Good day, ladies and gentlemen. And welcome to the Kratos Defense and Security Solutions first quarter 2010 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Laura Siegal. Ms. Siegal, you may begin.

Good afternoon, everyone. And thank you for joining us on the Kratos Defense and Security Solutions first quarter earnings conference call. With me today is Eric DeMarco, Kratos’ President and Chief Executive Officer; and Deanna Lund, Kratos’ Executive 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 available on Kratos corporate website at www.kratosdefense.com. Additionally, I’d 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 the company’s website 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 these important risk factors is included at the end of the press release we issued today. Our statements on this call are made as of April 29, 2010 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. This conference call…

Thank you, Laura. Good afternoon. As we provided a preliminary report of our first quarter results a couple of weeks ago when we announced the pending acquisition of the Gichner Holdings, Inc., today, I’m just going to provide a brief summary of the quarter operating results, get into some recent events and talk about operations and programmatics. Deanna’s going to give a complete detail of all the financials, including all the GAAP numbers and then I’ll wrap it up. Today Kratos reported first quarter 2010 revenue of $68.7 million, inline with what we communicated just a few weeks ago. First quarter EBITDA increased once again to 8.6% of revenues or $5.9 million, up sequentially from our fourth quarter 2009 EBITDA of 8%, and surpassing our expectations as a result of favorable program mix and continued intentional reduction of some low margin and non-value-add pass-through work. Additionally, Kratos’ Government Solutions segment EBITDA, which comprises about 90% of our business and where we perform our Department of Defense and National Security work increased to 9.3%. For the first quarter Kratos’ Public Security and Safety business continued to improve its profitability, with a sequential increase in contribution to the corporation after its return to profitability in the fourth quarter of 2009. Overall, Kratos’ first quarter EBITDA margin increased 18% over the first quarter of last year. Today we reported pro forma EPS from operations of $0.11 for Q1, excluding the interest charge of $2.2 million related to our recent refinancing. As Deanna will discuss in some detail, since we last communicated with you and as a result of certain very recent changes in Kratos’ shareholder base, our NOLs are no longer completely unlimited from a technical standpoint. However, as the result of the timing of this recent change, which worked out very well…

Thank you, Eric. Good afternoon. Today we reported quarterly revenues of $68.7 million, compared to first quarter 2009 revenues of $82.6 million, which reflects a reduction in our Government Solutions segment revenues from $74.4 million in the first quarter of ‘09 to $61.5 million in the first quarter of 2010, reflecting our continued reduction of lower margin pass-through revenues and efforts to enhance operating margins, the impact of government in-sourcing and certain of our Government Solutions contract, as well as, the impact of delays and contract awards, which include certain work that has been extended on bridge contracts but at a reduced operational pace. Although one of the delayed contract awards, the $48 million military sales contract was awarded in March, we were unable to ramp up the production on the program in the first quarter that we had originally anticipated. In addition, our Public Safety business though it has returned profitability continued to be impacted by the macroeconomic conditions. Revenues decreased from $8.2 million in the first quarter of ‘09 to $7.2 million in the first quarter of 2010. Kratos’ gross margins increased for the first quarter of 2010 to 24% from 20.8% in the first quarter of ‘09, and sequentially from 22.6% in the fourth quarter of ‘09, as a result of the favorable mix of revenues comprised of our higher margin, Ballistic Missile Defense, Information Assurance and Cyber Security business areas. SG&A decreased from $11.4 million in the first quarter of ‘09 to $10.6 million in the first quarter of ‘10, primarily due to cost reduction actions we have taken. Our EBITDA for the first quarter of 2010 was $5.9 million or 8.6%, up sequentially from an EBITDA margin standpoint of $6.6 million or 8% in the fourth quarter of ‘09, and up year-over-year from an EBITDA…

