Gaston Kent - VP of IR Ronald D. Sugar - Chairman and CEO Wes Bush - President and COO James F. Palmer - Corporate VP and CFO

Douglas Harned - Sanford Bernstein Myles Walton - Oppenheimer & Co. Ronald Epstein - Merrill Lynch Heidi Wood - Morgan Stanley Cai von Rumohr - Cowen & Company Steve Binder - Bear Stearns Joseph Nadol - J.P. Morgan Joe Campbell - Lehman Brothers Howard Rube - Jeffries & Co George Shapiro - Citigroup

Good day ladies and gentlemen, and welcome to Northrop Grumman First Quarter Earnings Conference Call. My name is Lacy, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session at the conclusion of the presentation. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Gason Kent, Vice President of Investor Relations. Sir, please go ahead. Gaston Kent - Vice President of Investor Relations: Thanks, Lacy, and good morning everyone. Welcome to our first quarter 2008 conference call. I would first advise you that our 10-Q has been filed and is available to you now. We provided supplemental information in the form of a Power Point presentation that you can access on our Investor Relations website at Northrupgrumman.com. The presentation will be available for a limited time and should be viewed in conjunction with today's commentary. Before we start, please understand that as shown on slide 2, some of the matters discussed on this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect the company's views with respect to future events and prospective financial performance. Forward-looking statements involve risks and uncertainties and the actual results of the company may differ materially from the results expressed or implied by the forward-looking statements. A more complete expression of these risks and uncertainties is contained in the company's SEC filings; including form's 10-K and 10-Q. During the call, we'll discuss first quarter results including the non-GAAP measures, segment operating margin rate and free cash flow, both of which are reconciled in our press release. During today's call, we will also discuss our outlook for 2008. Guidance will include GAAP measures of sales, operating margin, earnings per share from continuing operations, cash from operations and non-GAAP measures total segment operating margin rate and free cash flow. We also want to draw your attention to schedule six of our earnings release, which provides the discontinued operations reclassification for 2006 and 2007 for the Electro-Optical Systems business, which has been sold. On the call today are our Chairman and CEO Ron Sugar, our President and COO, Wes Bush and Chief Financial Officer, Jim Palmer. Please go now to slide 3 and at this time I'd like to turn the call over to Ron. Ronald D. Sugar - Chairman and Chief Executive Officer: Thank you Gaston and good morning, everyone. Thanks for joining us to discuss our first quarter earnings. As we announced last week, we are reporting a charge to earnings this quarter for LHD-8 and related impacts at our Gulf Coast shipyard. We believe we have appropriately bounded its impact and we are taking all necessary corrective actions. Wes Bush will provide additional discussion and the specific milestones by which you can measure our progress as we move forward. Although the LHD-8 charge is deeply disappointing, the remainder of our first-quarter performance was strong. This morning we also announced an increase in our quarterly common stock dividend. The new quarterly dividend is $0.40 per share, up from $0.37. This is the fifth consecutive annual increase in the dividend. We have doubled our dividend since 2003, which represents a compound annual growth rate of nearly 15%. This most recent increase demonstrates the confidence we, and our Board have in the company's financial strength and outlook. We continue to execute a balanced cash deployment strategy that includes dividends and share repurchases. Our dividend policy calls for maintaining a competitive payout ratio. This increase demonstrates our commitment to that policy. We also repurchased 7.6 million shares of stock during the quarter for $600 million, which leaves us with $1.9 billion for additional repurchases on our current authorization. And lastly, earlier this week, we closed the sale of our Electro-Optical Systems business for cash proceeds of $175 million and a small after-tax gain. Now, I'll briefly discuss first quarter results before turning the call over to Wes and Jim. With the exception of our Gulf Coast shipyards, we continue to see performance improvements across our programs and businesses. It was a particularly strong quarter for new business awards. We captured $12.1 billion in new business awards, increasing total backlog by 7% to $68 billion, another record for this company. We continue to see a strong flow of orders across all our businesses with backlog increases for Aerospace, Electronics and Ship Building. The obvious highlight of this quarter was the KC-45 Tanker win. The United States Air Force selected Northrop Grumman for development and production of up to 179 air refueling tanker aircrafts for approximately $35 billion. The Air Force announced that Northrop Grumman's offer clearly represented the best overall value to the government. Our competitor has filed a protest to the Air Force's decision with the Government Accountability Office and we wait the GAO's determination regarding that protest, which is due no later than June 19th. We are looking forward to a successful resolution of the protest and getting on with building the first of the KC-45 tankers, which are sold greatly needed by our war fighting men and women. In addition to the tanker award, we were also awarded $1.4 billion for the DDG 1001 Destroyer and major components for the DDG 1000. We also continue to be very successful in the restricted arena with several of our businesses capturing significant restricted contract awards, which in total represent approximately $2.6 billion in new awards. Shortly after the close of the quarter, our mission system sector won a large position on Joint Tactical Radio System JTRS AMF as a member of the Lockheed Martin team. And this week, Northrop Grumman was awarded the Navy's $1.2 billion Broad Area Maritime Surveillance contract or BAMS. This award highlights our leadership position in unmanned ariel systems, our legacy of innovative engineering to fulfill critical customer requirements and our ability to win the large improvement competitions. BAMS is another key strategic victory, the third in a series of major competitive aircraft wins that began with the Navy's UCAS-D last fall and also includes the KC-45 refueling tanker win in February. With the UCAS-D, KC-45 and BAM, we have captured three of the largest of our near-term competitive opportunities. But many more very large new program competitions will be decided this year and next. These include the joint like tactical vehicle, Aerial common sensor, Global Positioning System Operational Control System or GPS-OCX, the VISX, which is a competitive follow-on to our very successful Vehicular Intercommunication System, The Kennedy Space Center support services contract and GOES-R, the environmental monitoring satellites. In addition to these, we also continue to have a significant competitive opportunity set in the restricted arena. We also expect a significant increase this year in contract follow on awards from our current portfolio of franchise programs. Examples are the CVN 78 construction contract and follow-ons to the Air Force Global Hawk, Space Based Infrared System and the F-A18 aircraft for Australia. Based on first quarter results, we continue to expect sales of $33 billion. We now expect 2008 earnings from continuing operations of $4.90 to $5.15 per share. And we now expect cash from operations of $2.6 billion to $2.9 billion and free cash flow of $1.7 billion to $2.1 billion. So looking ahead, we are winning major competitions, generating record backlog, growing our sales, expanding our margins, and executing our balance of cash deployment strategy all of which support our confidence in our ability to achieve the 2012 targets