Good day, and welcome, everyone, to the Lockheed Martin Second Quarter 2010 Earnings Results Conference Call. [Operator Instructions] 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.

Thank you, Devon, and good morning, everyone. I'd like to welcome you to our second quarter 2010 Earnings Conference Call. Joining me today on the call are Bob Stevens, our Chairman and Chief Executive Officer; and Bruce Tanner, our Executive Vice President and 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. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. We have posted charts on our website today that we plan to address during the call to supplement our comments. 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 Bob.

Thanks, Jerry. Good morning, everybody. Thanks for joining us today. I hope this call finds you well and maybe finding some ways to survive the heat of this summer. We have a lot to update you on today, and I would like to get right to it so I'll proceed on the basis that you’ve had a chance to read the earnings release and see our updated guidance. I'd like to start with an operational overview then I'll walk you through the highlights on a business area by business area basis. In Aeronautics, there are three programs I want to cover, and I want to start with the F-35 program, as the Joint Strike Fighter remains our program of greatest opportunity and greatest challenge. And I want to spend a bit more time on some additional detail with you here so that you have a good feel for where we are in the program. In the quarter, the government completed the Nunn-McCurdy recertification process, finding the F-35 to be essential to national security and a high priority. Extensive cost assessments and risk analyses were conducted and evaluated by DoD, highlighting areas requiring additional focus, adding resources to the development program and flight test and in software development while lowering the near-term production ramp rate by 122 airplanes. The program executive officer, that's the senior-most government official on the program, that position was elevated from a two-star billet to a three-star billet, and Admiral Dave Venlet, a superbly qualified professional with lots of relevant experience, is now in this role. In recognizing that there are program uncertainties and risks remaining, DoD called for a series of what will be routine ongoing reviews to monitor performance and to make adjustments, and the first of these reviews under Admiral Venlet, known as a…

Thanks, Bob. As we've done in prior calls, we've included charts on our website to help with this part of the discussion, and at this time, I’d encourage you to open the charts and follow along as I make my comments. Let's begin with Chart 3, which is just a reminder that all financials in today's web charts reflect the impact of the portfolio-shaping we announced earlier this quarter. First, Pacific Architects & Engineers was moved from the continuing results of IS&GS and to discontinued operations as we have decided to sell that business. As a result of this, we have lowered our sales guidance for the expected level of annual sales, but we were able to offset the earnings impact and our EPS guidance as you'll see on a later chart. EIG on the other hand will remain in continuing operations as we evaluate a sale versus a spinoff to our stockholders. Finally, we realigned our Readiness & Stability Operations, our RSO business, from IS&GS into Electronic Systems where it will be combined with Simulation, Training & Support to form the Global Training & Logistics line of business. If you now turn to Chart 4 and our second quarter sales summary, overall, the Corporation grew 3% in the quarter, with all four business areas achieving growth above prior year’s levels. IS&GS had the highest growth of 6%, due primarily to growth in our civil line of business due to work with the census program and other IT work for numerous federal agencies. Electronic Systems generated revenue of $3.5 billion, with 4% growth in the quarter. This was driven primarily by global trending and logistics and tactical missiles at Missiles & Fire Control. Aeronautics grew 2% in the quarter, primarily from expansion on the F-35 low-rate initial production contracts and…

[Operator Instructions] Our first question comes from Joe Nadol of JP Morgan. Joseph Nadol - JP Morgan Chase & Co: Bob, thanks for that update on F-35 on the flight testing and everything you gave. I was wondering if you could give a little more detail on where you are in negotiations on both LRIP 4 and the redo or the update to the SDD contract. Any sense as to when this stuff gets concluded and if there are any -- because we’re late now relative to when we usually sign the contract, usually it's May. Now we're in late July. Any color you can give.

