通用動力 (GD) 2005 Q1 法說會逐字稿

Good day, and welcome to this General Dynamics first-quarter 2005 financial results conference call.

Today's call is being recorded.

For opening remarks and introductions I would like to turn the call over to Mr. Ray Lewis.

Please go ahead, sir.

Thank you, Carol, and I would like to welcome the members of the press and the investment community that are on the call with us today.

As always, we are likely to make some forward-looking statements.

They will be our best estimates, but obviously they are subject to the risks of any normal business.

And I would direct you to our 10-Ks and Annual Reports for a more detailed explanation of what those risks might be.

With that said, for opening comments, I'd like to turn it over to our Chief Executive Officer, Nick Chabraja.

Thanks, Ray, and good morning.

I think our press release issued earlier today is pretty straightforward, so I won't dwell on the information that's presented there.

I thought I might share with you my perspective on the quarter.

And in particular, I think there are three things that I feel are particularly important from a positive point of view.

The most important thing in the quarter was $8 billion of new orders, which added over 2.5 billion to our backlog.

Second, we had very respectable cash generation, which is always helpful when you get it in the first quarter.

And third, and we had very good performance out of our IS&T group, and absolutely superb performance at Gulfstream.

And I want to talk about each of those things in a little more detail.

First, the backlog.

The 8 billion in new orders was spread across all four of our major business segments.

Funded backlog as a result increased 2.5 billion from the end of the year, from the fourth quarter, with growth in every segment.

Importantly, Gulfstream's book-to-bill ratio expressed in dollars is above 1, and has been for the last three quarters.

So a very good first quarter order book for Gulfstream.

Cash flow.

In terms of cash flow, we are off to a good beginning, having generated free cash flow from operations net of CapEx equal to 94% of net earnings.

And again, I would say I'm always pleased when I see strong cash generated early in the year.

We almost always have a powerful fourth-quarter cash, and when I get it early in the year, it gives me comfort that we're going to have a strong year from a cash flow point of view.

Let's talk a little bit about the two business units that I particularly pointed out earlier.

Sales growth in IS&T was reasonably modest, about 7%.

But that was complemented with an almost 17% increase in operating earnings and a 90 basis point increase in margin rate.

So really powerful performance out of that group from a margin perspective.

Total Information Systems and Technology backlog increased over $900 million in the quarter, and is slightly more than $2.5 billion above where it was at this time last year.

Let's talk about Gulfstream for a minute.

This is really a good news story.

Gulfstream sales grew by 24% compared to the year-ago quarter on increased deliveries; 20 as compared to 17.

Operating earnings increased 53%, and the margin rate improved by 250 basis points to 13.4%.

So I think our disciplined approach to cost controls and productivity down there continues to pay extraordinary dividends, and my complements to the team at Gulfstream.

In fact, again this quarter, for the third quarter in a row, we recorded a modest gain on the sale of (indiscernible).

I think Gulfstream's performance was particularly impressive in light of what I would view to be somewhat of a disadvantageous product mix in terms of the deliveries in the quarter, which will get better as the year unfolds.

Let me draw some facts to your attention that magnify that point.

A year ago, we had 17 deliveries in the first quarter; 13 of those were large cabin and 4 were mid-size.

Of the 13 large cabin aircraft, only 1 was a reduced range aircraft.

So that aircraft, together with the 4 mid-size, would be 5 out of 17 lower-margin aircraft.

This year in the first quarter we had 20 deliveries, 14 large cabin, 1 more than a year ago.

But 5 of those were reduced-range versions -- either the 500 or 350 at lower margins -- and 6 mid-size as compared to 4.

So of the 20 deliveries, 11 of them were what we would view to be lower-margin product.

So in light of that mix, I really felt good about what Gulfstream did, and it should portend good things for them as they go through the year.

Let's spend a minute on our other two operating units.

Combat Systems, this one is particularly important.

Sales and earnings are down slightly from a year ago.

Timing and mix of deliveries is the driver here, and it also affected the margin rate.

To give you a little color, the margin rate held very well at Land Systems, volume down slightly there.

But we had margin issues at both ATP and OTS, largely having to do with mix and timing, and work on some new issue contracts at slightly lower margins, at least at this point in the year.

But backlog growth is a key element of the Combat Systems story, with a $1.7 billion increase in funded backlog.

They now enjoy a robust $10 billion backlog, enhanced in the quarter by the addition of the Stryker 5th Brigade, the MGS, and a Portuguese armored vehicle order.

In addition, earlier this week we issued a press release announcing that Land Systems have received an order for an additional 99 Stryker vehicles.

So here's the issue -- this is a business group that we have talked to you about expecting 19 to 20% -- 18 to 20% growth in volume and respectable margins, much like last year.

We're not backing away from that.

I have told our group executive and each of the presidents we will stand firm on our forecast for Combat Systems; look for improvement throughout the course of the year there.

And I think they will be right on plan.

Marine Systems was the problem in the quarter, and we will talk about that a little bit.

NASSCO, on the good side, delivered the second of the four double hulled tankers to have been our nemesis for awhile.

