Paul Gregory – VP, IR Wes Bush – CEO and President Jim Palmer – Corporate VP and CFO

David Strauss – UBS Howard Rubel – Jefferies & Company Doug Harned – Sanford Bernstein Robert Spingarn – Credit Suisse George Shapiro – Access 342 Myles Walton – Oppenheimer Cai von Rumohr – Cowen And Company Sam Pearlstein – Wells Fargo Security Robert Stallard – Macquarie

Good day, ladies and gentleman and welcome to the Northrop Grumman fourth quarter earnings conference call. My name is Steve and I'll be your operator for today. At this time all participants are in a listen-only mode. Later in the call we will conduct a question-and-answer session. (Operator instructions). I would now like to turn the conference over to your host for today, Mr. Paul Gregory, Vice President of Investor Relations. Please proceed, sir.

Great. Thank you, Steve. Good morning everyone, welcome to Northrop Grumman's fourth quarter 2009 conference call. We provided supplemental information in the form of a PowerPoint presentation that you can access at www.northropgrumman.com. Before we start, please understand that matters discussed on today’s call constitute forward-looking statements pursuant to Safe Harbor provisions of Federal Security Laws. Forward-looking statements involve risks and uncertainties, which are detailed in today's press release and our SEC filings and may cause actual company results to differ materially. During today's call, we'll discuss fourth quarter and full year 2009 results and our guidance for 2010. We'll refer to non-GAAP measures, which are defined and reconciled in our earnings release and the supporting materials posted on our website. I also want to point out that the divestiture of our advisory services business known as TASC was completed on December 18. On the income statements TASC sales, operating income and the net gain on sale are accounted for as discontinued operations for 2009 and for all periods presented. On the call today are our CEO and President, Wes Bush and our Chief Financial Officer, Jim Palmer. So, I think we’re ready to go to Slide Three and at this time, I’d like to turn the call over to Wes. Wes?