Yes, happy to, Joe. So I think the most accurate answer on LRIP 4 is that we meet recurringly and are going through great detail on the program. My sense is, I share your view that it's taken longer, Joe, but I think the time that we're investing is sensible time to make sure that all the details are right. I will tell you from my point of view, as we will take a fixed-price incentive type contract here, we certainly want to get this right so that we understand the risks and expectations. I think, there's a corollary for the people on the government's team to want to get it right from their point of view. So I don't feel that there's any particular distress here. There is no particular pressure. I just think it's a genuine effort for everybody to want to get it right. My feel is we're a couple of weeks away to finalize it. As I said, the ongoing discussions are fulsome. They are interactive and we are exchanging views and listening to proposals and counterproposals and options and thoughts and things. So I will tell you it's gone a little longer, but I would not characterize it as getting off track in some way. On redoing the SDD contract, I think that's going to take a bit of time, and I think that's going to take a bit of time because as I mentioned to you, there are a couple of reviews that I think we should all begin to internalize as ordinary and even routine on a program of this nature, and it might even grow to be routine on other programs that meet a threshold in the Department of Defense. In our case, it’s a technical baseline review that’s already commenced, and I think will be done -- I will tell you, October or November, I don't control the date on that, but we're certainly working in close conjunction with the review team, as well as an update to the independent manufacturing review team. And that's how I phased in my mind, Joe, the likely resolution of matters remaining in the SDD phase of the contract.

Our next question comes from George Shapiro of Access 342.

A question on Aeronautics, Bruce. This quarter had 11.8% margin. I'm thinking that you probably increased the margin on some programs, maybe the F-35 production so if you could go into that. And then the second half guidance implies that, that margin is going to go down to 11% or so when it seems like it should, if anything, get better because you’ll have more C-130 deliveries, F-35 production will probably be higher so if you could explain why you’d expect it to go down in the second half.

Maybe just a couple of comments on the quarter itself. As you said, you're right at the 11.8% margin in the quarter, and I kind of think of that, as I compare it to last year's second quarter, as we've got much more F-35 volume bringing in with it lower margins than the rest of the portfolio. We also have in the quarter three additional C-130s, and those bring with it typically probably higher margin than the overall portfolio. Those are being offset by reductions in both the F-16 and F-22 program so that's kind of how we got to the second quarter here. I'll give you just a – I just found it kind of interesting as I was looking through some of the data, George, just to put it in perspective. For the first half of 2010, the development program that Bob mentioned for the F-35, the SDD contract, is 2/3 of what it was in the first half of 2009. While the LRIP contracts, think of these as the early production contracts, is twice what it was in the first half of 2009 so you see the phenomenon where we're shifting significantly from the SDD contract over to the LRIP contracts. As far as why we're seeing some downside in the second half of the year, you're right that there are higher C-130J sales both quantity-wise and dollar-wise in the second half of the year. But at the same time, we're seeing some acceleration overall of F-35 activity and of course, that brings with it the lower margins in total that the F-35 program brings with it. There was -- you mentioned a profit step-up. There was profit step up in the LRIP contracts in the first half of the year, and we're not seeing likely a step-up in the second half of the year and that's another reason why it will be down in the second half versus the first half.

Our next question comes from Richard Safran, Buckingham Research.

On the cash, you have a tremendous amount of cash reserves. You're generating record cash. Doesn't really seem like you're interested in a large acquisition. So just a couple of things here. You’ve bought back a lot of stock in the first half. Does that continue in the second half? Will you be slowing that in the back half? Is there a higher dividend yield likely? Is there a special dividend? Could you just go over what you think the plans are for cash here?

I’ll take a shot at that, and Bob can add to it, anything I leave out, Rich. Cash has been strong. As I pointed out, cash was strong in the second quarter, even making a $350 million pension payment in the quarter. I try to tee up in my comments that the second half of the year will bring with it a $1 billion-plus contribution, discretionary contribution to the pension plans. And we try to characterize that as being at least $1.4 billion in total for the year. So we do have the potential as we always do in the second half of the year, particularly in the fourth quarter of this year to take a look at where we sit pension-wise, funding-wise and cash on hand-wise and decide if there's additional contributions or not that would be beneficial to make in the latter part of this year. You asked about dividend yield, Rich, and I'll say, we always take a look at that in the third quarter time frame. We'll do that again with the board of directors at the September board of directors meeting. I think we’ve had some seven consecutive years of 10% or more increase in our dividend rate on an annual basis. We'll take a look and see what the board wants to do in the September time frame as I said. And lastly, I think you mentioned there’s potential for a special dividend yield. I don't see that happening. It's not under consideration at this time.

Our next question comes from Myles Walton of Deutsche Bank.

I was wondering if you could talk a bit about moving parts in Space as we move from '10 into '11. And in particular, the equity accounting for USA and kind of what you expect there, given the manifest. And also what your plan is currently for Orion as you see the authorization and appropriations kind of fight out and come to some resolution here?

