Good day, ladies and gentlemen. And welcome to the Third Quarter 2011 Huntington Ingalls Industries Earnings Conference Call. My name Chenille, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today’s conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Andy Green, Vice President of Investor Relations. Please proceed.

Thanks Chenille. Good morning. And welcome to the Huntington Ingalls Industries third quarter 2011 earnings conference call. With us today are Mike Petters, President and Chief Executive Officer; and Barb Niland, Corporate Vice President, Business Management and Chief Financial Officer. As a reminder, statements made in today’s call that are not historical fact are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of Federal Securities Law, actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in their remarks today, Mike and Barb will refer to certain non-GAAP measures including segment operating income, adjusted segment operating income, adjusted segment operating margins, adjusted total operating income, adjusted total operating margin and adjusted diluted EPS in the third quarter of 2011. All adjusted figures exclude a non-cash goodwill impairment charge. Reconciliations of these metrics to the comparable GAAP measures are included in a schedule that accompanied our earnings release and is posted on our website. We have posted presentation slides on our website today that we planned to address during the call to supplement our comments. Please access our website at www.huntingtoningalls.com and click on the Investor Relations link to view the presentation, as well as our earnings release and reconciliations. With that, I’d like to turn the call over to Mike.

Thanks, Andy. Good morning, everyone, and thanks for joining us on today’s call. I’m pleased to report Huntington Ingalls Industries results for the third quarter of 2011. Today we reported sales of $1.59 billion, down 4.3% from the same period last year. A $300 million non-cash goodwill impairment charge which was driven by adverse equity market conditions and not a change in our outlook resulted in a reported net loss of $248 million for the quarter and a loss of $5.07 per share. Barb will have more to say on the charge in her presentation. Excluding the impact of the charge, total operating margin was 6.9%, up from 4.6% last year and diluted earnings per share was $1.05 for the quarter up from $0.86 in 2010. Total backlog at the end of the quarter was $17.3 billion, up about $400 million over the second quarter. Third quarter was a very successful quarter for the company. We booked $2.1 billion of new awards including new construction contracts for DDG-114, the second ship and the DDG-51 restart and NSC-5, the Coast Guards latest National Security Cutter. We also booked several sizable maintenance and repair contracts at AMSEC and Continental Maritime and Newport News Shipbuilding won a large maintenance contract to support the Navy’s Nuclear Propulsion Program in upstate New York. We delivered two ships during the quarter, the Submarine California and NSC-3 Stratton and we began to ramp up production of Virginia-class submarines to two per year. Overall, the third quarter demonstrated the strong momentum we’ve generated since the spin-off last spring. We continue to perform in line with our long-term expectations and we are excited about our prospects going forward. Now, I’d like to review each program in a little more detail starting with Ingalls shipbuilding. For the DDG-51 restart as…

Thanks, Mike, and good morning to everyone on the call. I’d like to briefly review our consolidated and segment results as disclosed in the press release then wrap up with some comments on pension. Before I get into our operational results, I’d like to discuss the goodwill impairment charge we took during the quarter. As you are aware, we normally perform a goodwill impairment test at the end of November or more often if certain criteria are met. We performed our last goodwill test at the time of the spin and we determined there was no impairment. However, as a result of the decline in our stock price and market capitalization in the quarter, we were required to take a closer look at goodwill to evaluate for impairment. We performed the relevant evaluations and although, our internal cash flow projections suggested a value above that implied by our stock price, the sharp decline in our market capitalization and decline in equity market multiples required an adjustment to goodwill. The $300 million non-cash of goodwill charge does not have an impact on our liquidity or debt covenants. And keep in mind that this is an estimate and is subject to adjustment in the fourth quarter as we finalize our testing. I want to emphasize what Mike said, our long-term outlook as not changed. This non-cash goodwill impairment charge was strictly driven by adverse equity market conditions. Now turning to the financials on slide four of the presentation, reported third quarter sales decreased $72 million from the same period last year and I will provide more details when I discuss each segment results. Including the $300 million non-cash goodwill impairment charge taken during the quarter, GAAP reported segment operating loss for the quarter was a $187 million. Total operating loss was a…

Thanks Barb. Chenille, we’d like to start the Q&A and just as a reminder to all the participants, please limit yourself to one question and one follow-up, so we can get as many in as we can.

