Good day everyone and welcome to the Kratos Defense & Security Solutions Second Quarter 2008 Earnings Conference Call. Today's call is being recorded. At this time, all lines are in a listen-only mode. Following the speakers' remarks, we will announce the opportunity for questions, and instructions for asking a question will be given at that time. As a special reminder to our media guests who are listening in, please remember that during the question-and-answer portion of this call, we are not taking questions – we are not taking questions. For opening remarks and introductions, I would like to turn the conference over to the Vice President of Investor Relations, Mr. Michael Baehr, who will read the Company's warnings regarding forwarding-looking statements. Please go ahead, sir

Thank you. Good afternoon everyone and thank you for joining us for the Kratos Defense & Security Solutions second quarter 2008 earnings conference call. With me today are Eric DeMarco, Kartos' President & Chief Executive Officer and Deanna Lund, Kratos' Senior Vice President and Chief Financial Officer. Before we begin the substance of today's call, I'd like to make some brief introductory comments. Earlier this afternoon, we issued a press release which outlines the topics we plan to discuss today. If anyone has not yet seen a copy of this press release, it is currently available on the Kratos corporate Web site at www.kratosdefense.com. Additionally, I would like to remind our listeners that this conference call is open to the media and we are providing a simultaneous webcast of this call for the public. A replay of our discussion will be available on our Company's Web site later today. During this call, we will discuss some factors that are likely to influence our business going forward. These forward-looking statements may include comments about our plans and expectations of future performance. These plans and expectations are subject to risks and uncertainties, which could cause actual results to differ materially from those suggested by our forward-looking statements. We encourage all of our listeners to review our SEC filings including our most recent 10-Q and 10-K and any of our other SEC filings for a more complete description of these risks. A partial list of important risk factors is included at the end of the press release we issued today. Our statements are made on this call today August 6, 2008 and the Company undertakes no obligation to revise or update publicly any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations or otherwise for any reason. Also this call will include a discussion of non-GAAP financial measures as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP are included in the earnings release which is posted on the Company's Web site. In today's call, Mr. DeMarco will discuss our financial and operational results for the second quarter of 2008. He will then turn the call over to Ms. Lund to discuss the specifics related to our second quarter 2008 financial results. Eric will then make some concluding remarks about the business and we will then open up the call to your questions. With that said, it's my pleasure to turn the call over to Mr. Eric DeMarco.

Thank you, Michael. I will start out today with an update in the status of Kartos' strategy and business plan and some specifics on the integration process of our two recent acquisitions. And then I'll provide an operational review of the business. Coming out of our transformation at the end of last year, Kartos was a sub-scale, national and homeland security product solutions and services provider. We were too small to credibly bid on and win large multi-year contracts in the prime contractual and not large enough to leverage off our fixed public Company, general administrative cost infrastructure to generate acceptable EBITDA margins. Over the past six months, we have made two strategic acquisitions, Haverstick Consulting and SYS Technologies. These acquisitions have not only doubled our Company's size, but they have also provided Kratos with the resources, the contract vehicles, customers relationships, past performance qualifications and overall critical mass required to create a business development organization that has the capabilities to pursue and win large prime contract opportunities. Specifically, the acquisitions we have made have put Kratos in the position to bid on several major contract opportunities with major branches in the Department of Defense which this Company could not have bid on previously. This business development organization is now being led by Cliff Cooke, SYS its former Chief Executive and now the Senior Vice President of Strategic Development for Kratos. This business development function and its success is absolutely critical to a Company like Kratos to generate and sustain organic growth. This is a function that Kratos had not had previously, primarily due to our limited size and resources. As we move forward, this strategic business development function will be absolutely instrumental in Kratos achieving and sustaining its strategic organic growth objectives of up to 10%. The successful integration…

Thank you, Eric. Good afternoon. Today, we reported quarterly revenues at $72.3 million, a $24.5 million or 51% increase from comparable revenues of $47.8 million in the second quarter of 2007, which reflects a full quarter of operating results with Haverstick merger which occurred on December 31, 2007. Our operating results do not include the impact of the SYS transaction since the merger closed on June 28, the last day of our second quarter. Our quarter end balance sheet includes SYS but the operating results at SYS will not be included in our operating performance until the third quarter. On a sequential basis, our second quarter revenues were up $4.1 million or 6% from first quarter revenues of $68.2 million. Revenues in our government solutions sector were up sequentially $4.3 million or 7.8% from $54.9 million in the first quarter to $59.2 million in the second quarter. On a year-over-year basis, our government solutions revenues were at $23.7 million or 67%, up from $35.5 million in the second quarter of 2007 to $59.2 million in 2008. This year-over-year growth includes the impact of the Haverstick acquisition which contributed $22.3 million thereby yielding an organic growth rate year over year of 3.9% in our government solutions segment. These sequential growth and year-over-year growth in our government solutions segments was the result of increases in certain C4ISR programs and weapons systems program. Revenues in our Public Safety & Security segment were up year over year $800,000 or 6.5%, up from $12.3 million to $13.1 million driven primarily by growth in our Security, Access Control and Facility Automation businesses. On a sequential basis, our second quarter Public Safety & Security segment revenues were down slightly from $13.3 million to $13.1 million due to the completion of certain projects. Our gross margin for the…