Unfortunately, they experienced horrendous weather on the West Coast, particularly in January, where they had nine straight days of torrential rain.

And we had a couple of things that happened to us.

NASSCO's work is largely in the open air, so you can imagine what those nine days of torrence (ph) were like.

But we also experienced very high winds that disabled a crane that was critical for us.

We had a crane run off its skids and get damaged.

And it was a pivotal crane; it was the crane that transports steel from our essentially open air warehousing facility and introduces it into the steel manufacturing and cutting facility.

We had to work around the absence of that pivotal piece of equipment, and it severely disrupted our workflow.

These two things were the significant contributor to a $19 million charge we took in the quarter with respect to that program.

The third ship of the class, which is 84% complete, will deliver later this year and the fourth ship, only 12% complete, delivers in the third quarter of 2006.

NASSCO did receive an order from the Navy for the seventh and eighth T-AKE ships, and the first T-AKE is barely 60% complete.

We also had in total in the Marine group, which I think isn't apparent from the press release, about 30 million in charges.

In addition to the 19 at NASSCO, there was another $6 million charge for currency translation in connection with the BP Amoco ships.

And we had a $5 million charge, sort of unusually so, at Electric Boat having to do with a repair contract that they were working on there.

The Marine Group backlog now stands at 17.2 billion, and while we're not without risk there going forward, we see some positive signs.

So overall, we're off to a very good start in 2005.

It is pretty much as we had anticipated.

We believed that the first quarter was going to be slower from a volume perspective than most of the sell side analysts believed.

But we're pretty much right on our game plan.

Mike Mancuso would like to add a few things.

Thanks Nick.

Good morning, ladies and gentlemen.

First, let me remind you that attached to our press release, in addition to the statement of earnings and operating results by segment, are a number of exhibits that provide selected financial information, backlog, aircraft deliveries, a reconciliation of cash flow to the change in debt and a summary income statement for discontinued operations.

I will offer a few comments on the number and get quickly to your questions.

As Nick indicated, we are off to a good start, with segment operating results consistent with our internal plan, and in fact slightly ahead, notwithstanding the charge at NASSCO.

The unplanned tax benefit was a fallout of the conclusion of the latest federal audit cycle.

From a run rate perspective, we expect 2005, and the remaining three quarters actually, to approximate about 33%.

During the quarter we closed on the divestiture transactions announced earlier, generating 373 million in cash proceeds with a pre-tax book gain of 32 million.

The tax basis of those businesses was much lower, however, generating a $42 million tax liability, and resulting in an overall $8 million loss in discontinued operations.

I would refer you to Exhibit F in the press release to lay out some of the details of those activities.

Cash flow for the first quarter was very good and is ahead of where we were last year.

Net debt of 1 billion 8 is 1.2 billion below last year.

Debt-to-equity and debt-to-capital ratios are significantly lower than last year.

And earlier in the quarter we repurchased 1 million shares.

That concludes my prepared remarks.

Now I will turn it back to Ray to initiate the Q&A.

Thank you Mike.

Now, Carol, I want to announce that we're going to institute a rule, and we sort of did this last quarter, but I want to make it explicit.

Each person will get one question.

If you have more than one you can go back to the end of the queue.

But we had a lot more people last quarter participating, and we like that.

So to give as many people as possible a chance to ask questions directly of Nick, we do want to make it one question per turn at the turn style.

With that, Carol, could you explain to people how they can queue up?

(OPERATOR INSTRUCTIONS) Heidi Wood, Morgan Stanley.

Nick, my question is on Gulfstream.

You've talked about the pricing improvement at Gulfstream being significant.

Can you give us a sense as to where we are relative to 2000 prices?

And on the margins, can you characterize the progress you made, breaking it down between how much of it was cost reduction, how much of it was due to process changes and then how much of it was price firming?

I can't, Heidi.

I couldn't begin to compare prices today with 2000.

We have, frankly, different product than we had in 2000.

I think that the cost containment activity is a major driver in the margin improvement, but we have also experienced some pricing improvement.

But I haven't made an effort to distill the parts.

The pricing impact will improve as the year goes on.

We will have more of that later.

Okay, thank you.

Howard Rubel, Jeffries & Co.

I want to talk about sort of the issues you have continued to sort of have with the shipyard and sort of macro challenges you face with the Navy.

How do you sort of see them playing out so that you can earn a fair return and the Navy can get reasonable cost for the products that it would like to buy from you?

Howard, I think you almost have to take that one shipyard the shipyard.

NASSCO's problem is not with the Navy.

They did very well on their last major Navy program, that LMSR ships, and had no problem with the Navy.

With the benefit of 20-20 hindsight we know that NASSCO made very aggressive bids on both the arow-row (ph) ships that they produced and the four BP Amoco tankers.

Given that, they've done a hell of a job producing those ships and have come down a reasonably aggressive learning curve.

But the poor guys can't catch a break out there.

It's one thing after another.

And I think what we're doing is exactly what Mike Toner wants to do, and that is to get those ships built and get them the hell out of there.

They're great ships.

The customers very pleased with them.

We're just not making a return on them.

But I think NASSCO is well poised to build auxiliary ships for the United States Navy at a profit.