Thank you. (Operator Instructions) Your first question comes from the line of Jason Gursky of Citi. Jason Gursky – Citi: Hello. Can you hear me?

You bet. Great. We can hear you, Jason. Jason Gursky – Citi: Yeah. Thanks for taking the call guys.

Yeah. Jason Gursky – Citi: Mike, I’d love to just get some qualitative commentary from you if possible on why you think the DDG-51 award went away from you and what impact this might have on your ability to sustain flat revenue outlook over the five year period out to 2015?

Well, as far as the outlook goes, we’re not changing the outlook based on this first competition. As I said, we’re very disappointed that we didn’t win that competition. On the other hand, this was the very first competition that we’ve had since Katrina happened. And we’ve been doing a lot of work over the last three and half years getting ourselves ready doing the things that we thought were important and we did measure up. But what we have now is we actually have a stake in the ground on a target to shoot for, before that we were doing what we thought was right and what we thought would make value and we made a lot of progress, we just didn’t get all the way to where we need to be. Now we have a target to shoot for, we look forward to the next competition. We congratulate the team at there, we wish them well and we’ll see them in the next competition, we’re energized to go get it. Jason Gursky – Citi: Okay. Great. And then there was, I don’t know if you’ve had a change yet to see this report out today out in the press, but there seems suggestion that you’re going to a see 5% withholding on progress payments related to the DDG-114, due to some deficiencies and it sounded like management processes or something to that effect. I was wondering if you have any insights on that and what that means from perhaps an earnings and a cash flow perspective?

Well, we have ongoing in all of our contracts we usually end up with some -- with several kinds of disputes with our customers over various issues. And this particular one, I think has to do with our earned value management systems, but we have range of them and those disputes and withholds are spelled out in our filings. Again, this is something we will engage with -- have engaged, frankly, with our customers on and we will continue to engage on. But as far as our outlook and flows for the business we don’t see this is having any effect. Jason Gursky – Citi: Just to confirm there is no impact to cash flows or earnings driven by this in the near-term?

Not to our outlook, no. Jason Gursky – Citi: Okay. Thank you.

Your next question comes from the line of Rob Spingarn, Credit Suisse. Rob Spingarn – Credit Suisse: Good morning.

Good morning, Rob.

Hi Rob. Rob Spingarn – Credit Suisse: Mike you talked about LPDs 22 through 24 delivering by the end of ‘12 and you also mentioned 9% margin in the Gulf by ‘15. Are there any timing changes here, was LPD 22 do this here and then the target on the margin, is that slipping to the right?

No. There is no change, I mean 22 is, we do expect 22 to deliver this year and 23 and 24 next year. And our target has always been 9 plus percent in 2015, so no change there. The team is performing right on line and right on track with the plans that we’ve laid out. Rob Spingarn – Credit Suisse: Okay. Would you be able to give us some sense of how the margin plays out in ‘13 and ‘14, you’ve been clear that we shouldn’t look for much in ‘12, ‘13 is really where we see a bit of a jump just given the number of zero margin ships that depart in ‘12? But how do we think about ‘13, ‘14, ‘15 then?

Well, without being terribly specific what we said is that 2013 is a point of inflection for margin improvement. And what will happen is these, by 2013 all of the underperforming contract work will be behind us and Avondale situation would be behind us at that point too. The new contracts will be coming on. Our bias towards conservatism on the front-end of new contracts, we’ll be ramping up on those contracts in terms of margin recognition, which is why we see this getting up to the run rate in 2015. So you think of 2013 is a point of inflection. Rob Spingarn – Credit Suisse: And how do you think about 2012 guidance and timing on that guidance?

At this point, I’m not sure that it makes a lot of sense for us to try to guide into this environment at all. Rob Spingarn – Credit Suisse: Is that largely due -- is that more due to what’s going on in Washington or is it the uncertainty around the Avondale closure situation, what?

I would say, yes. I would say, yes. Rob Spingarn – Credit Suisse: I mean is it...