we laid out at the Investor Conference in February. We continue to be very confident and excited about the future of Northrop Grumman. Now, I will turn the call over to Wes Bush. Wes? Wes Bush - President and Chief Operating Officer: Thanks, Ron. My comments are outlined on slide five and will include more detail on the LHD-8 path forward so that on future calls we will be able to update our progress against those milestones. But before discussing LHD-8, I want to touch on operational highlights on some other programs of interest to you in our Electronics and Information Technology businesses. I'm pleased to report that during the quarter we continued to move forward on all of these programs, making progress towards completion and working within our current estimates to complete. Block 60 Falcon Edge software is achieving intermediate delivery milestones towards scheduled delivery of the third increment of electronic warfare capability in the second half of 2008. The second of three intermediate milestones was delivered in the first quarter, as planned, and the next increment is backing the schedule. On Wedgetail, we've completed the development, test and evaluation phase of the program and completed the delivery of the software build to support the tight acceptance test in evaluation phase, which is scheduled to start this quarter and will continue into the third quarter. The start of this phase was delayed somewhat by customer activities but this does not impact our performance to the EAC. On our state and local outsourcing contracts, Virginia continues to move through transformation and has completed key milestones. The transformation activities will be completed this summer and the program will begin to deliver recurring services from the transformed environment on schedule in July. Ongoing infrastructure consolidation continues to the middle of 2009 as scheduled under the contract. On our county of San Diego program, we completed transition last year. We've made good progress through stabilization and we're focusing on recurring service delivery. The program team is working to leverage transition improvements to drive efficiency in ongoing operations. The New York City wireless program achieved initial operating capability on March 31st. This first go-live event represents a tremendous achievement by our team. We're continuing to build out the network and anticipate completion this year. As this impressive capability nears completion, we expect to be adding new services in the future, further enhancing the utility of the network for the city. Now, I would like to discuss LHD-8 and the path forward on the program. We have reset the schedule based on the revised DAC an established key milestones to measure progress. The first major milestone is the aft main engine light off that's scheduled during the second quarter. When this milestone is complete both the forward and the aft engines will have been light off and both shafts will have been turned. This milestone establishes that the main propulsion plants are working. As we indicated last week, a key driver of our schedule is the work to be performed on the electrical cabling of the ship. During the third quarter, we plan to complete the electrical cabling installations throughout the ship. Accomplishment of this milestone is key to our ability to support the test program on the revised time line that we have established. In the fourth quarter this year, we will perform the integrated propulsion test, that’s required prior to builder's trials. This test simultaneously runs both engines at the power level supportable with pure site testing. And finally, builder’s trials at sea will begin in the first quarter of 2009 preparatory to schedule delivery in the second quarter of '09. In addition to identifying a comprehensive set of milestones as a part of the revised schedule, we have changed the profile of our systems test sequence to ensure that we identify any residual issues early in the rework cycle. As I mentioned on the call last week, I am reviewing progress on LHD-8 on a weekly basis and we are addressing the issues that led to cost and schedule growth to variety of programmatic, systemic and leadership actions. I'll provide a report on our progress on LHD-8 at each of our quarterly conference calls. I focused my comments today on the set of programs that we previously identified with operational challenges. Looking across our portfolio of over 20,000 programs in the company, I think it's important to note that we are delivering high quality products, while continuing to improve our program margin rates. This is the fundamental driver of performance in our company and it's on track to support the accomplishment of our long-term financial objectives. So now I will turn the call over to Jim to discuss the financial results. Jim? James F. Palmer - Corporate Vice President and Chief Financial Officer: Thanks, Wes. Good morning, ladies and gentlemen. In my comments this morning, I'm going to discuss the first quarter financial highlights, including the breakdown of the ship building charge, describe our cash trends for the quarter and then move on to a discussion of guidance for the remainder of the year. I'd like to begin by pointing out a change to schedule five of the earnings release. Today's presentation includes new business awards rather than funded contract acquisitions. We've made this change because new business awards is a better measure of the business that we are actually capturing. It can be reconciled to sales and total backlog changes for the period and makes more sense when calculating our book-to-bill ratio for the quarter. Our old measure, funded contract acquisitions simply measure funding on new awards or old awards for which funding had just been received. Thus, it did not represent new business awarded or captured during the period. Using the new business award ratio, we had a very strong book-to-bill ratio for the quarter of nearly 150%[ph]. Beginning with slide 6, we also had a solid 6% sales growth in the first quarter, this is net of $134 million reduction for the step back in revenue resulting from the EAC adjustments in ship building for LHD-8. Without this adjustment, sales growth would have been approximately 7.5%. The trends in three of the four businesses are consistent with our expectations and indicate that continuation of the same positive trends we saw in 2007. For information and services, 6% sales growth includes double-digit sales growth admission systems, mid-single digit growth for information technology and a small decline in revenue for technical services. One of the primary growth drivers for information and services is continued strength in our intelligence business at IT and mission systems. This strength includes revenue ramp up on existing programs and new business capture as well. State and local programs like New York City Wireless and the Virginia IT Outsourcing program also contributed to this sales growth, but to a lesser extent than last year. The other revenue driver in the quarter for information and services was IT's NETCENTS contract for the Air Force. In last year's 4th quarter we received a task order under this contract for defense knowledge online, which generated hardware and service sales in the first quarter. Moving to aerospace, sales rose 4%. Both integrated systems and space technology had positive comparisons to the prior year period. This is a reversal of the recent trend we've seen at integrated systems. For the last several quarters, the transition from development to production for programs like JSF and Advance Hawkeye have impacted sales. The slowdown of MP, RTIP and the cancellation of the E-10A also impacted sales. These trends are still in place, but this quarter's higher volume for existing programs like Global Hawk and new revenue from new programs like Navy UCAS-D, restricted work, and KC-45 tanker program are more than offsetting these declines. The tanker sales reflect the work we began before the Air Force issued its stop work order due to our competitor's protest. Moving to space, the