How about, Myles, if I take the equity part of that and maybe I’ll ask Bob to comment on the Orion piece overall? On the equity, well let’s back up, Myles, and just give you kind of an overview of Space in general. Space had a very strong first half, a very strong second quarter. And as I look at the second half of the year, I think that scenario where we potentially have some better performance coming in even than what we're showing in our guidance numbers there. It’s a real strong performance coming out of Space, particularly on the EBIT side of that. And I think as I teed up likely, I've lost track if I did that in the fourth quarter call, but I know I did in the first quarter call. I talked about there being a spike in the fourth quarter in Space Systems’ margins primarily because of the cessation of the Shuttle program and some profit adjustments we’d made there. I'll point out that our current guidance does not include the effects of that adjustment as a result of the fly-out of the shuttle. It's kind of right on the bubble as to whether that's going to be a fourth quarter event of 2010 or if it's going to roll over into 2011. But right now, that is not in our planning for the 2010 time frame. Once that final event has happened for the United Space Alliance and the plight of the shuttle, we would expect to see the equity earnings of that drop fairly dramatically. You should think of it in between the two of them, I want to say, between the United Launch Alliance, and the United Space Alliance, probably somewhere in the order of $200 million worth of equity earnings in total. U.S.A. is probably 2x to 3x the size of – excuse me, United Launch Alliance is 2x to 3x the size of United Space Alliance. So the impact won’t be the full $200 million obviously. We show that reduction and I gave you guidance, I think, in the third quarter of last year. We talked about longer-term views of Space's margins, Space segment’s margins. And I still think that even with the reduction in the U.S.A. equity earnings, the margin level that we're seeing for Space can sustain primarily because of some adjustments we're expecting to see in some of our government satellite contracts. So I don't see a large margin cliff coming, going from 2010 to 2011.

And, Myles, let me talk a bit about the interactions we're having with not only NASA, but other numbers of the administration about exactly what the Human Space Flight plan forward ought to look like. I can tell you the members were talking with or working hard and very focused on developing a balanced approach. Balanced with regard to funding, balanced with regard to probabilities of success, certainly balanced with regard to overall risk, and there is an interest in leveraging the investments that have been made in Orion, and Orion's performance continues to be rated as very good on a programmatic basis. So we think they're trying to develop a formula that gives them flexibility going forward, and we think that Orion will play a role in that flexible approach. Perhaps first as a crew rescue vehicle, which I think we talked considerably about, not launching astronauts from the earth, but sending the capsule to the space station such that in an emergency, the crew could evacuate, get on the crew rescue vehicle and return to Earth. But also having flexibility in the Orion configuration that over time it can evolve into a crew exploration or crew transport vehicle, that would include lifting astronauts from the earth. And of course, the capsule discretion in Orion is also unfolding with regard to a variety of propulsion systems. What rocket or type of rockets will be available to ride, when. So there’s a pretty comprehensive review right now, but our sense is that we performed well, that individuals see the merit and risk reduction associated with Orion. And that there will be a role for the Orion spacecraft in some fashion as the strategy unfolds. And I think we'll learn a lot more about this in the second half.

Our next question comes from Heidi Wood of Morgan Stanley.

Bob, a question for you on the F-35. When the program was awarded, Peter Aldridge put restrictions on it insisting that Spiro development would be necessary to contain costs growth. And we now read about the Pentagon complaints about cost growth and no discussion about requirements creep, but one presumes they're related. But we also know that’s the issue that has repeatedly hurt or sank programs. So as we look forward, what's the likelihood that we're going to be seeing continual cost growth on the F-35? Or put another way, Bob, when can we see that cost growth has peaked? Where are we on the bell-shaped curve?