Yeah. I mean any one of these things would be completely assumption driven and so to have three of these things -- these three things, all of them being so assumption driven that, pick your set of assumptions you get a set of numbers. So from our standpoint that’s not effective in our communication plan and what we’re trying to communicate is that, we are – we’ve got our eyes wide open on what the risks around these different issues are. Rob Spingarn – Credit Suisse: Okay. And then just to finish up, to sustain you just had a great margin at Newport News in the quarter, I think everybody sees that? How sustainable are those performance improvements on Virginia and what else should we think about there and how do those margins go forward?

Well, this is Barb. And I would say is, we have multiple ships under construction on the Virginia-class program and I don’t believe 10.7% is sustainable and ratable, but during the third quarter we had an unusual amount of favorable risk retirement primarily related to the delivery of California and then New Mexico completing the warranty period. But because we have ship -- six subs under construction at any point in time, we have different risk retirements across each one of their ships. So you will see some lumpiness in our return on sales on that program. Rob Spingarn – Credit Suisse: Okay. Thanks very much.

You bet.

Your next question comes from the line of George Shapiro of Access 342. George Shapiro – Access 342: Yes. Barb, I saw the loss for -- provision for losses went down $21 million in the quarter, so you’re at $31 million now, so probably runs out in the first quarter next year except that LPDs don’t finish delivering till the end of next year. So, why won’t there be the risk of another charge that needs to be taken there?

Well, we’re talking about risk associated with getting those programs out of the yard. But right now as we see it both LPD 23 and 24 are over 85% complete at this time and they are going to deliver in the latter part of the first half of next year, so we feel at this point in time those provisions are about where they need to be. George Shapiro – Access 342: Okay. And then one question on inventories, they certain were better and your cash flow is very good this quarter. But they’re still seeing like they are too high. Can you just go through what’s happening there on a year-to-date is still up close to a couple of hundred million dollars?

Sure. Not a problem. Yeah. Our cash performance was actually pretty good but that was really due to accelerated cash collections and just timing. Inventory is higher than the end of last year and part of it’s due to the – clearly Avondale restructuring costs. But also we talked about the performance on our LPDs and LHA 6 and that manifests itself in inventory with the retentions and the progressing on those ships. And so you’ll see a big change in that inventory as we deliver the ships. So right now we are just paying the price for that. George Shapiro – Access 342: Okay. Thanks very much.

Thank you, George.

Your next question comes from the line of Heidi Wood of Morgan Stanley. Heidi Wood – Morgan Stanley: Yes. A couple of questions to circle back on Newport News. Can you breakout what were the contract cumulative adjustments in the quarter and maybe talk about the driver of these 22% services margins in the quarter that was pretty impressive.

Heidi, we are not going to break amount the numbers. But what I can tell you is, the biggest, the unusual events were just the delivery of California and then New Mexico coming out of the warranty period. So we had some pickups because we retired risks there. But across the program, we have different incentives, we have material incentives, scheduled incentives, small business incentives, as we retire all that risks we will have cumulative pickups there. When we make the complete modules and deliver modules, we’ll retire risk there. We will retire risk based on our cost performance, our labor performance. So it’s a constant watch across each of the ships. Heidi Wood – Morgan Stanley: The services margins, can you talk to us about that uptick?

The services margins -- there was a little bit of pickup related to a very tiny amount related to the Toledo DMP. And then in addition to it is just all of our Savannah River, the way we do that margin with no sale comes in and it’s just timing. I don’t expect to see that continue. Heidi Wood – Morgan Stanley: Should we think that the services margins is being more in the mid-teens on a sustained basis thus far?

I think it will be a little less than that because of the aero funding that we received on the Savannah River contract and then that will start to be declining. Heidi Wood – Morgan Stanley: Okay. Mike a quick question for you and then I’ll turn it back over, a bigger picture as you sort of talked about the skyline and heading into kind of ‘13 and beyond and obviously the rollout of the previous port program. You’re sort of intimating more favorable contract terms versus the past, but help us understand across the industry we’re seeing evidence of much tougher contract terms going out of Pentagon? You have the F-18 multi year it has prior margins, KC-X signed fixed price development at zero and F-35 LRIP 5 which is at this stage not signable it should cost review by a half of -- share your thoughts, so what’s happening specifically in your contracting environment that is enabling you to drive your confidence that you’re going to be able to be seeing higher margins and better regencies through a defense budget down cycle?