trends here are also consistent with prior quarters, we continue to see higher revenue in the restricted programs and in the James Webb Space Telescope program. Sales increases here are partially offset by lower revenue for other programs including AEHF, STSS and TCAF. Electronic sales rose 2% and include higher sales to the army for the lightweight laser designator/range finders and the vehicle intercommunications systems. Sales also rose in shipbuilding. The increase includes $48 million in revenue from fleet support, which represents revenue now being booked for AMSAC, as well as approximately $80 million for surface combatant programs. Increases in other programs were largely offset by the $134 million step back in revenue resulting from the LHD-8 EAC adjustment. Moving on to operational performance in slide 7, information and services expanded its margin rate by 50 basis points, aerospace expanded its margin rate by 30 basis points and electronics likewise expanded its margin rate by 80 basis points. In all three businesses, overall program performance improved. For electronics, program performance improved for electrical optical and infrared counter measure programs, as well as land forces programs. In addition, royalty income was higher than in the prior year period. The royalty income represents settlements of third party licensing and patent disputes relating to fiber-optic technology originating with Litan [ph], one of our heritage companies. For our aerospace program performance improved that both Integrated Systems and Space Technology. In restricted programs the EA-18G, B2 and the airborne laser programs. On a consolidated basis, the ship building charge reduced segment margin rate by a little bit more than 400 basis points. Without the charge, segment margin rates would have been nearly 10% compared with 9.5% in 2007 first quarter. With the exception of our Gulf coast shipyards, we continue to see performance improvements across programs and businesses. The charge and shipbuilding totaled $326 million. $272 million of the charge is for the LHD-8 program. $35 million represents the resource impact and risk adjustments to other Gulf coast ships and $19 million is the non-cash write down of purchase intangibles resulting from the adjustments to EAC for these programs. Of the $272 million for LHD-8, about $180 million is for test, integration and rework, and approximately $70 million is for the scheduled extension and the associated level of effort that continues as the schedule is extended. Our total operating margin rate includes improvements in the net pension adjustment and comparable quarter-over-quarter amounts of corporate and allocated expenses. Excluding the impact of the charge, our total operating margin would have been 10%. , a 60 basis point improvement over last year. Other than the issues in shipbuilding, the positive trends in our businesses are very much in evidence in this quarter's results. Other notable items affecting the first quarter include the increase in other net, an income of $15 million from the expense of $8 million last year. This primarily represents the increase in royalty income over the prior year period, which I mentioned earlier. Offsetting these improvements is an effective tax rate of 35.7% this quarter. Since the adoption of FIN 48 in last year's first quarter, our income tax expense also includes interest expense related to what FIN 48 would characterize as uncertain tax positions. Although this interest cost is relatively a stable dollar amount from quarter-to-quarter, it represents a proportionally larger component of this quarter's total tax expense, and increased the tax rate by nearly 1.5 percentage points. This quarter's higher tax rate also includes the expiration of the research and development tax credits at the end of last year. Moving on to cash on slide 8, cash from operations was $194 million for the quarter, down from $400 million last year. Historically the first quarter is normally low, and that is obviously the case this year as well. In addition, during the first quarter this year, two of our sectors were transitioning to an accounting software system that is common with other parts of our business. This transition had a timing impact on billings that increased accounts receivables by about $200 million, which we had anticipated. The transition to the common system is now essentially complete, we do expect to recover the majority of this amount in the second quarter. That leads me to our updated 2008 financial guidance for the business, which is summarized on slide 9. Our sales guidance for each of the four businesses is unchanged. We continue to expect consolidated sales of approximately $33 billion. For operating margin rate, we continue to expect low 8% for information and services. We are increasing our guidance for aerospace operating margin to approximately 10% from the mid 9% range. Likewise, we're also increasing our guidance for electronics by approximately 50 basis points. We now expect a mid 12% margin rate there. The outlook for ships has been adjusted for this quarter's charge and the ongoing impact of the step-down in margin rates going forward. So we now expect margin rates of about 3% for ship building in 2008. Slide 10 summarizes prior and the updated guidance, the change in the segment margin rates, results in a consolidated segment margin rate of mid-to-high 8%, about 100 basis points lower than our prior guidance. And after allocating for expenses and the net pension adjustment, we would expect our total operating margin rate to be in the high 8% range for 2008, again about 100 basis points lower than our prior guidance. We continue to expect a tax rate of approximately 34% for the year. For our earnings per share from continuing operations, we've adjusted the guidance for the 100 basis point reduction in segment as well as total operating margin rates. As I mentioned, this reflects the impact of this quarter's ship building charge as well as the impact for the remainder of the year from the LHD collateral impacts to other ships. That impact to earnings for the remainder of the year is about $0.10, but the increased margin in ES and aerospace offset somewhat the ship building earnings per share reductions giving us an updated guidance of $4.90 to $5.15 per share. Now, looking at cash, the impact of the ship building charge reduced our prior 2008 guidance by $200 million. We now expect cash from operations of $2.6 billion to $2.9 billion, and free cash flow of $1.7 billion to $2.1 billion. And we do expect our cash to be more back end loaded this year with performance becoming progressively stronger as we move through the year. This does reflect the impact of the transition to the new common accounting system in the first quarter, as well as tax payments, which will be made in the second quarter. I would echo Ron's comments regarding our commitment to our balance cash deployment strategy. Given the momentum we are seeing in new business awards, our record backlog, the strength of our balance sheet and our strong outlook for cash we expect to continue our balance cash deployment strategy going-forward. Also as Ron said, we don't see the ship building charge as impacting our long-term view of the health and potential of our business. We continue to have confidence in our 2012 financial targets as shown on slide 11. This includes our outlook for ship building as well. We continue to see significant opportunities to improve performance in this business on a go-forward basis. One of those performance improvement drivers will obviously be completing and delivering the ships that have been impacted by hurricane Katrina. Although this will take a little bit longer than we had previously anticipated, it is still likely to be essentially completed by the end of the 2009 as we have previously planned. So, Gaston, that completes my comments at this point. I'm ready to turn the call over to you for questions and answers. Gaston Kent - Vice President of Investor Relations: Okay. Thanks, Jim. Lacy, we're ready for Q&A please. Question and Answer