Thanks, Paul. Good morning everyone and thanks for joining us. As Paul said, this morning we’ll discuss our fourth quarter and our full year results as well as Northrop Grumman’s outlook for 2010. We had a solid finish to 2009. Earnings per share totaled $5.21 exceeding our guidance of $5 to 5.15 and we had outstanding cash results. Cash from operations and free cash flow were very strong and when adjusted for discretionary pension contributions and the taxes that we paid on the TASC sale were at the high end of our guidance and comparable to last year’s record levels. During 2009 we continued to deploy cash to create value for our shareholders. We raised the dividend by 7.5% and we used $1.1 billion to repurchase more than 23 million shares of our stock including 8.4 million shares repurchased in the fourth quarter. At year end we had $924 million remaining on our share purchase reauthorization. As we previously announced, the most recent increase in the authorization was funded by the net proceeds from the TASC divestiture. Another 2009 highlight is our yearend backlog of more than $69 billion. Total backlog continues to represent more than two years of sales and includes $32 billion of new awards captured in 2009. We’re very pleased that despite delays on several competitions, our book to bill ratio for the year was 96%. We continue to capture high quality competitive contracts. Turning to results for our businesses, Aerospace Systems continues to perform well. Sales grew 7% for the quarter and 6% for the year. Our unmanned and manned aircraft programs along with our restricted work were the drivers for the quarter and for the year. Volume increases on programs like BAMS, Global Hawk, F-35, F-18 and the B-2 have more than offset declines in some of our missile and space programs. We expect continued strength in both manned and unmanned programs. During the quarter we received a $300 million contract for five Global Hawks. This fixed price and Santa Fe contract runs through 2011. We also introduced the first Euro Hawk unmanned vehicle, marking the first international configuration of the Global Hawk. Aerospace also continues to improve their margin rates with expansion to 10.5% for the quarter and 10.3% for the year. Electronic Systems also had a strong quarter in the year. Sales increased 2% for the quarter and 9% for the year was solid margin rates for both periods. During the fourth quarter the Royal Australian Air Force accepted initial delivery of the first two Wedgetail aircraft and we reached agreement on delivery requirements. Final delivery and full acceptance is expected later this year and delivery of all six aircraft is planned by mid 2011. With Wedgetail development complete and agreement reached on the remaining contract requirements, we believe the financial risk on Wedgetail is behind us. For Information Systems fourth quarter sales were comparable to the prior year and full year sales increased 5%. Margin rates for the quarter and the year were impacted by state income taxes resulting from the TASC sale and lower performance on the Virginia outsourcing contract know as VITA. These two items offset the positive margin rate trends generated in our intelligence and defense businesses, which now account for about 75% of Information Systems sales. These two profitable growing businesses are very well positioned in their markets, including cybersecurity and C4ISR. They will be the performance drivers for the sector. As a result of strong business captured during the year, IS grew backlog by nearly $480 million or 6% to 8.8 billion. During the quarter, Information Systems won the five-year $580 million IBCS program, which is the first step toward enabling integrated joint and combined Air and Missile Defense capabilities. In Shipbuilding, we continue to focus on improving performance in the gulf through the new operating system that we put in place last year. We’re making good progress. The new operating system is providing increased visibility in the workflow and it’s enabling us to better sequence work to reduced cost growth that results from work performed out of sequence. Currently, we’re addressing two quality issues that received some attention in the press and I wanted to address each of them individually. Regarding pipe weld, we’ve been working closely with the Navy since last year when it was discovered that some of our pipe joints may not have met specifications. Beginning in the second quarter of 2009, our EACs were updated to include the expected cost to repair the pipe welds. We believe we understand what’s required to correct the piping. Late last year, LPD 21 experienced a problem with its main proportion diesel engines. We’re working hand in hand with the Navy to identify and understand the real causes of the engine problems and to support implementation of the appropriate corrective actions. Based on what we know today, we do not believe that the corrective actions represent significant financial exposure for the company. We’re confident that quality and performance will continue to improve as we refine and mature the operating approach that’s now in place on the Gulf Coast. The new processes providing better information on a more timely basis and have helped us address some of the cost issues that we faced on our Gulf Coast programs particularly the LPD. Today, we’re under contract for four remaining LPD’s which will be delivered over the next three years. As a result of the LPD issues that we’ve described over the last year, we expect minimum margin on these shifts and the pace of our margin rate improvement in shipbuilding will be impacted by the substantial sales volumes on these contracts over the next three years. In Technical Services, sales increased an 11% for the quarter and 10% for the year. And the margin rates also expanded for both periods. Business capture was outstanding this year. TS won some major competitive awards such as the $3.8 billion KC-10 program and at the end of the year they captured the Saudi Arabian National Guard Contract which has a potential award value of $550 million. For the year TS backlog increased by 10%. So now let’s talk about our priorities for 2010. Northrop Grumman has a tremendous range of capabilities that are well aligned with our customer spending priorities and we have outstanding human technical and financial resources. Our number one priority is to achieve sustainable performance improvement. That’s the message I conveyed to our senior management team at the beginning of the year. Our goal is to instill a true culture of performance across the entire organization. This will shape our decision making, the way we set our strategy and the way that we measure and incentivize our team. Our leadership is driving improvement with a real sense of urgency. Change will not occur overnight but we will succeed at this. I’m excited about what I believe the team can achieve in creating value for our shareholders and for our shareholders and for our customers. Earlier this week the administration released its proposed FY ’11 budget and provided details of the QDR. The release of the budget process is a first step and a very long and dynamic process. In general Northrop Grumman programs are well supported which reflects their relevance and importance to current and future national security requirements. In the days and weeks ahead additional budget details will be available and the deliberative process and Congress will begin. As that process moves forward specific program challenges and opportunities will be more clearly defined. At this early point in the process we don’t want to speculate on the final outcome for any individual program, but in the aggregate it appears that Northrop Grumman’s portfolio continues to be well aligned with the nations security needs. We’re well positioned in high priority areas such as unmanned systems, cybersecurity C4ISR, long range strike and logistics, but we recognize that the investment accounts like all government spending will face increasing pressure. In terms of new business opportunities we’re pursuing high quality growth in a disciplined way, our stands on the upcoming tanker competition is a prime example. Among other issues unless the final RFP is restructured to provide a best value competition one that recognizes value for performance that exceeds minimum capability thresholds and one that enables to improve financial terms this program is not an attractive opportunity for Northrop Grumman. Northrop Grumman’s greatest opportunity to generate value for shareholders is by improving our performance. Our primary objective is to create value through bottom line performance and continued strong cash generation. Consistent with this our guidance for 2010 caused for modest sales growth, with an improved operating margin rate. Our guidance for 2010 EPS from continuing operations is $5.70 to $5.95 and primarily reflects a combination of segment margin rate expansion across the businesses, lower net pension expense and continuing share repurchases. Our guidance contemplates that these improvements will be somewhat offset by a higher tax rate. We also expect continued robust cash flows. Cash from operations is expected to range between 2.5 and $3 billion and free cash flow is expected to range between 1.7 and $2.2 billion before discretionary pension contributions. As a management team, we’re firmly committed to realizing positive performance improvements in all of our businesses. So now I’d like to turn the call over to Jim for a more detailed discussion of our 2009 performance and our 2010 outlook. Jim?