Heidi, that's a broad pretty sweeping question. Let me give you the best feel I can. I do envision the program as having two discrete components as I mentioned in the remarks: the Development phase and the Production phase. The Development phase, while lasting a number of years, is the shorter phase and for me, the criticality there is invest everything you need to invest, to get a full emission-capable system while focusing in the Production program on driving out the costs of recurring production of that fully mission capable system. So we saw through the Nunn-McCurdy process and we may see in an iteration or two in the future, some adaptations or adjustments associated with making sure we're allocating resources in a smart way to get everything we need to have on the program. Now in that Development phase, I would say resides at least part of your concern about requirements creep. I will tell you, we're not seeing requirements creep or the generation of a lot of new things. Let me say in some significant or major way, and I attribute a great deal of appreciation to customers who came forward early and who made sure that the airplane would meet their operational needs and focus, and I think Admiral Dave Venlet here is a real strength because he brings an operator's background and he ran the Naval Air Systems command. And he understands how to think in terms of operational needs and he works with his colleagues in that way. We will see the manifestation of these developments of how well we're doing in demonstrating the performance of the airplane. And if there are any additional features we’ll probably see that unfold in the test program where people might, under reasonable circumstances, want to see some tests added to demonstrate or assure some aspect of the overall performance. We may see it in some software, but I pretty much think, and has been reinforced by the tests that we've completed, the hardware is progressively locking into a good configuration. And there are no major technical showstoppers to date on the program. We believe that. I believe all in the government who have responsibilities of overseeing the program believe that. So for me, I know the numbers of airplanes are big, the size of the program is large, and therefore the cost numbers are significant. But I think within a substantially large program, we're seeing adaptations that we’d expect to see. But again, I want to disabuse you of any sense you might have that requirements turn or creep are driving either our performance on the airplane or within the program or the overall cost of the program because that's really not a source of cost concern at present.

Our next question comes from Doug Harned of Sanford Bernstein.

On IS&GS, when you look at the performance in the quarter and look at it with the new alignment compared to the past quarters, the margins really didn't change much in the quarter and backlogs were down, down about $700 million. Could you talk about what's happening there? And some of the programs I would assume that you've had issues with, those should be moving behind you yet we haven't really seen the improvement in margins. So could you talk about both those issues, both the backlog and margin there?

Hi, Doug, I'll take a shot at that. I think your starting premise there that programs that we discussed in the second quarter of last year that caused the margin pressure last year, that the performance on those programs is largely behind us and that, and I'd say that's true. What we are seeing though is that if you take a look at the newly configured IS&GS. We still operate under the Civil, the Defense and the Intelligence line of businesses. And you should probably think of those businesses as comprising probably about 40% Civil and roughly 30% Defense and Intelligence, and what we're seeing happening is that the Civil piece is growing at a very, very fast clip relative to the other two. In fact, the other two in the second quarter, actually Intelligence was fairly flat. Defense business was actually slightly down. And so while we're seeing in the quarter both Defense and the Intelligence lines of business doing, I'll say, north of double-digit margins, the growth that we're seeing in Civil, think of that as kind of the high-single digit kind of business is offsetting that performance in the Defense and Intelligence and resulting in kind of a flattishness in the margins that you're talking about overall. Relative to the backlog, I think some of it is just the timing of orders. I don't particularly see -- speak to backlog in general for the corporation, not just IS&GS, but we don't truly have a whole lot of large-scale competitive orders. The largest one of note obviously is the Littoral Combat Ship which should be decided next month. Most of the rest of our orders across all the business areas, not just IS&GS, you should think of them in the form of farm and follow-on orders. And I'll say in particularly in IS&GS this year is particularly spiky in the fourth quarter where a large number -- it's always high to begin with, but this year seems a bit abnormally high for the number of orders in the fourth quarter versus the rest of the year. I think overall, this backlog in general, we ended up a little bit down in the second quarter compared to some. Some of those because of the delays frankly, and getting the LRIP 4 negotiation done out of Aeronautics, but actually I still look forward to the rest of the year for backlog. I think we're going to see growth in the third quarter and then growth in the fourth quarter as well, and I would expect that we probably end the year close to where we started the beginning of 2010 with.

Our next question comes from Jason Gersky of Citigroup.

Just a quick question on the Space Systems and looking out as far as 2012. I think in the past, you've talked about some classified satellites that’ll come in starting in 2012. Can you remind us if that's still the case and what the scope of the contract is there for your classified satellites?

Jason, I think it is a classified opportunity. I think in this world, we can describe it as the next-gen satellite for the U.S. government, and it is a large opportunity. We still see that as likely occurring in the 2012 time frame in terms of the, I'll say the quantity orders. We’re right now performing some development work as we speak. We're already under contract for this, and I'll just remind you, this is a contract that was awarded to us sole source sometime, I guess, in the beginning of 2009 or late 2008 time frame. I think the order you're talking about is more the production order, and that's still on track for 2012.