Thank you, Deanna. So, in summary, Kratos had a very solid first quarter, taking into consideration the current government contracting environment, including the slow government procurement process, contract award delays and contract protests continuing to impact the industry. We believe that Kratos is very well positioned in the areas of national security priority. These include ballistic missile defense, including Aegis and FAD. Unmanned aerial vehicles and unmanned systems, including the weaponization of unmanned systems, modeling, simulation and design work. C5 ISR, including electro-optical, infrared, photonic and other exotic types of sensors, including sensors related to unmanned systems and ISR applications. Information assurance, network management and cyber security, including in support and protection of Department of Defense and three-letter and classified agencies. Public Safety and Homeland Security and the protection of important strategic assets and infrastructure here in the United States. And finally, weapon systems sustainment and lifecycle extension, including related C5 ISR systems and the large FMS market. Kratos had a very strong first quarter of bookings, with a book-to-bill ratio of approximate 1.3 to 1. Kratos’ PSS business has returned to sustained profitability. It had a solid first quarter’s bookings, which has continued thus far into Q2 and we are pursuing several new Homeland Security type opportunities in our capture process at this time. We’re also taking a very close look at funding trends in this area from a strategic standpoint and is specifically related to the recently released Quadrennial Homeland Security Review. And as I mentioned before, preliminary first quarter new contract bookings for Gichner came in very strong at approximate $50 million. Finally, we just received word today that one of our major range prime contracts, which we have been performing under a bridge for the past several months has now been awarded with a five-year contract term and a significant scope of work increase. We will be more formally announcing this award shortly. Accordingly, we fully expect revenues to ramp throughout 2010, starting in Q2 as we start to perform in increased work on some of our recent large and other contract awards. We are also reaffirming our previously stated 2010 profitability targets, EBITDA and EBITDA margin rates and we expect to generate a significant amount of cash flow from operations for the fiscal year, including approximate $10 million of cash flow from ops in Q2 alone. With that, we’ll turn it over to questions.

(Operator Instructions) And our first question comes from Mark Jordan with Noble Financial. Your line is open. Mark Jordan – Noble Financial: Thank you. Two questions, if I may. First, Eric, now with the change in the NOL status, since that has now been broached. Does this change your view in terms of how you will continue to build this company? Again, you had talked about being precluded from using stock. Is that now an open alternative and could we assume that you might be more opportunistic on acquisitions moving forward than you would have been otherwise given the prior constraint?

Right. That’s a very good question, Mark. That was a factor in our thinking on issuing equity. However, as we mentioned on the last call, our equity, we’re looking at it as pretty valuable right now. The business plan is very solid. And as we talked about today, some of the larger contract awards that had been pushed to the right. We’re starting to get them. They’re starting to come through. So, you never say never but that factor has been removed. It would have to be something very important, very strategic or there would have to be a significant opportunity for us to do something like that. The hand of cards we’ve right now we feel pretty good about. Mark Jordan – Noble Financial: I’d like to talk a little bit about new contract opportunity in two areas. One, obviously you had a kind of a breakthrough in terms of scope foreign military sales for the Air Defense Systems. What other larger opportunities are there out there that would represent new business? That would be question one. Question two, given, you had stated that there were a couple of large range re-competes that you, in areas where you are a player. Does this award that you received with expanded scope enhance your potential competitive position on those, when those other ranges come up for competition?

Right. So, I’ll take them in reverse order. On the contract I mentioned today that absolutely sustains our qualifications, our past performed qualifications in the area. And with the scope increase, it probably enhances it somewhat but it’s more of a sustainment. Our company’s past performance qualifications and capabilities in range operations and technical services, I personal believe are second to none. And we are very well positioned to go after competitively some of our competitor’s work that’s coming up in the future, which is what we intend to do. On the first part of your question, there are some large opportunities that we’re pursuing. Some of them are related to FMS and they are weapon system sustainment related, sustaining, upgrading, retrofitting certain weapon systems of friendly governments. In addition to that, we are taking a look at from a missile defense standpoint, potential opportunities with our missile defense target product and solutions. Missile defense is not just related to the United States. It’s related to many of our friendly allied government and their forces. And we’ve a very unique capability that only one other player we believe has anything close in and with our ARAV systems. And that’s an area we’re going to be looking hard at going forward and we see some opportunities coming down the pike we can go for. Mark Jordan – Noble Financial: Thank you. Finally, do you have anything you can share with regards to the investor that filed a 13D a few weeks ago? Have you had any additional communications or any communications that you could share?

Right. So, on the 13D, Mark, of course, we’ve studied it. And suffice to say, we’ve some of the same questions, I’m sure that you have, one of them being the ability to finance a tender offer or exactly what does he mean saying a security company like us should not be publicly traded. Frankly, we don’t know the answers to those questions right now. I have had communications with Mr. Tomas, very amicable, very professional, very professional. I don’t want to get into any details on it but it’s safe to say that some of the questions that I just mentioned and some others we still have. Mark Jordan – Noble Financial: Okay. Thank you.