Thanks Wes and good morning ladies and gentlemen. My comments begin with Slide Four. I’ll discuss our 2009 results and include some detail on the financial impact of the TASC sale and then update you on the trends, underline our 2010 guidance including pension. I would echo Wes’ comments regarding 2009 performance and add that on a pension adjusted basis, earnings per share from continued operations increased 24% year-over-year, after adjusting for the goodwill impairment charge in 2008. Cash generation was also very strong, essentially comparable to last year’s record levels, when you consider the impact of the discretionary pension plan contributions and the taxes paid on the past divestiture. As you know in 2008 we had outstanding cash results that were driven by substantially reduced working capital while sales in 2008 increased by 6%. This year’s cash results before taxes related to the TASC sale and the voluntary pension contributions reflect relatively stable working capital while sales again grew by 4.5%. So the positive trend in cash management were maintained in 2009 allowing us to continue a balance cash deployment strategy that calls for returning cash to shareholders investing in the business and funding our pension plans. The strong financial results were accomplished well addressing several major operational initiatives. First was the realignment of the seven sectors into five business sectors last January. In addition, to establishing a more customer focused business structure the consolidation also allowed us to reduce overhead and to streamline operations. We have also expended a tremendous amount of effort to improve our Gulf Coast operations with the new operating system that Wes discussed in his remarks. And obviously the TASC sale was successfully executed, this activity was initiated in response to our customers changing initiatives on – all operational conflicts of interest OCI and require considerable effort in achieving a very good market price for the business while at the same time ensuring a successful future for the business. When we announced the sale we indicated that TASC's operating results for 2009 will be reported as discontinued operations in our 2009 and prior financial statements. Not all of the analyst estimates on our financial results were updated to reflect that accounting treatment that was reported today. So in order to help you reconcile your models to our reported results we provided a Pro forma reconciliation. That’s on slide five. It reconciles are reported results with the Pro forma results if TASC had been part of continuing operations for the entire year. The highlighted top row shows consolidated Pro forma results and then under the discontinued operations caption the first row shows TASC operating results that are now classified as discontinued operations. Through December 18th the date of the sale TASC had sales of 1.536 billion and operating income of 147 million, which translates into $0.28 of earnings per share that will move from continuing to discontinued operations. The next line is simply the net gain on the sale which totaled $0.05 per share. Moving to the continuing operations captions state income taxes directly associated with the sale totaled a $106 of which 87 million were directly allocable to our continuing operations. Of that amount 50 million impacted sales and 37 million impacted Information Systems operating margin. The 50 million is recoverable under our cost type contracts and is therefore recognized the sales, while the 37 million was allocated to fixed price contracts and directly impacted that has reduced the IS operating margins for the quarter and the year. These onetime state income taxes reduced earnings per share by $0.08. Finally, in 2009 we paid $508 million for federal and state taxes on the transactions. So cash from operations and free cash flow were reduced by commensurate amount. However, for financial reporting purposes these taxes are recognized as cash from operations in the cash flow statement while the cash proceeds on the sale are recognized in the investing activities section of the cash flow statement. So adding back the taxes to the reported free cash flow, gives us a free cash flow number of $1.9 billion for 2009 that essentially our businesses generated from "its normal operations". This 1.9 million is or has been reduced by the $462 million of after-tax effect of the additional voluntary pension contributions to our plans, pension plans in 2009. Now, I'd like to take a few minutes and talk about 2010 guidance on slide six, we expect to 2010 sales of 34 to $34.6 billion. Our sales guidance reflects growth for Electronic Systems, Information Systems and Technical Services in the range of two to 4% each. Stable revenues for Aerospace Systems and a three to 4% revenue decline in shipbuilding as a result of lower carrier repair and overhaul volume in 2010. Our outlook for Aerospace Systems does contemplate our understanding of the potential restructuring of the NPOESS and F-35 programs. We have not received any formal contractual direction on either program at this point, but for inflows our customers has access to participate in a restructuring other program and the path forward will involve over the next several months. For the F-35 we anticipated a potential change in the program fee structure in the fourth quarter and we adjusted our financial assumptions accordingly. We expect 2010 segment operating margin rate to improve to the low 9% rate from this year’s 8.7%. The improvement will be driven by margin rate expansion across the businesses. In shipbuilding, we are currently booking minimal margins on the LPD program as Wes mentioned and we expect shipbuildings 2010 margin rate to be in the 5 to 6% range. This represents a modest incremental improvement from 2009, but in my view it’s the right level of expectation given where we are in the LPD program. Until we see that our operating systems improvements are generating sustainable performance improvement and that our program mix improves as LPD revenue contribution declines from the delivery of these ships currently under construction margin rate improvement in shipbuilding will be gradual and modest. In the appendix of today’s presentation we provided 2010 sales and operating margin rate guidance for each of the five businesses, for your information. For the company in total we expect 2010 operating margin rate to expand to the mid 8% range from 7.4% in 2009. This reflects the operational improvements that I just described above as well as the substantial improvement in the net pension adjustment. Our earnings per share guidance also assumes a lower share count which is offset somewhat by the higher estimated tax rate of 34.5% for 2010. Moving to cash metrics, as Wes mentioned, we expect cash from operations at 2.5 to $3 billion and free cash flow of 1.7 to 2.2 billion. Both of these estimates are before the impact of planned discretionary pension pre-funding. And on Slide Seven, we provided a bridge from our 2009 earnings per share from continuing operations through our guidance for 2010, so that you can see proportionally on an EPS basis where the improvements are coming from. The largest improvements are operationally driven and from lower pension expense are somewhat offset by lower other net items and then the higher estimated tax rate for 2010. And finally our guidance includes a reduction in the average shares outstanding as we use the proceeds from the past sale to repurchase our stock. In summary, we expect 17 to 22% increase in our earnings per share from continuing operations for 2010. Slide eight provides some additional detail regarding pension accounting. We expect 2010 net pension adjustment to be in expense of approximately 35 million or $0.07 a share. This is an improvement of about $275 million over 2009 and the year-over-year improvement is detailed on the chart and driven by several factors. In 2009 our plan assets earned more than 15%, substantially higher than the 8.5% projected long term rate of return. In 2009, we also made $800 million at discretionary contributions to the plan. So the combination of these two factors significantly reduced our projected FAS expense for 2010 and in addition, our CAS recovery improves by about $25 million in 2010. Those positive factors were offset by 25 basis point reduction in the discount rate from 6.25 to the 6%. And our assumed long-term rate return on plan asset is unchanged at 8.5%. You can also see on the chart that the funded status of the plans improved to 88% at the end of 2009 compared to 84% at the end of 2008. The improvement reflects the cash contributions to healthy plan returns and some adjustments to our actuarial assumptions. And those positive impacts were partially offset by the lower discount rate which increased our year end pension obligation by approximately $700 million. For 2010, we have a $57 million of mandatory funding requirement and our current cash deployment plans call for approximately $300 million a discretionary pension funding in 2010. So, Paul, I think with that introduction, we're ready for some Q&A.