[Operator Instructions]. And our first question will come from the line of Rob Spingarn with Credit Suisse. Please proceed.

Hi, guys. It is Peter Skibitski [ph] actually. Ronald D. Sugar - Chairman and Chief Executive Officer: Hi, Pete.

On the 3% ship margin for the year there, I just wanted to ask that kind of imply the teams were on 8.5% or so Q2 to Q4. Do we think of that as the increased level across the last three quarters, or is there kind of going to be a ramp there and is there any reason for the Street to think that '09 will be below the level of last three quarters? Ronald D. Sugar - Chairman and Chief Executive Officer: Pete, your perspective on the remainder of the year is essentially as I see it as well. I do expect a ramp as we go through time both this year and then into next year.

Got you. And then I wanted to ask as well. Given that the revenue takedown this quarter in ships, should that lead us to believe your ship revenue guidance is going to be towards the lower end as you finish out the year, or is there still the possibility that we have to be upper end? Ronald D. Sugar - Chairman and Chief Executive Officer: I think the guidance of $200 million between the low and high is about what I see at this point in time.

Okay. Put some takes as the year goes on. Ronald D. Sugar - Chairman and Chief Executive Officer: Yes.

Okay. Got you. Okay. I will get back in the queue. Thanks guys. Ronald D. Sugar - Chairman and Chief Executive Officer: All right.

And the next question will come from the line of Doug Harned with Sanford Bernstein. Please proceed. Douglas Harned- Sanford Bernstein: Hi, good morning. Ronald D. Sugar - Chairman and Chief Executive Officer: Hi Doug. Douglas Harned- Sanford Bernstein: On the ships, the 10% margins, you're looking 10% margins aside from the LHD-8 situation. That is up at the level that you're talking about long term. And the first thing I was interested in understanding is, do you see the shipyard now LHD-8 aside at currently being at a higher level, even closer to what you're long-term objectives are? Ronald D. Sugar - Chairman and Chief Executive Officer: Doug, at the Investor Conference in February, we talked about a longer-term view of the ship building business, having the potential to have margins in 10 to 11%. I think that is the… my view has not changed there on what that long term potential is. Clearly we, as I mentioned in my prepared comments, getting through the Katrina affected ships is important. And Mike and… Mike Petters and crew responsible for the shipbuilding program are really focused on improvements that we can drive across all of our ship building organizations and implementing those will be the key, I believe to achieving those longer-term objectives. But frankly, again, when I look at those objectives, and past performance, I don't really see a reason why we can't get there. It does mean, as I said, completing the Katrina affected ships, and being very diligent about our processes around ship building as we go forward. Douglas Harned- Sanford Bernstein: But, do you see the performance levels you're at now aside from LHD-8 is getting closer to what you're going... I guess let me backup, if you look at 10%, is this sustainable type of a margin, as we are able to take the LHD-8 aside while or are there some benefits we saw in the quarter that were one-time in nature? Ronald D. Sugar - Chairman and Chief Executive Officer: Doug as Pete observed on the prior questions, we're really looking at about 8.5% margins on a go-forward basis for the rest of the year in shipbuilding. As I said that is essentially what is undermining our 3% margins for the year. That's really where I see us for this year. Douglas Harned- Sanford Bernstein: And do you see anymore... when you go out to '09, do you expect to anymore pushback in revenues for the other ship programs as a result of LHD-8? Ronald D. Sugar - Chairman and Chief Executive Officer: At this point, our guidance reflects everything we know. Douglas Harned- Sanford Bernstein: Okay. Great. Thank you. Ronald D. Sugar - Chairman and Chief Executive Officer: Thank you.

And our next question will come from the line of Myles Walton with Oppenheimer. Please proceed. Myles Walton - Oppenheimer & Co.: Good afternoon. Wes Bush - President and Chief Operating Officer: Hi Myles. Myles Walton - Oppenheimer & Co.: It looks like book-to-bill in Integrated Systems is particularly strong over two times in the quarter even excluding the tanker, obviously you have the tanker under protest, but assuming that goes through and BAMs following that with a win in the quarter. How much of that recent win activity is kind of anticipated in your five year plan at the Analyst Day, is this spade of wins here putting upward pressure on some of those projections? James F. Palmer - Corporate Vice President and Chief Financial Officer: Myles, those wins were essentially anticipated in our view of the long-term. Just as I got the questions immediately after the Tanker win about whether we were going to increase our guidance or thoughts around 2012. Obviously we didn't, immediately prior to, or immediately after the Tanker win. As we said in our call today, the ship building charge doesn't change our view of the long term, nor does the one-quarter book-to-bill at this point in time. As both Ron and I, Wes said, we continue to have a great deal of confidence in our 2012 targets. And obviously the book-to-bill events of this quarter are important to achieving that, but we all know one quarter doesn't make the trend for the 5-year period. So, we feel good about it, feel good about the 2012 targets. And as Ron said, a lot of opportunities ahead of us, and we're going to go after those as aggressively as we have the three ones that we've achieved this year and last year. Myles Walton - Oppenheimer & Co.: Okay, I appreciate them. Not trying to rob the numbers, just trying to get a feel for what was contemplated with respect to those. And then if I could, probe a little bit on the classified side, I appreciate you sharing the bookings. What was, I guess, can you put that in context to kind of what you do on an annual basis with respect to classified and just how much of an up tick is that that you've gone out and highlighted it? James F. Palmer - Corporate Vice President and Chief Financial Officer: Myles, my perspective on the classified or restrictive, is that it is even more lumpy than any of the other businesses in which we participate, so, as we have mentioned in the past, we saw good opportunities in that restricted area, we've obviously brought some of those home this quarter. But we do see some other significant opportunities on a go forward basis that we're pursuing. Myles Walton - Oppenheimer & Co.: And what's your annual restricted revenue? Wes Bush - President and Chief Operating Officer: We don't disclose that, Myles. Myles Walton - Oppenheimer & Co.: All right. Thanks.

And our next question will come from the line of Ronald Epstein with Merrill Lynch. Please proceed. Ronald Epstein - Merrill Lynch: Yes. Hi, good afternoon, guys. Ronald D. Sugar - Chairman and Chief Executive Officer: Hi, Ron. Ronald Epstein - Merrill Lynch: On some of the upcoming programs, right, you've got JLTV common sensor, some other stuff. When do you expect a decision on Aerial Common Sensor? Ronald D. Sugar - Chairman and Chief Executive Officer: I think Aerial Common Sensor is probably in the next year. There are a number of ways that the Army may choose to go forward on that, Ron. Clearly, there is the competition, which we are gearing up for and we feel very comfortable about our position there. In the meantime, as the Army is looking at that they are providing continuing upgrades to the existing legacy systems, Guardrail and others and we are actually participating very strongly in those as well. But I would say next year probably for the ACS. Ronald Epstein - Merrill Lynch: Okay. James F. Palmer - Corporate Vice President and Chief Financial Officer: JLTV, we expect the down select to occur in the early part of the summer to get into the TD phase one that program. Ronald D. Sugar - Chairman and Chief Executive Officer: Yes, the TD phase, of course, being the first phase, it's not huge dollars but it's extremely important for the three or so people to get involved in it. And then that leads into follow-ons later. Ronald Epstein - Merrill Lynch: Okay, great. And just a follow-on... just another ship related question. You highlighted on the call, I guess, a week or so ago, and then today, some management change. Can you into more color on that? I mean, how are you changing the management in the shipyard so that --? Wes Bush - President and Chief Operating Officer: Ron, it's Wes. Let me give you a broader view of that. First and foremost, as you're aware, we have announced earlier this year the integration of Newport News and what we previously called Ship Systems Sectors into our single integrated shipbuilding sector. And as a product of that decision, we are naturally going through the process of identifying both organizationally and on a personnel basis what the best assignments are and the best structure is to take the shipyard forward. We made an announcement just about a month ago that Irwin Edenzon from Newport News would be coming down from the Gulf coast to take on general management responsibilities. We've made some other announcements regarding individuals that are both supporting the ship building sector and supporting Irwin. Again, this is a stepped process to go through, and look at how we want to form this integrated organization going-forward to best execute the opportunities and the programs in shipbuilding. Ronald Epstein - Merrill Lynch: I guess, more specific my question is after you guys learned about the LHD-8, did you make any management changes at that point? Wes Bush - President and Chief Operating Officer: Yes, we certainly have gone through the process of looking at the way the organizations is approaching LHD-8. We made some changes in leadership on the program itself. And we are also of course, incorporating those lessons Ron as we form the overall organizational approach for the integrated sector. Ronald Epstein - Merrill Lynch: Okay. Great. Thanks. Wes Bush - President and Chief Operating Officer: Thank you.

