven aircraft be reportedly (inaudible) and I’m sorry the latter part of your question was again?

Well, the latter part was about the export opportunity and where you think that’s stand on a hill at this point.

We still say precluded from being able to sell because of a Congressional amendment. So, until the amendment is rescinded, if it's rescinded there is no likelihood of international sale, but another has been discussion on that, but it will literally take the active Congress to repeal that law before we could sale them internationally. I’m not particularly positive on the ability for us to make that happen in the next few years.

And Bruce, where does production on long lead product standard at this point, the very early stuff and then is my follow-up, if you could just refresh us on the top competitive opportunities for Lockheed; let's say over the next couple of quarters.

When you say the production, Rob, I guess you're talking about F-35?

Well, I'm talking about F-22, but in terms of the real early smaller components on that program, have they ceased production at this point?

From a supply base perspective?

Yes.

It's getting real close. Think of this is kind of three-year cycles from contract award to aircraft delivery and our piece of that is probably in the last 12 months or so of that three-year cycle. So, suppliers tend to be the much longer legged portion of that effort. Think of it, the early part of that, mostly with metals, think as specialty titaniums and the like. So, those folks are literally probably at the end of this year will start seeing some impact if this nothings turned on.

Then the other part was just on competitive programs?

Competitive programs, honestly third quarter is probably going to look a little light. We are heavily weighted in fourth quarter. There is a number of competitions happening then. I would like to think we'd see an F-16 Egyptian order by that point in time. I'm also optimistic about a couple of C-130J international opportunities happening in the fourth quarter. I think this could be a big year. My question is whether it happens before the end of the calendar year or not, but we're expecting some big things happening on the C-130J international front as well as domestic front and not to distant future. Other big programs, competitions, it's not competitions. I guess it's actually a sole-source at this point, but we expect a large order within Electronic Systems on PAC-3 for Taiwan. We have previously done in both Singapore and the UK kind of a turnkey training activity. We expect sort of the next follow-on of that within Singapore, called the Singapore Fighter Wings course to occur in the fourth quarter. And then, on top of that there is probably, as I look at just see other data is probably close to $3 billion of follow-on business, not competitive, but follow-on business within Electronics Systems and we expect to materialize in the fourth quarter.

Did you mentioned at all before, when you talking about opportunities with F-35 partners, the timing on some of those orders?

Timing of the orders, no, I don’t know that I have a real good answer for you there, as far as my expectations. I would think, we start seeing those orders probably next year or 2011, early 2011, one or the other, Rob.

We’ll go next to Joseph Nadol with JPMorgan

Bruce, just back on IS&GS just for a moment. What I hear you saying is that, we had some protest and then couple of performance flip ups during the quarter, that are going to impact us not only in the quarter, but the rest of the year. But at the same time, several of your competitors out there, large and small have had some issues year-to-date in services, and of course, we all hear some of the things coming out of the government on in-sourcing and there has been more pricing competition etcetera. I mean, how much of this do you really think is just a couple of flip ups and how much of it is, is just a structural change it’s happening in the services business, big picture?

Well, I don’t think any of the sales impact that we’re seeing has anything to do with this. Yes, as you described the in-sourcing or even the competitive, more price competitive, I think we have a very competitive offering across the Board within our IS&GS business area. And again I don’t think the in-sourcing impact the sales at all. If you look at the EBIT side of the earning side, I’d characterize those as our issue, not driven by any other externalities. We didn’t perform as well as we are capable of and that's ours to fix.

So, it's really in your view nothing that can prevent that will prevent you, assuming you get back to your performance last year or in 2007 nothing to prevent your margin from getting it back up to the mid nine?

Yes. There is nothing kind of structurally as I look it now, it says that can't be done. We’ve got a correct the things that we slipped on and continue to win new cons. Again as I said earlier, this is the business that turns over practically every year, continue to win new contracts at the kind of margins that will allows us to do that. I think that simple.

Have you examined the OCI language that's out there and determine whether this is going to be any conflict of interest issue to your business, where you might have to divest any businesses, any lines of business etcetera?

We wouldn’t get into either acquisition or divestitures, but we have examined the OCI language. We don’t think we have a lot of exposure there. Less I’d say probably than a lot of our competitors, but it is something we are watching closely. We will continue to watch going forward.

Then just for one quick follow-up and F-35 just given all the budget, I think going on right now in Congress, now the moving part. Can you just give what level of sales you expect from that program next year versus this year even so its round number?

I hate to even hasten, I guess Joe. It is going to be significant growth in the F-35 part of next year. I talked to some of you folks at the Paris Air Show in the couple of sessions over there, I talked about the longstanding commitment that says, we would probably could have a $20 billion Aeronautics business within the year 2015. If you just put and say that probably 75 plus percent of that $20 billion, we expect to be the F-35 program in 2015 and if you kind of play annual compound, annual growth rates on those numbers, and it's going to grow in excess of 20% a year to get to that level and we still feel confident about that number in 2015. Hopefully that helps.

We will go next to Doug Harned with Sanford Bernstein.

I wanted to stay on in IS&GS. The thing that I find difficult is that we've got multiple issues here at one-time in a unit that's really performed very well over recent years. And from what you're saying I understand that we’ve got two red programs, one in civil, one in intel. There's a slow start with some state department work, which I assume is in global services?

Correct.

And then you have five protested programs and those are mixed, civil and defense. Is that correct? And those are the ones that those are delayed and slowing revenue growth. Is that correct?

Correct.

Then what I'm trying to understand is, is it a coincidence of these things have happened or is there something overall in IS&GS since there across multiple units that you feel needs to be addressed here?