Outstanding, thanks Jim. Steve, I think we're ready to go to Q&A.

Yes sir. (Operator instructions) And your first question comes from the line of David Strauss with UBS. Please proceed sir. David Strauss – UBS: Good morning.

Good morning Dave.

Good morning Dave. David Strauss – UBS: Wes, you noted the long tail you have with LPD 17. Given that, can you just talk about the upside opportunities there is that ships over the next couple of years?

Certainly, as you know our shipbuilding business has two major components to it, one is the nuclear business and Newport News and the surplus business in the Gulf. Now, clearly LPD presents a challenge as I mention earlier and as Jim also described in his remarks as we go forward. But when we look more broadly across the portfolio there are also good opportunities that we’re addressing. For example, the increase in the submarine procurement to two per year, starting fairly soon. That is well supported in the budget that will represent very nice opportunity for our Shipbuilding business. And I would say broadly as we looked at the budget coming through earlier this week the Presidents recommending a good strong support for shipbuilding. So as we look out on the horizon we do see our nation continuing to recognize the imperative or strong able cost structure and given our position in shipbuilding that should represent a good opportunity for our business over the longer term. But all that being said I would reinforce what we communicated during our remarks that given that we do have a substantial sales volume on LPD at a very low margin rate it will represent a downward turn on the rate at which we can improve margin rates here over the near term. David Strauss – UBS: Okay. That’s great color. And then as my follow-up could you just address the outlook on the Information Systems side, obviously the President has talked about freezing non-defensive discretionary spending what kind of impact do you think that could have on the business? And then also where you are today with VITA and how does that run out from here?

Yes, let me take the first of those and Jim you might want to give a little financial flavor on VITA. With respect to the positioning of our Information Systems business, as I mentioned in my remarks the defense and intelligence components of that business today represent about 75% of the sales. And as you could see and looking at the budget request those areas are very, very well supported with respect to what the administration is requesting and quite frankly we believe with respect to what the Congress will support going forward. The other roughly 25% of the sales is the area that we describe as civil business within Information Systems that is a mix of Federal civil business and state and local. We’ve been fairly clear in our prior communications that we are stepping back from the state and local IT outsourcing market the market that we are not deemed to be particularly attractive. And as a result that is causing that aspect of the business to reduce over time. The civil federal market the market in which we participate continues to represent some very good opportunities for the company. So while our overall civil business is not looking at substantial growth because of the purpose and reducing our exposure in state and local IT outsourcing the component of that marketplace that deals with other departments of government beyond defense and intelligence, we continue to see as representing good opportunities for us going forward.

On the financial side, the VITA contract represents a drag on our earnings at this point. As you know we’ve from all press reports we’re have been in conversations with the state or Commonwealth over potential changes to the contract that we think are warranted those conversations continue. I wouldn’t want to speculate on what that outcome might be in terms of the operational activities we continue transitioning a number of the agencies and we continue having conversations with the Commonwealth about whether certain agencies should be a outside the scope or have a different scope associated with their transformation. From a exposure, financial exposure perspective I mentioned in the past that I see this type of contract having two major elements of exposure one is the cost of transformation at this point I think we have a fairly good handle on that subject to resolving the exact scope of some of the agencies. On the other issue associated with these types of programs is the future revenue stream associated with the total contract life. At this point, I would characterize that is the largest variable in our thinking about this program. But I think our financial assumptions at this time are reasonable and reflect that variability as well. David Strauss – UBS: All right, thanks for the color.

All right.

Your next question comes from the line of Howard Rubel with Jefferies & Company. Please proceed. Howard Rubel – Jefferies & Company: Good morning. Thank you.