And the scope of it and the size of it?

You should think of that as being multibillions of dollars’ worth of orders. And that's about as specific as I guess I want to get here.

Our next question comes from Ron Epstein of Bank of America.

Bob, when you think about F-35 in Europe and the current push for austerity in Europe, what impact do you think that’ll have on orders out of that region? And how do you think that could be offset in Asia?

I think that's a great question, and of course, one of the things we do as you do pretty often, Ron, is push back and look at how the global economy is changing and what conditions will likely result as a function of those changes. I note that the architecture of the program is such and the nature of the program design is such that most nations, I think, pretty soberly look out at a set of risks. The risks haven't really gone away, and one of the considerable risks is the proliferation of surface-to-air capabilities, think of area denial capabilities so what might have appeared more routine with regard to the use of tactical airplanes in the past is going to be anything but routine in the future because of these area denial circumstances. I think it’s human nature that almost everybody doesn’t want to think about the circumstances, but some people are forced to think, "What happens if there's unrest? What happens if there's instability?" So I think that’s one driver of looking and balancing economic needs and security needs. I think there still is a sense that we need to recapitalize on a security front. I think also, the way we’ve integrated global supply chain here. So many of the discussions that we are all quite familiar with on these types of programs extend beyond security to issues of economics and employment and interest, and that all makes a great deal of sense to us and I'm sure you as well. The Joint Strike Fighter architecture, in addition to being an interoperable system that shares the design and development on the security capabilities, also shares a component of the industrial base and it's very strongly integrated into the fabric of the program. So if you think of…

Devon, this is Jerry. I know we had some extended comments at the beginning of the call so if we could extend the call here to at least another 15 minutes, at least 12:15. We want to go ahead and get some more callers out of the queue.

Our next question comes from Howard Rubel of Jefferies & Co. Howard Rubel - Jefferies & Company, Inc.: Bob, when you took over leadership of Lockheed, there were a number of things wrong, and you set about methodically fixing them and frankly created an enormous amount of shareholder value and trust, and you name it, and it was done right. Now sort of we've kind of entered into a little bit of a more unsettled period. You've talked a lot about the F-35 and your initiatives to fix that and make -- I remember when you used to talk about the T-46 and the shock you had on that program and how that happened and how that just caused you to think about enterprises and so on. And so maybe going forward, could you sort of outline some of the other things you're thinking about in terms of where you're not satisfied because it looks like you're starting to move pieces around to make the business better?

I don't find that honestly, Howard, when I was given what for me is a huge privilege and opportunity to play a leadership role here that the company was all that awful. There were things we wanted to do better and more of, and things we had been doing that we were very proud of and we wanted to continue, and I tell you that's my appraisal of the environment today. There’s things that we’re doing enormously well in this company, but we have spoken, I think, with great clarity about a new reality that we’re all facing, and every one of us is going to face a new reality every day and it’s going to require us to behave differently. I'm very proud of the workforce here. I think they are first-rate. Their technical skills are high and their commitment is on a -- these are professionals who believe in the mission and will do everything and anything they possibly can to be successful. Our job is to create the climate. So I think you can look at the things we’re engaged in now. Portfolio reshaping is a careful examination of all of the lines of business and all the activities that we are in. And we want to make sure we're tightly aligned. We're proud of the PA&E business. These individuals in the business do great work around the country, but the customer demand is moving in a way that is progressively moving away from our strategic orientation, and we're realistic about that. In the case of EIG, we're enormously proud of our 40-year-plus franchise here that we built, but we recognize that customers want to raise the bar on even the perception of OCI, of conflicts of interest and we’re going to respond, I think, professionally and…

Our next question comes from Rob Spingarn of Crédit Suisse. Robert Spingarn - Crédit Suisse AG: Wanted to ask you, Bob, about this sizable Canadian F-35 deal. Could you talk a little bit about if there is any customization of the aircraft or anything different there and to what extent the contract accommodates that or any other elasticity in the price just given the cost situation now and how far out that is? And then just separately, Bruce, how are you sizing SOFSA on an annual basis? What do you think the flow is going forward and how much of that is war-exposed?