Yeah. It’s a great question Heidi. I think to answer that, lets go back and remember why we have underperforming contracts in the first place. The contracts that were signed on the LPDs and the LHA were signed in the aftermath of Katrina when the yard was being rebuilt, but the culture of the yard had been broken. And so the cost baseline that was assumed in those contracts was not correct. What we are doing, while we absolutely recognized the points that you made that there are certainly going to be different kinds of risk sharing, there is going to be different kinds of terms and conditions out there. The fundamental issue for us is, if we can get the cost baseline right that’s going to be a major improvement in where we’ve been over the last five years. And the contracts that we are negotiating today, we are negotiating those off of the cost baseline that we’re actually performing to today rather than, so we know what the cost baseline is for us to go get this work under contract. As I said you’re exactly right there are other pressures out there that if we were running at a full rate, I would say we would be in the same boat as everybody else. But we’re resetting the cost baselines right now in all of our contracting and so that overwhelms the effect that you talked about. Heidi Wood – Morgan Stanley: Okay. Good. Thank you so much.

You bet.

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

Hi Sam. Sam Pearlstein – Wells Fargo: Good morning. Barb you had mentioned 3% of sales for CapEx, which if you do on the order of $6.5 billion, I guess gives you about a $190 million of CapEx that’s a pretty big step up from where you’ve been running. Can you talk about what we might see in the fourth quarter there and why it’s going up?

Well, you calculated about right and really it’s just kind of a normal phenomena vendor here all your vendors are going to getting their invoices and want to get paid by the end of the year, but also some of our work is completing towards the end of the year. So, we’ve talked about we were finishing that inactivations facility, we have the extension on [NLF] going on getting ready for the two subs a year. We’re buying equipment getting ready for the two subs a year because we’ve already started that second one. So, a lot of it it’s just timing at the end of the year and somehow the suppliers always get their invoices in at the end of the year to make their sales numbers to and as they complete the work. So, I look forward to be real. Sam Pearlstein – Wells Fargo: Okay. And then when you mentioned the $75 million to $100 million of pension contributions how does that compare to this year?

This year we just had a small amount of pension contribution so it is significantly more, the discount rates are driving that. Sam Pearlstein – Wells Fargo: Okay. And I just one follow-up it’s just in -- I know you don’t want to talk about the Virginia class positive adjustment in terms of the size, but it looks like in the first quarter you had 7%, 9% now a 10% margin in Newport News which is a business that I would have thought would be generally more stable. And so when should we start to see something where there aren’t these big swings on a quarterly basis?

Well, that’s the problem when you look at your business -- at our business on a quarterly basis it’s a little harder because of the lumpiness those with cash as well as risk retirements on the program. So, you really need to look at this business more instead of quarter-over-quarter but more year-over-year type look at the total year. Sam Pearlstein – Wells Fargo: Okay. Thank you.

Your next question comes from the line of Noah Poponak of Goldman Sachs. Noah Poponak – Goldman Sachs: Hi. Good morning.

Good morning Noah. Noah Poponak – Goldman Sachs: Is there something that makes your third quarter margins seasonally strong relative to the other three quarters of the year?

Well, what we were just talking about on the Virginia Class, just the fact that we delivered California, we came out of... Noah Poponak – Goldman Sachs: Well, I’m not talking about this year specifically, I mean on an ongoing basis every year. It looks like historically there has been some seasonal strength in the third quarter relative to the year, although it doesn’t happen every year. I’m just wondering if there is something that would drive that for the company?

There is -- I would say no in general. I think you could note that the -- our third quarter is the end of the government’s fiscal year. And so there may be on a kind of a random basis there may be some effect of that that might have a little bit of an effect. But in this particular case, the fiscal calendars had nothing to do really with this. This was about work that we finished and risks that we retired. Noah Poponak – Goldman Sachs: Got it.

It just happened -- it just happened to be this quarter. Noah Poponak – Goldman Sachs: Okay. Following up on the question before about tougher terms of trade with the Pentagon where you’re kind of saying that, your starting point for your cost basis is in a substantially different place. How do you think Mike about the risk that as you improve when you go back to the negotiating table at the Pentagon, they seem in a lot of other cases very willing to strongly suggest that they need to then reset the bar again on you and sort of have you shared a lot of the improvements you’ve garnered with the customer?