Hi, Howard. Howard Rubel – Jefferies & Company: Good morning gentlemen, thank you. First just a follow-up and try to translate Jim's comments on VITA is that mean you are losing money on the contract today?

We are losing money today Howard. Howard Rubel – Jefferies & Company: And there is probability you can at least get to break-even or something better than that?

We're clearly working very hard to achieve that yes. Howard Rubel – Jefferies & Company: And then and just to go to your outlook for one moment when you talked about stable for Aerospace and modest growth in some of the other categories, could you sort of highlight a couple of puts and takes that get you either – get you to where you are and where we might see some upside or some risks?

Let me start with Aerospace and Wes you could jump at anytime you want. Our forecast is for stable revenues in Aerospace. And clearly, as you know, it's a portfolio and so there are a number of programs that are growing. And there are another set of programs that are actually shrinking. So, on the growing side, we see programs like F-35, the F-18 bands and some of our restricted activities continuing to grow. And then on the downside, programs like KEI and TASC that we're capable obviously have smaller or no revenues in 2010 when they had revenues in ‘09. The E-2C is essentially transitioning and completing much of its production activities. And the E-2D is on the front end of the ramp up in production. And so, there is an evolution or decline in E-2 revenues in total. And then UCAS has some lower revenues in 2010 as compared to 2009. Shipbuilding is largely, the decline is largely driven by the amount of carrier overhaul work that we anticipate in 2010 compared to ‘09. And then the technical services growth is largely related to the successful new awards that they won in 2010 or 2009 rather. Information Systems the growth largely is coming out of the intelligence and defense divisions which continue to grow with the civil division actually shrinking somewhat on a year-over-year basis and then the Electronic Systems, just the growth is across the portfolio with again some programs up and others down, but on an overall basis a very well diversified portfolio with growth. Howard Rubel – Jefferies & Company: Thank you very much. It’s great, thanks.

All right.

Thanks Howard.

Your next question comes from the line of Doug Harned with Sanford Bernstein. Please proceed.

Good morning Doug.

Hi Doug. Doug Harned – Sanford Bernstein: Good morning. Just following on that, on the Aerospace side. I’m interested in understanding the puts and takes because the programs you outlined. If I were to go to 2010, taking care your ICSat out you’re in the transition on E2, I mean this to me and I can’t see into the restricted programs in the space, but it seems to me you’ve got a pretty strong growth trajectory coming out of 2010. Is that fair? And also it seems to be shifting towards production from development at the same time.

Doug is your question in 2010 or coming after 2010? Doug Harned – Sanford Bernstein: No, no, no. The 2010, the flatness in 2010 appears to be due to some things. These aren’t secular trends; these are things that are changes that won't be repeated in ’11. On the downside, on the upside actually may get better?

Yeah I think. Doug Harned – Sanford Bernstein: Sure.

Good reflection of the situation Doug. Doug Harned – Sanford Bernstein: Yeah.

The other down in Aerospace is the Missile program IPIC [ph] and those kinds of right.

Okay. KEI and I pick together in terms of the missile areas represent a meaningful down, but as you point out if you look at the portfolio and the areas where we see the administration recommending continued investment and broken investment the unmanned platforms are certainly an area of substantial focus. The manned platforms that we built had to do away a lot of work in ISR in particular and we see those being very well supported. And of course as we look across the whole set of restricted activities there is some nice opportunities there as well. So I think you’re, in fact it is right the puts and takes always very familiar with the budget ups and downs. But when we look at the, through an Aerospace we are quite pleased with what we have. Doug Harned – Sanford Bernstein: And then just as a follow on you talked about the tanker and the position you are taking with respect to the structure of the contract and then if it’s structured in unfavorable way with too much risk, that’s not something you will want to pursue. Now, you’ve announced that you’re going to compete on the re-compete on Ground-based Midcourse Defense. I’m curious how you look at that one given that there is an incumbent to obviously has a lot of knowledge about a very complex program. How are you looking at competing on that one in terms of the risk you would take and the kinds of structure that would be acceptable in that kind of bid?

In fact let me give you reflection on tanker first to make sure that the full picture is well represented. We of course have provided the departments a lot of commentary around the financial terms and conditions that were resident in the draft RFP. And they were a variety of issues there that we identified that represented a risk profile that we did not find acceptable to support our bid. There are other issues associated with tanker beyond the financial terms. As I indicated in my remarks, we're also quite frankly displeased with the approach where value beyond the threshold requirements is not really well recognized in the scoring methodology for the proposal. So as structured it really does not represent a meaningful competitive opportunity for our offering, which inherently is a larger aircraft and inherently provides more capability, but a bigger airplane inherently cost little bit more. So, without that value recognition methodology in the final RFP, we are fundamentally disadvantaged in the source selection evaluation process. So, there are variety of factors that go into our conclusion that unless we see some major restructuring in this final RFP this is simply an unattractive proposition for our company to pursue bidding on. So, that’s a perhaps a little bit broader picture on tanker than just the financial terms and conditions. But certainly the financial terms and conditions are very, very important and every single one of the new activities that we're going to assess bidding upon, we're going to take a very careful look at the financial terms and we are going to be very candid with the procuring organizations as to our perspectives on those. We're early in taking the look at GMD. We are not particularly concerned about competing against incumbents. We have been quite successful at doing that in the past or simply because there is a long entrenched incumbency does not necessarily meaning that you cannot have a very effective opportunity. We’ve demonstrated that last year in our win of the KC-10 Contractor Logistics Support Competition. So GMB is one that we’re taking a very careful look at and we are certainly going to be highly engaged in working with Missile Defense Agency in assessing the procurement terms and giving them our feedback, I believe that they are looking for a good robust competition here and we’re quite interested in that.

