John A. Fees

Just a couple of touch stones on this. One is going back to the oil and gas business for a minute, we are continuing to see a decrease in output with an increase in demand and I can''t predict and I''m not sure anybody can predict reliably what this current global recession and economic crisis, however you want to label it, is going to have an impact on that. However, without significant capital expenditures within that being able to develop existing, known and potentially develop all resources there, that''s going to have to happen to keep that output from going down. So we really believe that there will be a good work going forward. We have not seen in fact, we have seen an increase in certain regions in terms of project perspectives and where we''re going. So, we really don''t see anything there that would lean towards anything more than a robust bidding environment and many good large projects for us to execute on.

In the government side, we''ve actually had record quarters and we are pulling in record backlogs in that particular segment for our customers who we supply nuclear components to overall on the government side. So, my expectation in that area is that we will continue to do very well on that particular side, there is a great need for our...the things that we supply to the government through that particular segment, we''ve been able to do some very good orders that give the government a benefit in terms of some consolidated buying as well as give us great insight into where we''re going over the next couple of years. We''ll be hiring in the plants and we will be increasing our workforce to be able to execute that backlog, so I think that looks robust and it looks very strong.

On the power side, I would expect this dynamic that we''re seeing of new generation versus running the existing base to be about where it is right now for the next 1 or 2 years domestically in the United States. We are...our business is low, but unique from the standpoint that when we see the newbuild OEM business down and reserve margins decrease, and there is a desire for more electrical output in the United States, we see our service business go up. And so one kind of offsets the other, ones with much higher margin than the other and so they work very well together. But, I think we are getting a pent up demand for electrical power generation that really should start hitting home over the next couple of years.

And internationally, we still see very robust circumstances internationally. And again internationally, I can’t predict yet at this point. There has been so much that has happened in the last 30 days in terms of the financial and credit markets domestically and around the world we really don''t know what the impact of any of that is and whether or not there is going to be any slowdown there. However, right now, we are seeing fairly robust demand internationally for power generation and we really believe over there next year or two, you''ll see more results from us in that area than we have in the last. So, I don''t know if that answered your question? We can promise that about an hour on that so.

Will Gabrielski - American Technology Research

Sure, that''s helpful. On the competitive side, just from when you look at your competitor in the biding process. Do you see any particular region getting a little bit more competitive or bidding a bit more aggressively, trying to take share or is still a pretty healthy environment capacity constraint today, say versus a year or two ago?

Michael S. Taff

Well, I think what we see is pretty similar to what we''ve had in the last year or so. I mean, it''s still a very competitive environment. But typically, on oil and gas side, we''re the dominant player from a global standpoint typically and our competitors tend to be regional type and then in the U.S. on the power side, John, I think the landscape there haven''t changed dramatically over the last 12 to 18 months.

John A. Fees

And recognize too that our capacity and our utilization of our capacity moves around. This year, we''re very, very full in Middle East and we''re reasonably full in Asia. Next year, Asia ramps up significantly like it did two years ago, when we had a really great result out of Asia when that happened. We see the Middle East coming down in terms of its volume; it''s very, very full right now. We see it coming down to a more reasonable level and capacity. Right now, there is not much in the Gulf. We are bidding some activities for P-Max and some others that are in and around Mexico, all the way up that there is some potential ongoing developments in the Gulf. But right now, I''d say that, that load is pretty light.

And then when we get up to the Caspian, we were very active in the Caspian, not a lot of projects up there right now but those should start developing over the next couple of years. So, as these markets move around and as the volume is around the world, the competitive situation changes a little bit as well, so we just have to monitor that and stay on top of that going forward.

Will Gabrielski - American Technology Research

Sure. One last one, if you don''t mind. Can you just talk about the government margin going forward? Obviously because I am looking a bunch of work and I think you just alluded to Q4 being above what you would normally receive in a Q4 award. Is there any shift in margin there expected on some of these new awards and particularly I guess the Virginia class, second Virginia-class sub program and then maybe other opportunities down the roads to convert may be Destroyer fleet or anything as the government focuses on that shift?

John A. Fees

We have certainly have been able to get some incentives in some of these long-term agreements that we''ve made with the government. We''ve been able to deliver on some of those incentives. You''ve seen that in some prior quarters. I would expect these forward-looking quarters to be about the same, and I would say that if we produce a better result there, it''s going to be predominantly more volume.

Michael S. Taff

The key is continuous improvement.

Will Gabrielski - American Technology Research

Okay, thank you very much.