Yes, on the F-35, Rob, we have had a partnership relationship with Canada and eight other countries as well as three U.S. services for quite some time here with the award of the SDD contract in October 2001. There's been a huge amount of collaboration, and that collaboration includes the configuration, and I think you will probably hear when we explore opportunities in the future more oriented toward foreign military sales the discussions about how much flexibility there will be in the configuration, but I’ll tell you a considerable amount of flexibility is already built in the configuration to meet the demands that the operational command in various countries would have because that was the point of developing the kind of partnership and consortium we have on the F-35. So specifically to your question about Canada, there is very little discussion about some need for extraordinary tailoring of the air vehicle configuration or its mission systems because, frankly, it's already in there. There will be discussions, I think on a country-by-country basis that make a lot of sense about how those nations and those militaries will best support the airplane. And so there may be some tailoring of support requirements that would include some levels of industrial participation and so forth. I'll tell you that I believe you're not unfamiliar with this, and we are certainly not unfamiliar to this. Even as we just look back at our F-16 experience. There are various ways that we can help to support or enable customers to improve their operational availability, improve their mission capability and so forth. In the Joint Strike Fighter, at least in the near-term, it doesn’t look like there'll be a lot of configuration adaptability as much as there’ll be flexibility in approaches for sustainment support.

Rob, I think your second question concerns SOFSA and the level of activity we've got there and perhaps what the war exposure there is to the SOFSA contract. Just a couple of thoughts from my perspective. First off, this is an IDIQ contract and we’re in the middle of about a, I think it's 120-day transition period to move from the previous prime contractor to ourselves. So we're in the early stages of recognizing any high level of activity frankly on that program. Going forward on kind of a steady state basis at least near-term as we look into 2011, I would think from what I know of the contract, we're probably going to expect somewhere in the, say, $400 million to $500 million a year range in sales. And I’ve thought a lot about your question on the war exposure and, frankly, my reaction is I'm not sure I know what the normal is for this activity. I mean, special operation troops are so engaged all over the world in any event that I'm not sure how much of that changes as a result of, say, a slowdown in Iraq or Afghanistan for instance. So that activity has not seen a whole lot of change from what we could tell for a number of years, but I will say all those years included the Iraq and Afghanistan conflicts. So I don't know that I have a very crisp answer for you there other than I’m not really sure what’s going to happen there.

Our next question comes from Sam Pearlstein of Wells Fargo.

I guess, Bob and Bruce, can you talk about the planned voluntary reduction you've hinted at, and I know you don't know the details, but can you at least size some of that? Are we talking about something in the $10 million range, the $100 million range or what should that look like in terms of one-time cost? And then is that something that is an allowable cost and how should we think about the cost savings in terms of what you'll be able to keep versus what the customers might take back in pricing?

This is Bruce. I’ll try to answer it, Sam, to begin with. I think Bob characterized it well to begin with. This is part of our offering to essentially vice presidents and director levels across the corporation. And we're early into the stage of the voluntary executive severance program. The eligible people have until September 7 to actually declare so I don't have a quantification for you at this point in time. I would expect to have that -- obviously September 7 falls in the third quarter. I would expect to have that quantification in time for the third quarter. Our expectation is that this would be allowable cost. We’re doing this with the idea of lowering our cost projections going forward as a result of this. And I'll say, we would expect to have some cost reductions in particular as we do not back-fill all these positions first off and second off perhaps if we back-fill at lower levels. We're looking at that as well. So from an overall perspective, I would think this would essentially pay for itself in fairly short order and that’s the reason I think it is an allowable context.

And Sam, I'd only add and I must just for clarity and accuracy, I have not had a specific discussion with Secretary Carter about this initiative. But generally, as we have all listened to Secretary Gates, Secretary Carter and others about asking not only the Department of Defense, but all of the companies that support them in their mission to take a very serious look even an innovative look or doing things that may feel a little nontraditional to get a better control of overall costs and value that support affordability, even to the extent of talking about ways to support initiatives with additional profitability or incentives or other phases. I'm not trying to put words into Dr. Carter's mouth but I think spiritually, notionally, this is very much aligned with the kind of initiatives that we all ought to be thinking about, and it is absolutely the right thing to do to tighten up span of control, to improve reporting, to lower the cost structure, to be effective and efficient in a time where efficiency matters more rather than less. And that would certainly be part of a conversation we would have about whether the costs are allowable because they're very good returns, we think, for both the customer and we think for ourselves. And the goal of Secretary Carter's initiatives are to find these areas that work for the government and work for us. So I’ve felt. I think Bruce and others here have felt, that this is very much in alignment with the general sense of what we ought to be doing. And as Bruce said, in September we'll know the total level of participation. Again, the program is entirely voluntary, and we ought to appropriately allow individuals time to consider their alternatives and then we'll be better able to report out to you more detail here, Sam.