Your next question comes from the line of Robert Spingarn of Credit Suisse. Please proceed sir. Robert Spingarn – Credit Suisse: Good morning.

Good morning.

Hi Robert. Robert Spingarn – Credit Suisse: Just to stick with Aerospace for a moment and some of the moving pieces in there. Can you give us a little better fidelity on what kind of revenue you're flowing on Joint Strike Fighter this year and NPOESS at the same time as well?

Yes, our plan would call for JSF revenues or F-35 revenues to be up, maybe a couple $100 million over the 2009 level across the total company not just Aerospace. Robert Spingarn – Credit Suisse: Right.

But Aerospace Electronic Systems and Information Systems. So a few $100 million associated largely with the (inaudible) portions of Joint Strike Fighter as opposed to the STD portion of F-35. Robert Spingarn – Credit Suisse: And with that total Jim?

Pardon. Robert Spingarn – Credit Suisse: With a couple 100 million out, what kind of total we were looking out there?

We really haven’t talked about the total let's just say we are up a couple 100 million. Robert Spingarn – Credit Suisse: Okay.

And on NPOESS our plan is kind of the $0.5 billion range for NPOESS. Robert Spingarn – Credit Suisse: Okay. And then maybe this is for Wes, on Global Hawk Wes we’ve seen unit funding come down over the past year or two in the budget, at least in the base budget. We did seven a couple of years ago; we’re now doing four, what’s the long-term trend here?

I think we’re going to see it fluctuate a little bit year to year, it varies across these blocks as each of the blocks has a different configuration with respect to the mission capabilities. We see Global Hawk continuing to be very well supported, continued demand for it in theater and we also see continued new applications. We announced last year that the BACN capability these battlefield communications network nodes were added to Global Hawk and we’re going to be putting BACN on two of the Global Hawks going forward. So we see it well supported, I think we will always see some ups and downs year-to-year and the minute count depending on the block capabilities. Robert Spingarn – Credit Suisse: Okay and then just moving over to ship building particularly new Newport News. You talked about some of the movement; you or Jim talked about the carrier overhaul diminishing a little bit in ’10, but based on the funding that we just saw on Monday, should we expect a reversal in ‘11 there. To me that looked like very solid carrier funding across the board, new and overhaul.

I basically see our shipbuilding business is about a $6 billion business for the next few years. Robert Spingarn – Credit Suisse: Okay.

Put and takes… Robert Spingarn – Credit Suisse: Would you say that you, how did you react to the funding that you saw on the carriers?

Positive.

Yeah. Robert Spingarn – Credit Suisse: Thank you.

Your next question comes from the line of George Shapiro with Access 342. Please proceed sir.

Hello George? George Shapiro – Access 342: Hello, how are you doing Jim?

Pretty good. George Shapiro – Access 342: First question for you, what caused the big drop in on unallocated expense this quarter versus last year also versus the 55 million in third quarter?

Every quarter we take a look at a bunch of different accruals and we've adjusted those accruals and so it's just that normal accrual process of looking at environmental accruals and the true up of prior overhead rates and just a number of those different factors, George. I wouldn’t characterize there is anything unusual and essentially are unallocated in total was pretty much as we thought it would be for the year in total. George Shapiro – Access 342: Okay. And then just maybe a more general one for you or Wes. How do you contrast such different performance in the sales side now in your shipbuilding business versus General Dynamics shipbuilding business given there are some common programs?

Yeah, George this is Wes. What I would reflect on there is while there are some common programs there are also some very, very different mixes, certainly we share production if you will on the DDG class and we have some obviously a partnership on Virginia class. But we have some very big programs in our portfolio not in theirs and vis-à-vis. We are the ones that build the carriers we do the Expeditionary Warfare ships the LPDs, the LHAs. So that, those are big differences and contribute to a different outcome with respect to what's getting budget year-to-year and what the magnitude of the future profile is going to look like. So, the common part is important, but certainly not the majority by any stretch of the total sales.

In fact I would that, I would expect that there the GDs revenues on DDG-1000 for example are ramping up, ours or not?

Right.

LCS is another one of those differences; there are a number as Wes said a number of meaningful differences in programs on a company-to-company basis. George Shapiro – Access 342: Okay. And then Jim just a simple one, what were the share the fully diluted shares outstanding at the end of the year?