I mean -- as we’ve talked many, many times when we go to negotiate a contract, we’re in that end of the business where we’re either our sole source supplier or we’re in a head-to-head competition with one other supplier. We are not in that end of the business where there 8 competitors out there who our and they’re in a pretty strong competitive environment which drives -- which drives the negotiations. So typically in our negotiations where we go into is, it’s usually less about price and it’s more about how we’re going share the risk that’s here. Neither one of us the government wants to buy the ships that we’re offering. We want to sell the ships that we’re offering, we want to try to find a way to share the risk, because by sharing the risk we are creating value for shareholders and we’re saving money for the tax payers. And so I think that -- that’s discussion of how are you going share the risk is what our negotiations all about. We get lost in all of this is that, if you sign a cost-type contract with the government the reality is, even if you only retire 80% of the risk and you have to increase the cost by some dollars for the 20% you didn’t retire. You save the tax payers in contracts you save that tax payers hundreds of millions of dollars, because if they had signed a price-type contract the price would have been 30% to 40% higher. Noah Poponak – Goldman Sachs: Right.

So, that’s what discussion is all about for us really it’s less about the price and its how do you craft the contract in a way that makes sense for the tax payers and make sense for the shareholders. And, for me the center of that conversation is, do we have a common view of what the risk is, do we have a view and can we create a common view of how we’re going to share that risk. Noah Poponak – Goldman Sachs: Okay.

They want to put all the risk on me they have to pay me more for it. Noah Poponak – Goldman Sachs: Okay.

If they -- if we decide to share it then that can be mutually beneficial to both of us. Noah Poponak – Goldman Sachs: That’s helpful. If I could just sneak in one other quick one for Barb, if I -- I might be looking at the math incorrectly here, but it looks like you’re saying the ‘12 discount rate would be down 30 to 60 basis points versus ‘11. If I just look at the Moody’s AA it’s done 125 basis points year-to-date, how do I put that?

Yeah. Well, we take our discount rate-- we use a discount rate based on AA bonds where the duration matches the timing of our pension flow. So, I -- based on where discount rates are today and everything untitled get the lower end of our range we’re given you. Noah Poponak – Goldman Sachs: Okay.

So if -- I will know that from the end of the year, end of year we do our measurement and it’s every body’s guess what the market is going to do and where we’re going to be. Noah Poponak – Goldman Sachs: Okay. Thank you.

Your next question comes from line of [Dan Barsi] with Sanford Bernstein. Dan Barsi – Sanford Bernstein: Good morning.

Good morning. Dan Barsi – Sanford Bernstein: Just to go back to contract awards again, I mean you booked over $2 billion in awards for the quarter, but something we’ve been hearing elsewhere is that there has slowing progress on moving contracts forward. Are you seeing any signs of order flow being delayed or of orders you expected taking longer to be finalized?

I can’t say, I mean what we’re talking about at this point in our contract negotiations are contracts or ships that have been authorized and we were and either been fully appropriated or mostly appropriated and we’re working our way through that. The negotiations are tough, but we don’t see that the things are being held back. If that’s what you mean. Dan Barsi – Sanford Bernstein: That’s what I was asking, yes.

Yeah. And we’re not seeing the effect of that. We’re seeing that things are taking a little bit longer just because of the -- the as I said before, trying to get this -- trying to get a common view of what the risk in the program is and then trying to find a way to make sure it makes sense for everybody. That takes a little bit -- that’s taken a little bit longer now, but that’s not a flow issue I don’t think. Dan Barsi – Sanford Bernstein: And then, just turning to the next opportunity on DDG-51, when would that come up and when would you expect to be awarded?

I see, I think that’s probably about this time next year is what I think the plan is at this point. But we’d have to I guess, we have to confirm that. I think that’s what it is and I think that the most important thing for our team right now is, the feedback loop that we got from this last competition allow us to go in and see what the opportunities are for us to be more competitive. Dan Barsi – Sanford Bernstein: Great. Thanks.

Our next question comes from the line if Brian Ruttenbur with Morgan Keegan.

Hey Brian. Brian Ruttenbur – Morgan Keegan: Hi. Just a question just a follow-up to some of the other questions to get clarity, on G&A, can you talk about it in the fourth quarter you had a drop from quarter -- two quarter from second quarter to third quarter, can you talk about that just in the fourth quarter kind of near-term looking at your toes?