Our next question comes from Cai Von Rumohr of Cowen and Company.

F-35, Bob, you've mentioned the need to maintain supply stability, and you've also said several times this should be a very affordable plane if you hit the quantities. Could you A, give us some color in terms of what is the leverage if the quantities are a little bit shallower build at the front end because of funding considerations? What kind of threat that poses? And secondly, maybe give us what your year-to-date pension return is, separate question?

We've talked about some sensitivity. Let's go back a little bit. We look at 122 airplanes have been taken out of the near-term build rate. We're looking at 32 airplanes in Lot 4 that's under negotiation. We're looking at the likely prospect of having 42 airplanes funded in the next Low-Rate Initial Production options. The Independent Manufacturing Review Team, Cai, which is not a Lockheed Martin-staffed organization, but a government-staffed organization. We work supporting them and in concert with them. They’ve done a review of the program. They will do another review of the program. I think, it's likely they'll continue to review the program. We welcome that review because it gives us a lot of insight. I think they’ve looked at a multiple of airplanes year-over-year that history instructs all of us. Let me say with some latitude would more or less be optimal. Now that's not tied down to a specific aircraft or two or maybe three, depending upon volume. But it is a multiplier of about 1.5. So if you wanted to hold a number in your head that may be a nominal point of departure, you might think that every year, you're adding about half again the number to keep that 1.5 multiple. It varies a little on how much automation you have in the factory, how much machine pace versus labor pace. I don't want to get into all the gory details unless the audience here does which I suspect not, but it is a little sensitive to that. What's really fundamental to this overall affordability issue, in addition to volume, which is embedded in your question and important is what costs are you starting at and coming down from? And what learning curve is most likely to be able to be fit to those…

And, Cai, you’d asked about the pension return. I'll just say first off, I'm pleased to say we have positive results year-to-date on the pension plan’s returns. We're not quite at the 8.5% level. So we have some more work to do for the rest of the year. I think maybe the bigger question there is what's happening with the discount rates because we have more liabilities than we have assets in the plan. And as far as the discount rates are concerned, if we were to strike a line in the sand right now because of where we sit from an interest rate perspective, it would probably down somewhat and so as I said in my opening comments, one of the reasons why we are pushing out the guidance for 2011 into the January column instead of October is because of the volatility we're seeing here both on the asset side as well as the interest rate side frankly.

Our final question comes from Troy Lahr of Stifel, Nicolaus [Stifel Financial Corp.] Troy Lahr - Stifel, Nicolaus & Co., Inc.: Just one question. You talked about faster growth out of the civil IT business. Is that mostly driven by the census work and when does that peak? Is that kind of second quarter or third quarter or does that kind of stretch out into the end of this year?

Troy, two things. The really sharp growth we saw in census (sic) [civil] in the first, I’ll say, first half of the year was due really to two main contracts. The first one was the census contract and you're right, that’ll start to slow down in the second half. I believe we've hit peak in the second quarter, and I think we start to turn down, and that contract essentially phases out by the end of the year. The second piece of the contract or the second piece of the growth that we're seeing in the Civil is really the Department of Energy Hanford Site contract. As you may recall, it was under protest and took a while for us to get going. We're now seeing the growth in the revenue coming from that contract, and that’ll stay fairly constant over time not just the end of this year, but into next year as well. Troy Lahr - Stifel, Nicolaus & Co., Inc.: Is that ramping up enough to offset some of the census work in the back part, do you think?

I still think we’re going to – that particular contract, the answer is probably no. But we're still expecting to see the same sorts of growth going forward in 2011 that we're seeing in IS&GS today in its new configuration, but just because of other activity, particularly in the civil area, besides the two contracts I mentioned there.

I think with that, Devon, I would like to turn it over to Bob and let him give his final thoughts before we break up today.

Just thanks very much for being on the call. I know we went a little longer than we usually do, but we did want you to have sufficient detail about our business. I thank you for your patience. We'll see you next quarter. Devon, thanks for your help on the call today.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all now disconnect. Thank you and have a nice day.