302.

It’s in the release I hope. George Shapiro – Access 342: Yes it’s in the release? Okay. sorry.

In the release. George Shapiro – Access 342: I'll look in the release then?

315. George Shapiro – Access 342: Well, that was the average, was that also the end of the quarter?

I think, I guess we will have that at the K release.##

Yes, we will see it in the K actually.

So that should be out soon. George Shapiro – Access 342: Okay. Thanks very much.

Thank you, George.

Your next comes from the line of Myles Walton with Oppenheimer. Please proceed.

Hi Myles. Myles Walton – Oppenheimer: Hey, good morning guys. I was hoping you could perhaps a little bit on the Electronic Systems. And so first on the sales growth side, could you reconcile the kind of outlook for three to 4% growth but funded backlog that’s kind of on at least in near term down trend line. And secondly, could you talk about the international piece of that business, where it is today and where do you think it will be next couple of years?

International pieces always very lumpy. That’s part of the downward trend that you observed, we were continuing to work a number of major international opportunities they always take quite a while to bring home and so the timing of when they occur will effect that revenue or – both the revenue and the backlog profile. We continue to – as you know the Electronic Systems continues to be the portion of our business that has the most international revenues we really see a relatively stable international profile for that business over the next few years. Myles Walton – Oppenheimer: Okay. Can I squeeze one in on…

Sure. Myles Walton – Oppenheimer: On tax – tax rate you said 34.5%?

Right. Myles Walton – Oppenheimer: Does that include R&D or not?

Does not include R&D, the possibility of a, the R&D credit being reinstated. Myles Walton – Oppenheimer: And what is the impact again.

About $16 million tax credit, so about $0.05 a share. Myles Walton – Oppenheimer: Okay. Thank you.

Your next question comes from the line of Cai von Rumohr with Cowen And Company. Please proceed. Cai von Rumohr – Cowen And Company: Yeah.

Hi. Cai von Rumohr – Cowen And Company: How are you doing guys, if I could follow up on George's question I mean, I guess some of us missed on unallocated and if it hits you plan, it was certainly down year-over-year, as we model 2010, what sort of a number should we use for general cooperate on unallocated?

I’m just going to continue with the guidance I gave that top level, I didn’t get into the line by line detail, so I think it's pretty much consistent with that. Cai von Rumohr – Cowen And Company: It is consistent with that but the problem is that a couple of bps is a big pretty number and this is one presumably you should have some visibility, I mean if we model it about a 150, is that or is it 200 or a 100, because it was about, it was closer to a 100 in 2009 that the…?

Remember Cai in 2009, we had the resolution of the HPT and the settlement of the TSSAM claim which had an impact, favorable impact in unallocated of about, as I recall $60 million in the second quarter. Cai von Rumohr – Cowen And Company: Okay.

So, that’s not going to continue obviously in 2010. Cai von Rumohr – Cowen And Company: I’m pushing you here so. In fact you are saying it should be closer to the 200?

I’m not going to give you a number. Cai von Rumohr – Cowen And Company: Okay. Okay. great. And you mentioned the F-35 you know adjustment in the fourth quarter and the adjustment for next year, specifically could you give us little more color on what the adjustment was and what you are assuming on the F-35 for 2010 and for any cost sharing that you’ll be asked to do?

Yeah, as I try to say in my comments we anticipated a restructuring of the fee in our fourth quarter close. So we did reduce our recovery assumptions on SDD. As we may know we share fee on SDD in Aerospace Systems not in the other two operations of the company that have F-35 work. And largely our activity in 2010 is associated with growth activity as opposed to SDD activity. So we lowered our fee assumption where we think is appropriate and reasonable at this point in time. I don’t know that we have a lot of exposure going forward. Cai von Rumohr – Cowen And Company: Excellent. And then you know you have a very broad range of cash flow 500 million range for 2010. Why was that range so broad and what has to happen to go to the upper or lower end of that?

The range is the same range we had at the beginning of this in terms of cash flow. The big variable is working capital. And we work really hard to manage working capital as I said in my comments we've had two really good years of working capital management but frankly that comes down to the last couple of days of the year when some customers both the government and other primes decide whether they are going to pay us in December or January. So it’s the variability largely around working capital that is accounted for in that range of up of cash flow. Cai von Rumohr – Cowen And Company: And you said you would use all the proceeds of the sale of TASC to buy back stock is that the after-tax proceeds and because I assume you would bought stock excluding TASC so as we think about this year how much should we think in terms of how much stock you're going to buy?

Well essentially on the chart that walks from 2009 earnings to 2010 earnings I had given you an estimate of that earnings per share impact for the repurchase program of 30 to $0.35. If we go back at when we announce the TASC sale, we increased the share repurchase authorization by $1.1 billion essentially the net number and so all of our guidance reflects that consistent operation of that information. Cai von Rumohr – Cowen And Company: Okay. Hey thank you very much.

Okay.