Yeah. I mean, I hate to use the word lumpy all the time, but that’s just kind of the aware our businesses. I would look at not a significant change in the fourth quarter to the third quarter. Brian Ruttenbur – Morgan Keegan: Okay. And then, most of your pension expense is going to be in the G&A line in 2012, because you are going to have that increase?

We will have an increase yes. Brian Ruttenbur – Morgan Keegan: And most of it will be in the G&A line?

It will show, yes, yes. Brian Ruttenbur – Morgan Keegan: Perfect. Thank you very much.

Our next question comes from the line of Carter Copeland from Barclays Capital.

Hi, Carter. Mayur Manmohansingh – Barclays Capital: Hi. Good morning, guys. This is [Mayur] in for Carter.

Good morning. Mayur Manmohansingh – Barclays Capital: My call dropped earliest so I apologize if the question I’m going to ask is -- was asked earlier.

Not a problem. Mayur Manmohansingh – Barclays Capital: Mike you talked about you captured 2015 long-term guidance the same in terms of flat revenues and 9 plus percent margins. With the loss of DDG well not winning DDG 116 we are just wondering, does this or were any other question that you may have had or that something else so that’s please as we look towards the sort of longer term forecast?

Our general presumption in the DDG line is that we will win about half of those. And there is four ships have been awarded so far and we’ve won -- and we’ve got of them. We’ve obviously got another competition coming up and we’re getting ready to go do that. But the loss of this specific ship while it’s very frustrating, it’s also very helpful to my team will allow us to be even more competitive for the next, for the next go round. And all of that’s not going to have at this point -- at this point there is not, we don’t see any change, any reason to change our outlook for 2015. Mayur Manmohansingh – Barclays Capital: Okay. And then you mentioned that most of the risk on LHA six lies ahead? I was just wondering...

Right. Mayur Manmohansingh – Barclays Capital: …if you can kind of give us some color in terms of how should we think about the freezing of risk on this ship? Where do you typically see kind of most of the risk is it the last 25% as most of that’s going to come up probably let’s say in the next quarter?

Yes. I mean, I think that when -- on these kinds of programs particularly the LHA six program, you are going to -- you are going to recognize it from when you fight it on the ship and when you fight it on the ship is when you are in the test program. If you done the work, if things have come together the way they -- the way you plan for then the test program will validate the work that you have done. The uncertainty comes in because of the -- the nature of the new design work and the nature of the -- the way that we put in. Now we’ve work hard to improve our first time quality in the business and we’re doing very diligent work, the program team on that ship is working very hard to define the scope of work as they are going through the construction process. But its really when you get into the testing program that you can validate either a) we’ve retired that risk or b) we’ve got more work to go do before we’re done with the work. So that’s kind of why -- that’s kind of why its back-end loaded the way that it is. Mayur Manmohansingh – Barclays Capital: Okay. And if I can sneak in one, final one for Barb, did you mention by any chance what you expect free cash flow to be for the full year?

Okay. Good question. I talk about this all the time our invoices are pretty big and at the end of the year have a lot of invoices outstanding and its all based on timing. So very hard to give you a point estimate on that. If all goes well, I look for the trend to continue favorably, but we did have a great timing in the third quarter a lot of invoices were paid early. So I look at cash flow to improve a little bit. Mayur Manmohansingh – Barclays Capital: Okay. Great. Thanks guys.

Your next question comes from the line of George Shapiro, Access 342.

Yes George. George Shapiro – Access 342: Just a follow-up Mike, it looks like revenue this year maybe coming at six or so, I mean is that going to be relatively flat next year and is there any color you can give it would seem like Newport should be up and the Gulf down if there is any color you could give on that?

I mean, I consider that at this point to be relatively flat and we are going through a phase where you will see, the work ship from one side to the other. You’ll see -- in fact you already seen some of that. But over the long-term, we don’t see any reason to change the overall outlook for the business. George Shapiro – Access 342: Okay. And next year you would expect the Gulf to be down and Newport to be up some to reach that flat kind of number?

We haven’t provided any sort of guidance by division like that. We just kind of have kept it at the corporate level and said this looks pretty flat across the whole business. George Shapiro – Access 342: Okay. Thanks.

Yes. Thank you.