And our next question comes from the line of Heidi Wood with Morgan Stanley. Please proceed. Heidi Wood- Morgan Stanley: Good morning, Nice quarter guys. Ronald D. Sugar - Chairman and Chief Executive Officer: Thank you, Heidi. All but, right? Heidi Wood- Morgan Stanley: Exactly. So, a couple questions, Wes, just a point of clarification on the milestones that you put out on the LHD-8, are those the long polls in the 10 that will give you visibility as you progress as to whether the charges you've taken are sufficient? Or are there other things you'd point to as you pass through that would help us have confidence that again what you took was sufficient. Wes Bush - President and Chief Operating Officer: Yes Heidi, I would characterize those milestones as critical in the overall sequence of events that is have to occur. The schedule that we've laid out is, as you may imagine is probably better characterized by [inaudible] it is a comprehensive approach to delineating all the work pass that have to occur. There are numerous pass, if you want to talk about critical pass through there that are important to getting us through it. We laid out those milestones, because they represent major increments of accomplishment. There are other things that we will include in our quarterly progress descriptions on how things are going to give you a fuller sense of the progress, and to your point our confidence in our ability to execute within the EAC that we've established. Heidi Wood- Morgan Stanley: Okay, great. And then to understand a little bit the guidance on the Electronics because obviously that is pretty impressive and it looks like now that you're thinking this is a little more sustainable. So first, can you talk about what the royalty income was that you talked about in the first quarter? And also what underneath in Electronics, what businesses that are driving the bulk of the great performance? James F. Palmer - Corporate Vice President and Chief Financial Officer: Yes. Heidi, the royalty amount for the first quarter was about $19 million improvement over the prior year. To a certain extent it was offset by some environmental cost accruals as well. So even though the royalty amount is $19 million there were some smaller offsets to it from an environmental cost accrual perspective. In terms of the areas that were driving the program performance improvement, it's essentially the items that I mentioned in my comments, which were the... I have to go back and find them here exactly, Electrical, Optical and the… basically Electrical, Optical areas Ronald D. Sugar - Chairman and Chief Executive Officer: I would just add that broadly Heidi, in our Electronic Systems Organization has put a lot of attention over the last couple of years on really driving on program performance. We are seeing the benefits of that comprehensively across the organization and if you will, the improvements that we have made in our performance within our EACs on programs that previously had been challenging for us. Those improvements obviously contribute to improved performance across the board in Electronics. So it's a fairly comprehensive. Wes Bush - President and Chief Operating Officer: I would be back that up a bit because if you look at this several businesses of ES there's a remarkable consistency. Ronald D. Sugar - Chairman and Chief Executive Officer: Across the board. Wes Bush - President and Chief Operating Officer: Good performances on all those businesses. They are not one star. Ronald D. Sugar - Chairman and Chief Executive Officer: Yes. Heidi Wood- Morgan Stanley: All right. And then Ron I have a two questions for you, if you don't mind. We are seeing, it looks like a little bit of pickup in M&A activity Lockheed sort of talked about it, we are seeing it happening in Raytheon. Can you talk to us about your perspective and degree of interest in pricing, properties, what should we be anticipating in terms of Northrop's interest in M&A over the next year or so? Ronald D. Sugar - Chairman and Chief Executive Officer: I would say no change from what we told you in the last year or two, clearly when we see something that we think is extremely important or strategic to us, we think there's value there for everybody. We'll go for it, we've done that selectively. We've not done a lot of it, but we've done it selectively, we're pleased with, for example the Essex situation. That's worked out extremely well for us. So, Heidi I would say probably while we don't normally comment on M&A, we would be thinking about our overall balance cash strategy. We'll have adequate resources. You saw the dividend increase. We have $1.9 billion in our share repurchase, and as we see opportunities in the market, we'll look at. I wouldn't signal any significant change in the direction we've already announced. Heidi Wood- Morgan Stanley: And then finally, I mean, I think I'm going to give you a little bit of a victory lap Ron. Because I remember a couple years ago, it seemed that Northrop was really struggling to win. It seemed like there were a number of things that you had lost and were disappointments, and I really feel like over the last couple years, I've seen that turn around quite visibly with a number of kind of impressive wins even. Can you talk about kind of fundamental changes you've implemented within the organization that might help explain sort of what we're seeing, the change in approach to competition. There may be a charge on some outsiders that you might be aggressively pricing to account for the wins. But what would your response be as to kind of why we're seeing these big wins? Ronald D. Sugar - Chairman and Chief Executive Officer: Well Heidi, a couple years ago of course we had a couple high profile competitions, one or two in which we actually thought they were long-shot opportunities for us. We didn't win them, we got hammered pretty heavily for not winning what we thought were long shots. We fundamentally determined that we had to put together as we have in our operating side, set of process improvements in business acquisition in terms of learning better about the customer markets that we're proceeding with. Shaping these markets better, and frankly putting substantially more executive horsepower and strength on them, personal engagement for myself and the top team. We laid out a set of what we call corporate priority wins. We have that list, all companies do, but we put particular energy into them over the last several years. And we also basically had a fundamental belief that the technical solutions we would offer would in fact be the best value for the customer, we had to make sure they understood that as well. We've done an awful lot in that regard. What you're seeing here in a series of very, very successful outcomes is probably a lagging indicator of a lot of hard work that's been going on in the last couple years. And I will tell you that the intensity for this competitive spirit has not changed one bit. In fact if anything, has gotten stronger. Heidi Wood- Morgan Stanley: All right. Thanks very much. Ronald D. Sugar - Chairman and Chief Executive Officer: Thanks Heidi.