Your next question comes from the line of Sam Pearlstein with Wells Fargo Security.

Hi, Sam how are you? Sam Pearlstein – Wells Fargo Security: Good how are you? Just a couple of things one is on that corporate over headline I just wanted to ask a question about the move of the headquarters from California to Washington how are you thinking about any one-time charges that are getting absorbed within the 2010 guidance that don't recur in 2011?

Yeah, I think in terms of one-time cost related to the move since the move is plan to recur in 2011, I think that’s more on an issue for 2011 and 2010 I don’t know that we’re going to incur a lot of cost on the move in 2010. Sam Pearlstein – Wells Fargo Security: Okay. And then, can you just talk about the order outlook in 2010, do you assume that your book-to-bill will be above one and what are some of the major competitions that you’re going after this year that we should see?

Sam, let me address that in terms of the major competitions, they’re a couple of that are in process right now where we hope to hear the outcome later in the first quarter. One is the GPS OCX program out of our information system sector and the other is also out of IS CANES [ph] program and both of these cases we’ve had a proposals and been working through the final proposal update processes and I believe that the government is on track for awards later in the first quarter. There are several others that we’re focusing on that appear to get continuing good support in the budget process. We talk about GMD a little bit earlier just kind of add to some of our earlier discussion on that as you know we have been the IPIC contractor for over 50 years. And so, we have a tremendous legacy of excellence and supporting the sustainment and continued evolution of those weapon systems. We believe that brings a strong competency to compete on GMD. So, we’re looking at that one very, very carefully. The EMALS [ph] program, which is another one of the ISR platforms intended to provide more near terms support in the battlefield there is an area that we’re also focusing on but we have a number of strong capabilities with position as well in the EMALS. Chase back is another good example that’s their joint space operation center. We’re taking a careful look at that. We here again have a very substantial side of capabilities and managing space systems and also in large scale operation centers and we’re looking at that and very careful. So if we look across our businesses, we see a wide variety of opportunities and as the administration is continuing to focus in the ISR arena, C4ISR and more probably, certainly in Cybersecurity and some of the other areas that I mentioned in my remarks earlier. So, it is unmanned. We see a very robust side of opportunities. I would say though just put a little bit of flavor on that we are driving a degree of discipline into our system around the evaluation of opportunities that not until beyond where we have been. And so we’re going to be looking at each one of these very carefully to make sure that successful capture of the opportunity supports our objectives or improving our margin rates, continuing to drive the overall performance of the company. So, when we look at the opportunities, we’re not thinking about scale. We’re thinking about performance. Sam Pearlstein – Wells Fargo Security: Okay. thanks. And just one last quick one for Jim, when you think about the progression of earnings in 2010, is there anything unusual in terms of how much we see in the first quarter versus the other quarters?

I think on a quarter – from a quarterly profile perspective, what we’ve seen in the past which is essentially builds as we go from first quarter through the year is what I would expect. We would have again in 2010. So first quarter would lower revenues and then lower cash obviously and then building as we go through the year. Sam Pearlstein – Wells Fargo Security: Okay. Thank you.

One more question if we could.

Sir, your last question will come from the line of Robert Stallard with Macquarie. Robert Stallard – Macquarie: Good morning.

Good morning, Robert.

Good morning. Robert Stallard – Macquarie: Quickly, pension Jim. There is a big drop obviously in 2010. If you would hit your target discount rate didn't move, you have these assumed payments this year. Where do you think pension could hit in 2011 directionally or what that number?

I thought nobody was going to ask that question? Robert Stallard – Macquarie: Let's try.

Here is everything you want to know about pension. In 2010, again the details in the presentation is as I look forward and Rob you are right. You are going to make a lot of different assumptions but assuming we hit our 8.5% long-term rate return. The discount rate doesn't change. We fund what we anticipate. I would see in 2011, relatively constant FAS expense. Our cost accounting, our CAS expense goes up significantly, so that the net difference improves by about the same amount as the 2010 over 2009. That increased in cost accounting, our CAS expense is largely reflecting for CAS the amortization of the 2008 losses and so it's been reflected in our CAS expense as we go forward. And in terms of funding in 2011 and probably a comparable level including the voluntary amounts at least at this point to, to what I anticipate in 2010 and then if I carry that forward one more year probably CAS and FAS stays fairly constant and cash probably goes up, I don’t know 3, 4, $500 million that kind of range. Robert Stallard – Macquarie: Okay. And there is follow up, just a final question you mentioned in the press release that you have included some contingency for program performance risk and opportunities. I was wondering if you give us an idea of how big that contingency might be.

I'd say I have a similar amount as I had in the prior year at the beginning of the year of 2009, that so CAS following question that is part of my unallocated at this point in time. Robert Stallard – Macquarie: Okay. That’s great. Thanks Jim.

All right.

Okay. Thank you very much. That concludes our call. Thank you for your participation. Have a good day.

Ladies and gentlemen that concludes today conference. Thank you your participation. You may now disconnect. Have a great day.