And your next question come the line of Pete Skibitski of SunTrust. Pete Skibitski – SunTrust: Hey, good morning guys.

Good morning Pete.

Hello Pete. Pete Skibitski – SunTrust: Mike, I was wondering if you kind of share with us how much incremental financial liability you could potentially incur with regard to this Avondale venture or the MOU with the State of Louisiana, because it kind of seems like it complicates the shutdown situation there and you start to think about the success the U.S. as had in commercial ship building. And so you wonder if you may be could incur a lot of liability there?

Well, thanks for the question. We -- our plan -- our plan of record that we are executing today is that we are closing that facility. There are lots of reasons, lots of stakeholders who have hope for other outcomes. And we are very respectful of that. We purposely wanted to explore all of those other outcomes, because we’ve got great ship builders there and we owe them the chance to go and explore the possibility of other outcomes. The State of Louisiana has stepped up and said if you’re able to find another path the state is willing to create some incentives and so you could think about this as, we’re on a path to closure, but if there is another way the state would be -- they’re trying to find a way to incentivize that. What we’ve said from the beginning is that we got to have four things fall into place for us to do anything other than close the shipyard. The first is, we really do need a package of incentives from the state. And they come forward in a very big way and to compliment the State of Louisiana they are working very, very hard to try to help us find another outcome. The second is, that we needed to have some agreement with the Navy that we were under the far that we would be able to go and explore these alternatives without giving up our rights on as far as restructuring costs and closure and we got that. So that’s the first two of the four things we need. The last two things we need is, we need a credible partner and we need a sustainable market. Now, if you put those four things on the list you’d say, okay, which of these…

Yeah. I’m not sure, I want to be that specific yet, I mean our aperture is pretty wide open to possibilities, but the reason the fundamental reason we’re looking for a credible partner and a sustainable market is, this needs to be in a place that’s not in the Navy work that we’re doing today. That means it’s going to be in some line of work that we’re not doing today, where we don’t have a whole lot of expertise and so we’re going to need somebody who understands the sustainable market that we’re looking for. They don’t understand what the key to success are going to be there, they understand how to -- how to drive and orient the process, so they can be successful. And so we would -- think of that more as a follow roll for us as opposed to a lead roll. But, our aperture is wide open at this point. Pete Skibitski – SunTrust: Okay. Got it. If I could just one last question on a separate topic, can you share with us why sales volumes on the forward would be down during the quarter, we sort of in a transition mode between phases or something or was an issue of number of days in the quarter?

It’s really driven by the engineering content is starting to decline a little bit and the construction is picking up, but we had -- last year full fledged engineering and construction going on at the same time. So, it’s just overall little decline in the engineering side. Pete Skibitski – SunTrust: I see, okay. Thank you.

Your next question comes from the line of Yilma Abebe with JP Morgan.

Good morning. Yilma Abebe – JP Morgan: Good morning. Thank you. One balance sheet question from me, given your cash balance and cash flow and expected cash flows going forward, can you comment on expectations for that pay down, even if you don’t want to talk about specific numbers and perhaps you can address generally your outlook on leverage?

Well, right now what we are doing on the cash side is and we’ve been saying this all along, until we get these LPDs and LHA-6 out of here we are going to be conservative on our cash deployment strategy. We will look at starting next year we will start to take in a real hard look at a balanced approach and when we make that decision we will let you know. Yilma Abebe – JP Morgan: Thank you. That’s all I had.

Okay. Thank you.

Ladies and gentlemen that concludes the Q&A session. I’d now like to turn the call over to Mr. Mike Petters.

Thank you. I just want to thank you all for participating in the call this morning. Again we -- this was another great quarter of improvement for us in operating income, operating margin and free cash flow. We do still have risk on the LPDs and LHA-6 programs, but we are making progress on those shifts and we are ramping up our new business and that means that we are still on track with the plan that we’ve laid out at the beginning of this year. Our goal here at Huntington Ingalls is to provide our warfighters with the highest quality shifts at the lowest possible cost on or ahead of schedule. Those are objectives that we believe create value for all of our stakeholders. So thanks for joining us this morning and we look forward to seeing you in the future.

Ladies and gentlemen, that concludes the presentation. Thank you four your participation. You may now disconnect. Have a great day.