And our next question comes from the line of Cai von Rumohr of Cowen And Company. Please proceed. Cai von Rumohr - Cowen & Company: Yes quick house keeping one. Was there any difference in number of billing days or work days in this quarter and kind of how does the year rollout in that respect? Ronald D. Sugar - Chairman and Chief Executive Officer: Cai, to my knowledge, there are no difference in billing days or workdays in the quarter. Cai von Rumohr - Cowen & Company: Yes. The number of billing days or working days, everyone are... you guys look on it. Ronald D. Sugar - Chairman and Chief Executive Officer: No, I don't know of any difference there of any magnitude at least. Cai von Rumohr - Cowen & Company: Okay. Secondly, you know, on your LHD call, I guess we discussed that, since about 8% of the southern shipyard's workforce is going to be on LHD-8 and basically working on things where they don't make any money for a while. There would be some kind of a ripple effect in terms of revenues and profits on the rest of the southern shipyard. Could you walk us through kind of… quantify what those numbers and how should we think about how that works? Ronald D. Sugar - Chairman and Chief Executive Officer: Cai yes, we... let's see. Obviously there is going to be people associated with the LHD-8 for a little bit longer period of time that would have moved to other ships or essentially that delays the work on other ships resulting in a delay of revenue and earnings on those ships. So essentially that's the model that we've built into our guidance. The delay in other ships is important, but it is not of a magnitude frankly that is as I said causes those Katrina affected ships to move out beyond 2009 in terms of completion. So it is a little bit of movement between now and that period of time. Cai von Rumohr - Cowen & Company: Okay. James F. Palmer - Corporate Vice President and Chief Financial Officer: Let me add just a comment, Cai as well, just to put a little more perspective on it. The workforce that's needed on LHD-8 is a certain set of skills that are needed to address both the rework and the testing profile. So it is that set of skills that are delayed from accomplishing task on some of the other ships. The challenge then that we have is to make sure that we are doing everything we can to maintain schedule to the extent we can on the other ships, and that sometimes is done by re-profiling that work so that the skill sets can be redeployed in a different sequence. So I would not want anyone to have the perspective that because we're doing something longer on LHD-8, we're stopping work on other ships, that is not the case, we're continuing to make good progress, we're simply having to adjust the deployment of resources. And some to extent accommodate the implications of those workflow changes in the recognition of scheduled progress that we have on some of the ships in the yard. Wes Bush - President and Chief Operating Officer: Also add in there Cai, if you note from Jim's comments he said that the collateral effect on those other ships, if you will, is about $0.10 this year in our earnings. Cai von Rumohr - Cowen & Company: Okay and then if we think about your win on BAMs and the Tanker, how much is in your 08 estimates for those? Ronald D. Sugar - Chairman and Chief Executive Officer: Cai, we really don't talk about how much is individual programs, our guidance 490 to 515, frankly takes into account the range of possibilities on when Tanker would be turned back on, what the funding levels might be. Obviously, we are under contract on BAMs have received funding and so again that guidance anticipates both of those have events and it essentially accounted for in that range. Cai von Rumohr - Cowen & Company: Okay. The reason I asked is that the Integrated Systems have pretty good revenues $1.340 billion and I guess normally it's knocked [ph] down in a second. But I would assume it would be picking up in the second half, unless I assume they got to do at least 53 that there is going to be opportunities that their could be more of a pick up, is that a fair assumption? James F. Palmer - Corporate Vice President and Chief Financial Officer: It really becomes when Tanker when the process is decided and what level of funding is available at that point in time will be key factors on how much work actually gets accomplished this year. Cai von Rumohr - Cowen & Company: Okay, great. And last one, you mentioned I guess winning 2.6 billion of lack or classified awards, and yet, in your release you talked about 688 of restricted program awards in the first quarter. Now could you kind of clarify the difference between those two numbers? James F. Palmer - Corporate Vice President and Chief Financial Officer: 688 is last year's classified or restricted awards. Cai von Rumohr - Cowen & Company: Okay. Okay, excuse me. Okay, excellent, thanks. James F. Palmer - Corporate Vice President and Chief Financial Officer: Thank you. Ronald D. Sugar - Chairman and Chief Executive Officer: Thanks Cai.

And our next question will come from the line of Steve Binder. Please proceed, sir with Bear Stearns. Steve Binder - Bear Stearns: Maybe just touch on Electronic Systems. It looks like a couple head winds in the quarter, government systems and I think naval marine as far as sales being down. Just wondering, is that simply just a timing issue, or is there kind of lifecycle going on there in programs? James F. Palmer - Corporate Vice President and Chief Financial Officer: Largely timing issues, Steve. A lot of the Electronics businesses we use a units of delivery revenue recognition model. And if you actually look back, you'll see that traditionally revenues are very strong and electronics in the fourth quarter reflecting the buildup of deliveries that occur. And then lighter as we go through time during the quarters, and essentially that's what's happening this quarter as well. The revenues are lighter in terms of those parts of the business that use that units of delivery revenue recognition model. Steve Binder - Bear Stearns: And Jim, what was your after returns so for in your planned assets year-to-date? James F. Palmer - Corporate Vice President and Chief Financial Officer: I'm sorry. Ronald D. Sugar - Chairman and Chief Executive Officer: Pension front. James F. Palmer - Corporate Vice President and Chief Financial Officer: We are negative for the first quarter about 5% I believe. Steve Binder - Bear Stearns: And then you touched on the issues in second collections on a quarter was there any customer related issues there at all, do you think it is really just internal? James F. Palmer - Corporate Vice President and Chief Financial Officer: Largely, there are always questions around timing since our billings are such large dollar amounts whether you get paid now the 31st, first or second of the following month is really important to cash flow. We always have those kinds issues, but largely the issues were the internal conversions to its common accounting system. Steve Binder - Bear Stearns: And Ron, may be you can just touch on ships and your feelings about the pluses or minuses spinning off that business in the future. I asked that question simply because you put news obviously very... you are familiar with it. It was a very successful spin-off solution and I'm just wondering if you see any merits there? Ronald D. Sugar - Chairman and Chief Executive Officer: Yes. Well first of all, Steve, we remain committed to our ship building business. We see significant opportunities to drive improvements in the business going forward. The fact that we took the step to unify the management structure of these businesses is to provide best practices both up and down from the various locations is I think an evidence of that. We're doing the things we think we need to do to drive performance there. Obviously we got a lot of work ahead of us, however we are committed to that, we see it does fit overall into the portfolio of Northrop substantial platform business the opportunity for other add-ons as a result to that. So, at this point in time I see no change in our direction. We're committed to moving forward. And we think that with the folks who can drive the most value out of this business going forward. Steve Binder - Bear Stearns: One of the thing that, as far as the restricted work the $2.6 billion is it fair to say that… is that primarily in Space Emission systems or is that kind of long duration kind of business awards? Ronald D. Sugar - Chairman and Chief Executive Officer: Steve, I really unfortunately can’t be more specific about that other than to say that spans number of sectors and a number of different programs. Steve Binder - Bear Stearns: All right. Thank you. Ronald D. Sugar - Chairman and Chief Executive Officer: Sorry about that.