You’re welcome.

Thank you. (Operator Instructions) Our next question comes from Mike Crawford with B. Riley & Company. Your line is open. Mike Crawford – B. Riley & Company: Thank you. Hey, just to segue from that last topic, so could you go through your thinking on the Section 382 impairment. It sounds to me like you’re taking the enterprise value and applying like a 50% takeover premium, so you get to like $400 million and then you can use 5% of that. Is that the way it works, Deanna?

Mike, it’s actually a lot more complicated than that. So, you do look at the market-cap of the company. There is some assumptions, the control premium that’s assumed. But then, there’s also, you look at the tax basis of the company. You look at how the tax basis compares to the market value of the company. And then there’s a portion that’s amortized over a certain period of time. So, there’s -- there are many factors that are driving that calculation that we have an estimate on currently. Mike Crawford – B. Riley & Company: Okay. And what are the probability, how confident are you in that, say $20 million versus say $15 million?

We have been working with our outside tax advisors, as well as, our valuation experts, who are obviously helping us from a control premium standpoint. So, we feel fairly comfortable with that estimate. Mike Crawford – B. Riley & Company: Okay. Great. Hey, Eric, you mentioned range work, a five-year term, significant scope of work increase. Is that White Sands or can you say at this point or?

Can’t say. Not appropriate to say right now. Mike Crawford – B. Riley & Company: Okay. Fair enough. On Gichner, from their website there’s a bunch of press releases over the years. And so, they talk about what they’re doing with the new Zumwalt-class destroyers. At least they, it looks like they had some subcontract to deliver 16 of these modular systems per ship. How many, has there been -- has it been disclosed how many destroyers they’ve been contracted for so far?

They… Mike Crawford – B. Riley & Company: Back in July of 2009 they talked about the first two?

Yeah. They’re contracted on three DDG-1000 Zumwalts. Mike Crawford – B. Riley & Company: Okay. And is this something that you’re going to pursue with other ship classes?

Absolutely. The modular command control communication and computer enclosures and the electronic modular enclosure technology that Gichner has is fantastic. It’s one of the prime reasons why we decided to merge with them because of modular compartments. One example is the literal combat ship. And as we know, there are two literal combat ships right now. There’s the Freedom and there’s the Independence. But there are going to be 55 of them built. And each LCS has numerous, several dozens mission module compartments, which are very similar to these type of mission module compartments. And there’s just one opportunity that we intend on going after very hard. Mike Crawford – B. Riley & Company: Okay. Great. Thank you.

You’re welcome.

Thank you. (Operator Instructions) And our next question comes from John Nelson with State of Wisconsin. Your line is open. John Nelson – State of Wisconsin: Hi, Eric and Deanna. I again want to congratulate you on a good quarter and sticking to the long-term game plan. And I’d like to ask you if you can maybe give us some more flavor for what kinds of, if the delays that are affecting a number of the contracts you bid on are focused in any particular areas or if they’re, if this is kind of the broad-based across not only the military but also the cyber security parts of the government.

Right. And thank you, John, for the words. In the information assurance, network management and cyber areas that we are playing in, we are not seeing any delays in that area at all, at all. We have -- we had seen some delays a significant number of months on some weapon systems sustainment orders, as Deanna mentioned. Those are now -- they’re now coming in after delay. So, we had seen that. We clearly have seen some in the range ops and technical services area. As we mentioned on the last call, we were on three bridge contracts, I believe. One of them has now freed up and with an additional scope increase, which is great. We are not seeing delays in the modeling and simulation work we’re doing, the unmanned system work we’re doing, the C5ISR work, we are not seeing it in those areas. So, it’s in those couple of areas where it’s stretched some things out on us and we’ve still got a couple things stretching. But thank God some of the big ones have started to free up for us. John Nelson – State of Wisconsin: Okay. Great. Thanks very much.

You’re welcome.

(Operator Instructions) And I’m showing no further questions at this time.

Very, very good. Thank you for joining us this afternoon. And we’ll look forward to circling up with you shortly as we move closer to the closure on Gichner and as we move through the second quarter. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect and everyone have a wonderful day.