Thank you, Deanna, very much. So, in summary, through the second quarter, the business is performing on track with business plan. The SYS merger completed at the end of June, we are reiterating our annualized revenue run rate projection to be greater than $300 million for '08 and run rate of approximately $400 million for '09. This excludes any additional acquisitions and currently assumes no changes in contract labor material or ODC mix in the contract base. The integration of Haverstick and SYS are substantially underway including the third quarter business realignment and G&A infrastructure cost reduction, a full benefit of which is ahead of us and will not be fully realized until Q4 and Q1 '09 due to the run off severance payment. This realignment action is directly related to our stated plan to integrate the businesses and they continue to improve Kratos' EBITDA margins and consolidating our current business position. The key element of the integration plan for Haverstick and SYS relates to business development and winning new work. One of the primary reasons for bringing these businesses together and executing this acquisition strategy is to combine the resources, the past performance qualifications in order to go after new work in the prime contractor role. This process has already begun with Cliff Cooke, Kratos' Senior Vice President of Strategic Business Development leading this absolutely critical initiative. That concludes my remarks. Thank you for joining us today on this conference call. We'd now like to open the call up for any questions that you may have.

Thank you. (Operator instructions) Our first question this afternoon comes from Mark Jordan with Noble & Finance. Mark Jordan – Noble & Finance: Afternoon Eric. Three questions, number one, given your service and product mix, where should – what should be a reasonable long-term target for you on DSOs?

Very good, Mark. Assuming the mix stays the way that it is right now, long term 90 days, may be high 80s but that about is good as that can get assuming no changes in the delivery and milestone characteristics. Mark Jordan – Noble & Finance: Okay. Secondly, with the addition of SYS obviously, being purchased for stock, what would you project to be your incremental borrowing capacity, again given the fact that you are larger – acquisition was done for equity?

Right. Today's credit markets of course remain very challenging and tight. And we'd have to take into consideration any additional mark-to-markets of our credit facility, taking into consideration new market characteristics. But the way that we – one way that we look at it Mark is let's just say that we were looking at $50 million opportunity, whether it's generating 10% LTM EBITDA of $5 million, we take that, add that into our bank EBITDA and we would look at 3 or 3.5 times that total number. Mark Jordan – Noble & Finance: Okay. Final question, you just allude your target this to achieve industry norms EBITDA margins over the longer term as once the inefficient cost drop off. Could you define specifically what those EBITDA targets will be?

If we can get into the range of 7 million to 9 million, 7.5 million to 9.5 million then 8 million to 10 million that would be fantastic for us. Mark Jordan – Noble & Finance: Okay. Thank you.

Thank you.

(Operator instructions) We move now Mike Crawford with Riley Investment Management. Mike Crawford – Riley Investment Management: Thank you. So, I realize that we are probably not going to see adverse less numbers for the June period until I can say next quarter, but can give us just a rough indication was it around $19 million revenues, 7% EBITDA something like that?

Mike this is Deanna. It was little less than that $19 million, it was close to the $18 and the EBITDA was less than that due to some onetime transaction cost that – their performance that quarter. Mike Crawford – Riley Investment Management: Right. Deanna, so you have backed up those onetime costs?

I don't know if we give it. Mike, we haven't run that and looked at that way because we don't pick them up until Q3. Mike Crawford – Riley Investment Management: Okay. And then further to that, I guess in another way of looking at the $2 million in expected annual savings as it's almost like adding 3 percentage points to the EBITDA margin?

Yes, Mike. Let me clarify that. That $2 million is not for SYS alone. That $2 million is from the combination of Haverstick's Navy business, Kratos' Navy business and SYS' Navy business. And putting together three Navy businesses into one division if you will and the duplicas – the duplicity and the redundancy in G&A functions and overhead functions in both rate pools. Mike Crawford – Riley Investment Management: Okay.

Okay. So, it's a combination. Mike Crawford – Riley Investment Management: Okay. Eric, just on the guidance, can you just flush out what you mean by $400 million run rate for next year? Do you mean you are entering – do you expect to enter the year at that level or that is about what you expect for next year or is that what you expect to end out in the Q4 of next year?

We are expecting to do somewhere around $400 million in revenue for 2009 Mike Crawford – Riley Investment Management: Okay. Great. And in that expectation, I think it's my expectation that there's room for upside related to a missile test shot work. Do you have much in the way at that for in those numbers?

Right. They are probably depending on the operational tempo at some of the bases and some of the program work under that $100 million TSA [ph] contract we won a few months ago. There very well may be some room for some upside. However, as I mentioned we are actively right now looking across the entire contract portfolio at material and subcontractor pass through revenue. And so over the next 18 months, if we are talking about now through the end of '09, if we can eliminate some of that to get out of our operational numbers lower or no fee business, our ultimate objective would be to increase the margins and that could offset some of that upside on deliveries. Mike Crawford – Riley Investment Management: Okay and that makes sense. And one final question, as you would like to – SYS stays in pursuing some public security contracts where they set some inroads in Pennsylvania and some other local markets, has there been any more progress on that?

Q3, the quarter that we are in right now and maybe the first month or so of Q4 are going to be very telling on these opportunities for us. Mike Crawford – Riley Investment Management: Okay.

Thank you, sir. Mike Crawford – Riley Investment Management: Thank you.

That would conclude our question-and-answer session. At this time, I would like to turn the program back to our speakers' for any additional or closing comments.

Thank you. We would like to thank everyone for joining us for our second quarter earnings conference call. We'll be back in touch with you the third quarter. Thank you.

Thank you everyone for your participation on today's conference and you may disconnect at this time.