That's an interesting question, Doug. I don't think that I see anything that is kind of like the common denominator across all the things that you mentioned there. I think the funding delays have more to do with the administration, not necessarily having the right people in place in the areas, where we had some growth last year that we seen from slackening off this year. I ultimately think that’s going to get fixed with the right people in place and we’ll get back on board there. The protest, the only comment I think we’ve been hit harder within IS&GS probably, simply because they compete for more quantities of contracts than any other business area in the corporation. We’ve been able to, with a higher percentage of those protest maybe than we have previously and they have all kind of come in fairly short order. As I said earlier, the big thing is they hit some of our more sizable contracts as well. We protested all the time in this business area, but often times they are on contracts that you don’t necessarily watch or follow or that don’t make that big they hit to us.

It sounds like the execution issues are two pretty separate ones, I mean those are pretty different businesses. And from what you’re saying in the State Department work, I'm assuming, when you say the administration, you getting people in, this is not an issue with this administration, it’s an issue of the transition to a new administration that slows that down. Is that?

You said it well.

Then the one other aspects of this is that you said how the business does tend to turn over even more quickly. And I know it’s also the backlog has come down. So, as you look forward here, you are constantly tending to deal with some new customers sets within the Federal Government, say maybe new types of projects. Is this in anyway contributing to more risk, you are in some different areas, is that a possible?

Some of those that we talked about in the intelligence is absolutely in our core has been in our core for a long, long time. So, I don’t. I’d hate to characterize it is because we are casting too wide a net if you will. There was some basic blocking intact and they got, got away from us on a couple of these things that we got to fixed. I don’t think it limits or shattering. I think it's all fixed. We dedicate ourselves and take the actions necessary to fix it. I think that's simple.

So, when Linda Gooden talks about the double-digit growth that she expect, I think on more of a multiyear basis. I mean this is still in your view very much intact.

I still think IS&GS will be amongst our highest growth business area going forward. I literally said through a briefing here not a few weeks ago, there we do see opportunities outside of the current marketplace that are growing very significantly. That we think we have a very good opportunity to plan and I think we have demonstrated just by the success of the past and we can play the market we are currently in and grow very considerably as well. Again most of that has come by outstripping the growth in the market at this point, we really kind of done that through taking market share from competitors. We still think that's possible because this business area operates in a markets place that is incredibly disaggregated. It's a very farflung area. The basic activities that we do though in those different marketplaces are not all that different between them and among themselves if that make sense.

We will go next to Sam Pearlstein with Wells Fargo Securities.

Bruce, you mentioned in the backlog changed with some of the termination like VH-71 and TSAT. What should we think about in terms of the second half in terms of any P&L impact from those in terms of contract close outs and termination fees etcetera?

You TSAT, it was related TSAT, but it was actually on the TMOS, it’s on the ground segment portion of TSAT and I wouldn't expect to see any earnings impact from those going forward.

Did the new AEHF is supposed to go in? Have you seen that order yet in terms of moving into backlog?

Yes. I think that it has. I believe it has.

And then just a follow-up, really separately; as given the market recovery we've seen in the second quarter, can you talk a little bit about the pension performance in the second quarter and where you stand year-to-date versus we assumed return on asset?

You've seen the marketplace just like we have, and I’d say that we are ahead of where we would be on a normal trend to get to the 8.5% level that we premised for the annual return on our pension plan. So, as we sit here today, what is it July 21st? I think we are ahead of schedule on that.

Can you quantify what that return is?

No, because it's going to bounce around between them. We will obviously tell you by the end of the year, we will give you an outlook in October for the 2010 timeframe, but obviously we're at this point ahead of where we would otherwise be if we were just tracking to the 8.5%.

We will take our next question from Heidi Wood with Morgan Stanley

I got to believe, where the IS&GS question one in a slightly different way. It seems that IS&GS is one of your shorter cycle businesses. So, withstand to reason that would be more susceptible to the after effects of both the change in the administration and tighter budgets. And you've taken great efforts to stress that its internal performance, but just to be devil’s advocate was read just a moment, if we look at tighter budget conditions ahead, when we'd be expecting tougher grading from customers, more protest and still a ramp up on programs and slower awards versus what you encountered in the last eight years in the Bush administration?

I’d like to think that as we go forward with the new administration and a new outlook and a new expectation of what is right in the acquisition process. I’d like to think the number of protest would diminish as opposed to increase or even stay constant. And that maybe overly optimistic on my part, but I still think that’s good for the industry, if we in fact can’t get the protest kind of back, so they are not as those probably one when they are today. The other part of your question relatively to the scoring and so forth, it hasn’t happened at this point, Heidi. Again I have try to make this characterize this as these are our issues to fix. There has been a lot’s of talk and discussion about that relative to the acquisition reform, but nothing that has come up that I have seen. They talks about different levels that would cause a concern of what's been written at this point. I guess is the best way to say it.

All right, but then, because the thing many of us are concerned as we look at, as this business has grown I don’t think we challenge the growth. I think it’s more whether the growth can be company with 9% margins or whether future ahead is sort of 8ish. But maybe you could give us color on, whether civil margins, because that’s an area of focus. Does that have a structural ability to go higher than overall segment margins?

Overall segment margin for IS&GS in total.

Yes.

I’ll honestly, I’d think the answer is, no. We probably frank with you and look at, what I said today, we’ve had these items that kind of popped up in the second quarter. We’ve taken, I think the right action to try to fix them. What I think I need to do is, to see if these actions do in fact kind of stem the performance issues that we saw in the second quarter, see if we can mitigate them somewhat going forward and then by the third quarter I have a whole lot better feel for what new business we have want at that point in time and I’ll be able to give you much better outlook in 2010.

Okay. With that I’d like to close by thanking you for joined the call today and for your questions and we look forward to talking to you again in October.

Once again that does conclude today's conference. We thank you for your participation.