And our next question will come from the line of Joe Nadol with J.P. Morgan. Please proceed. Ronald D. Sugar - Chairman and Chief Executive Officer: Hello, Joe. Joseph Nadol - J.P. Morgan: Hello. Good afternoon, good morning. To start with I guess a couple of questions on the Tanker again it's 1.5 billion amount that was added to your backlog and that's how much of that… how was the split between funded and unfunded? James F. Palmer - Corporate Vice President and Chief Financial Officer: That 1.5 of total contract value roughly $60 million was funded. Joseph Nadol - J.P. Morgan: Okay. Okay. And I know that you’ve mentioned that it's all kind of in your guidance for the year in terms of the EPS, but specifically I mean do you, does it matter to your guidance whether it comes in or out or is that just.. at this point 2008 within the range? James F. Palmer - Corporate Vice President and Chief Financial Officer: Yes. Well, for 2008 it doesn't matter. Damn, right it matters. Joseph Nadol - J.P. Morgan: For this year's earnings I mean. James F. Palmer - Corporate Vice President and Chief Financial Officer: Not so much, but frankly not so much for 2008, but the program is very important to us as we go forward so yes it does matter. Joseph Nadol - J.P. Morgan: No, of course. James F. Palmer - Corporate Vice President and Chief Financial Officer: But frankly for 2008, if there is a small change whether or not it's in or not. Joseph Nadol - J.P. Morgan: Yes. Okay. And then on the margin, in that segment Intergraded Systems, any better sense as to what the performance improvements were with just key adjustments you raised a number for the year but you are still below where you were in the quarter. Can you give us a better sense there? James F. Palmer - Corporate Vice President and Chief Financial Officer: Yes, we had. As we do every quarter, we look at individual contracts and their performance. So, we did have some adjustments as frankly everyone does in the industry [ph]. On a go-forward basis, we look at our forecasts for the year, and where I think the business can go. Traditionally, I would tell you that business has been very strong in performance. I know we are spending some unallowable costs on the protests, so I factored that into my thinking as well as I think about their earnings guidance or range of margins for the year. Essentially all of that has been in my thinking at this point in time. Joseph Nadol - J.P. Morgan: Okay. And then just one final one on the shipbuilding side, the $35 million, am I reading that right, does that includes some other EAC adjustments that were not related to be LHD-8 delay and if that's the case could you give a little color on those? James F. Palmer - Corporate Vice President and Chief Financial Officer: Yes, it does include some other EAC adjustments and as we mentioned last week when we had our preannouncement, we essentially took at – took a look at the lessons learned all issues that were identified on the LHD-8 and then looked across the portfolio to see whether or not there would be similar type items or related type items on the other programs and considered that in our EACs for them as well. Joseph Nadol - J.P. Morgan: Okay. So, is it fair to say there were wiring problems elsewhere? James F. Palmer - Corporate Vice President and Chief Financial Officer: No, not necessarily wiring problems but just any kind of the rework or schedule extension, those type of items. Joseph Nadol - J.P. Morgan: Okay. All right. Thank you. James F. Palmer - Corporate Vice President and Chief Financial Officer: Thank you Joe.

And our next question will come from the line of Joe Campbell with Lehman brothers. Please proceed. Ronald D. Sugar - Chairman and Chief Executive Officer: Hello Joe. Joe? Joe Campbell - Lehman Brothers: Hi, Hi , we had our lines crossed here, good afternoon or good morning. I read in the paper Ron that you and Jim MacClenny [ph] had a meeting with the Air Force and we won't ask too many of the private details. But the sense we had from the public commentary was the suggestion was that the Air Force was an unhappy with the sort of the tone or the argument of tone or the… I don't know what you want to comment about that protest, but I wondered if you just give us any color on what the Air Force is saying about how all this is going on beyond, we're all waiting for the GIO to do their thing?. Ronald D. Sugar - Chairman and Chief Executive Officer: Well Joe, first of all I won’t comment on customer meetings. I will tell you that Northrop Grumman has been delighted with the selection we continue to work hard to get ready to build these things, we've totally supported the Air Force’s position. The Air Force of course is not able to say anything at this point of time, because of the rules once protest is in place they have to go silent. And so, all I can say is that we're anxiously awaiting the successful resolution of protest get ready to those Tankers. Joe Campbell - Lehman Brothers: Terrific. Ronald D. Sugar - Chairman and Chief Executive Officer: Thanks Joe.

And our next question will come from the line of Howard Rubel with Jeffries & Co. Please proceed. Howard Rube - Jeffries & Co: Thank you very much. Couple of things. One is the EO business that you sold, it looks like it wasn't making very… in fact it was credit loss money last year? Ronald D. Sugar - Chairman and Chief Executive Officer: You are right. Howard Rube - Jeffries & Co: And this year breakeven. So, I mean that probably has what half of the reasons why you improved guidance in the segment on margin basis is that fair? Ronald D. Sugar - Chairman and Chief Executive Officer: Really it's just looking hear… because that business was being sold we were ready to fact out with the discontinued operations their margin. And so we were looking at the margins on the rest of the business and that's our thought process around the change in margins. It's really the improvements in the business ex the U.S. piece of business. Howard Rube - Jeffries & Co: Part of any risk… thank you. Part of… that's pretty fair. So part of any discussion with the Navy is when you reschedule the discussion with the Navy, what kind of feedback have you got from them, help that and how support have they did with this change? Ronald D. Sugar - Chairman and Chief Executive Officer: Well, let me take a cut at that. First of all, we're working very closely with the Navy. And I think that while we're not happy with the delay, and they're certainly not happy with the delay, the working relationship is very strong, not only on this ship but across the other ships, we have a common objective here, which is to get good ships to them as fast as we can. They're our partners in this; they have several hundred people working in the ship shipyards with us, shoulder to shoulder. This is a joint responsibility in some ways. Certainly we take responsibility for our part of this thing. I would say the relationship is very positive and strong going forward. And we're on the same page. Howard Rube - Jeffries & Co: I've appreciate that one. And the last thing is steel prices have gone up substantially recently in kind of we all are seeing a little bit of inflationary pressures. What do you do I mean are you seeing any of that as it affects your business and what are you doing to mitigate it? Ronald D. Sugar - Chairman and Chief Executive Officer: Well, Howard, obviously steel price is a component of our total cost, but I'll will tell you that labor and labor efficiency Labor quality, quality processes tend to be more important to us than the actual raw cost of the steel. By the way these ships have lots of electronic and machinery content as well. So while steel prices going up is not a positive thing it doesn't move the needle quite as much as our ability to improve our efficiencies and processes. Howard Rube - Jeffries & Co: Okay. Thanks. Ronald D. Sugar - Chairman and Chief Executive Officer: Howard.

And our next question will come from the line of George Shapiro with Citigroup. Please proceed. George Shapiro - Citigroup: Good morning or afternoon. Ronald D. Sugar - Chairman and Chief Executive Officer: Good morning, George. George Shapiro - Citigroup: If I look at Electronics, it seems like the guidance for revenues you are left the same despite selling effectively nearly $200 million. So what implies it for year-over-year electronic sales are going to be up close to 9%, but the first quarter is up only 2%. So can you tell us what's going to accelerate or help the back-end to get to the 9% and I used the midpoint $7.1 billion to calculate? James F. Palmer - Corporate Vice President and Chief Financial Officer: George, as I mentioned earlier we traditionally have higher unit deliveries in the later part of the year in the Electronics business, a significant part of the Electronics business uses the units of delivery method for revenue recognition. So, if you look back on a number of years or quarters, you'll find that traditionally they have or revenue growth in the first part of the year and stronger revenue growth in the later part of the year essentially reflecting that volume of increased unit of deliveries in the second part of the year… second half of the year. George Shapiro - Citigroup: But why isn't that just a seasonal issue, so why, why does it mean that you should see accelerating year-over-year increases? Ronald D. Sugar - Chairman and Chief Executive Officer: Well, they been winning lot of business George, if you look at our backlog – their the backlog. Wes Bush - President and Chief Operating Officer: Scheduled five of our release, George has a nice profile of the total backlog and if you take a look at their performance in electronics year-over-year, you can see a tremendous growth in their backlog and this is the manifestation of that successful business capture. George Shapiro - Citigroup: So you are figuring your capture in additional $200 million in revenues because you didn't lower the revenue guidance for the adjustment of the sale of electro optics? Ronald D. Sugar - Chairman and Chief Executive Officer: Yeah, exactly. George Shapiro - Citigroup: Okay. And the same question in ship building, it doesn't look like you lowered the revenues there except you commented that you had $134 million hit to revenues in the quarter because of the charge and at the Gulf shipyards you probably going to have less revenues because of your adjusted EICs. So is that just meaning you are getting more business from Newport News? Ronald D. Sugar - Chairman and Chief Executive Officer: Not necessarily more business from the Newport News, but and obviously part of that $134 million setback will be now recognized in the remaining part of this year, so as I alluded to earlier, I feel good about our revenue forecast for shipbuilding at this point in time. George Shapiro - Citigroup: Okay. And the drop in margin that you're saying whether rest of the year will be about 8.5% versus 10%, is that just reflecting the lower-margin at the Gulf shipyards and Newport News is going to be comparable to what it was in the first quarter, or there is something going on there as well? Ronald D. Sugar - Chairman and Chief Executive Officer: First of all, the guidance for shipbuilding for the year was lower 9% if I remember correctly. So as we go forward essentially it is… performance of both shipyards on a go-forward basis for the programs that they have. George Shapiro - Citigroup: No, what am I asking Jim is I mean, we know that Gulf shipyards are going to be lower because of the $36 million adjustments that you made. I'm just wondering whether Newport News is also going to be lower for some other unknown reasons? Ronald D. Sugar - Chairman and Chief Executive Officer: Nothing I know of. George Shapiro - Citigroup: So it is really just going to be the Gulf shipyards? Okay. And then one last one, the aerospace margin always tends to do better than what you think it's going to do, but to get from 12.7% in the first quarter to the range that you given requires a fairly substantial step down in subsequent quarters and it doesn't look like there were one-time items in quarter. So I was just wondering what may cause that to occur. Ronald D. Sugar - Chairman and Chief Executive Officer: Part of it is the new programs, which we traditionally start out at lower earnings rates to begin with. And frankly, as I commented to one of the earlier questions we did have some Q1 catch-up adjustments in this business, in this quarter. It's hard for me to project whether I'm going to have any further team catch-up adjustments because I'd knew about them, I should be recognizing them now, right. George Shapiro - Citigroup: Right. Correct. Ronald D. Sugar - Chairman and Chief Executive Officer: To your point there had been strong performers, I alluded to that as well. But the guidance at this point reflects what I know about their business, including the cost that we're incurring on the protest on allowable cost. And so, when I think about their margins and their performance, they have been strong performers, I expect them to continue to be strong performers. We are adding some volume with a new development contracts with lower revenue, lower-margins at the beginning, and then we have protest costs as well that we're incurring. George Shapiro - Citigroup: Then would it be fair to... I don't think you really... you said how much the catch-up's were. Would it be fair to say that cum [ph] catch-ups in the quarter were the bulk of the difference between your expected margin for the year and what you reported? Ronald D. Sugar - Chairman and Chief Executive Officer: That's part of it, yes. George Shapiro - Citigroup: Okay. That's my questions. Thanks. Ronald D. Sugar - Chairman and Chief Executive Officer: Okay. Thanks, George. Wes Bush - President and Chief Operating Officer: Cut the questions of now, we are running out of time now Ron. Ronald D. Sugar - Chairman and Chief Executive Officer: Yes. Let me just make a final remark. First of all, as we told you last week and this week and as Wes has delineated in some detail, we are taking action on LHD-8. We will emerge stronger from this situation than we did before. We see significant opportunity for improvement of the ship building business. The reminder of the company is clicking on all cylinders, and we continue to be extremely confident about the future of this company. So, thank you all for joining us this morning, and we'll talk to you next quarter.

Ladies and gentlemen, thank you for joining… participating in the Northrop Grumman's First Quarter Earnings Conference Call. This concludes your presentation, and you may now disconnect. Have a good day.