Their problem hasn't been in the construction.

They had a design to production issue, but it was really exacerbated by overly aggressive bids, and we've fixed that problem prospectively.

Electric Boat is in a cost plus environment.

Also, it's hard for them to be very profitable.

On the other hand, the Navy has appropriately and fairly relieved Northrop Grumman and Electric Boat from the risk on those first four ships.

As we get into a fixed-price environment, we will in fact do better.

And if and when the Navy can ever afford to increase their rate of submarines, we will do even better yet.

But the margin rates will be acceptable when we get the fixed price contracting.

Then the Bath Iron Works is doing very well.

They continue to come down learning curves very aggressively.

We haven't changed booking rates, but an argument could be made for that.

And here I think it's a question of what the Navy intends to build and whether the volumes are going to be sufficient to make it productive work.

Thanks.

Sounds fair to me.

Nick Fothergill, Banc of America Securities.

Apologies, I'm on a plane at the moment.

One question, if I may.

It's on the shipbuilding side of it.

Nick, what is your strategy going to be if the DDX is awarded to a single source?

And how might that strategy change if it continues to be dual source?

Let me do my best with that one.

Right at the moment, the Office of the Secretary of Defense has not permitted the Navy to go forward with their single-source strategy, according to this morning's announcement, which we think was very thoughtful.

What it does is leaves us working with the Navy to explore this entire subject.

But since your question is in the hypothetical, I will answer it hypothetical.

If we in fact are put to competition, Bath will do it's very best to prevail.

We're working very diligently to be the low-cost producer.

And we're making, as I mentioned earlier, great strides in that regard.

If the current strategy continues in place, we will build it together with our partner, Inpastagoula (ph), with whom we have very good relations, and with whom we see eye to eye on this build strategy as being the best thing for the Navy, for the nation, from a cost perspective.

The Navy has some different views on that subject, but I think we have a good working relationship with them and we will work this issue.

Joe Nadol, JPMorgan.

Good morning.

My question is I'm just trying to reconcile your guidance, your EPS guidance in the press release, with what you said about Q1 operations.

I believe you said Q1 operations, even including the Marine charges, were kind of on track to even a little bit ahead.

Your guidance, your EPS guidance, went up $0.20 to $0.32 cents, I think, but you've got a $0.32 cent tax benefit.

So could you reconcile how we should think about the guidance you provided?

I'm trying to slow you guys down from getting too far ahead of me.

It almost doesn't matter what I say anymore; people add onto it.

So I think you can view my guidance as conservative.

But I would add that there's risk out there in the Marine group that I can't quantify.

But we're not out of the woods on that program.

The second thing I would say to you is there's opportunity, considerable opportunity, on the upside that I also can't quantify, and that I would be remiss to suggest.

We've talked about the supplemental and what is in there, and it could be considerable.

There is, as you know, a difference between the House and the Senate versions.

How that will come out, and when it will come out, I don't know.

And that impacts on our upside.

And it's spread across several of our business groups.

And the timing of it is also something that I can't deal with now.

So it would be irresponsible of me to run that estimate.

So if you want to view this as a cautious estimate, well, so be it.

Okay, thank you.

Steve Binder, Bear Stearns.

Nick, you have kind of handled this question differently, but you did spell out back in the K a slight improvement in Marine margins.

I understand the risk and everything that you're encountering right now at NASSCO, but is there still a chance of slight improvement in margins given you're in the hole with the first quarter performance?

Well, it depends on what you mean.

We believe that absent nonrecurring charges we would improve the margins.

I still believe that.

If you want to extract the charges, we will do okay there.

But it's tough slogging.

We're not without risk there.

Cai von Rumohr, SG Cowen.

Yes.

Nick, could you give us a little more color of kind of the margin pattern at Gulfstream?

What should we expect of this kind of mix between reduced range and regular range on the large cabin for the year?

Your R&D looks like it was down year-over-year.

Is it going to build?

Can you give us any color in terms of the build and the pricing?

I think you said on the fourth quarter not to expect much until the fourth quarter.

You said today kind of as we go through the year.

I think you're going to see gradually improving margins here.

They're going to get a better mix.

I will give you one example.

We were down the delivery of one G550 compared to a year ago.

We had eight in 2004 in the first quarter; we had 7 this quarter, yet we're going to produce several more G550s than we did a year ago.

So expect that that higher margin aircraft is going to be loaded up late in the year.

I think they're going to do very well.

Thank you.

Troy Lahr, Legg Mason.

You said at Combat Systems you're kind of going to maintain the revenue guidance.

Your outlook for operating income, though, is that still the same or is margin pressure going to kind of --?

No, I think they're going to recapture their margin momentum.

Okay, thanks.

I think they got kind of the slow start we anticipated.

What some people missed was in forecasting more bullishly than we were in the first quarter -- and I confess we didn't give quarter guidance other than by suggestion.

I said we were going to do a little bit better from operations than we did in the first quarter a year ago.

We have had a number of Army contracts restructured, like Future Combat System.

And all of that was very good, but it took volume and pushed it to the right.

Some other volume that we have in our backlog didn't get in there fast enough to fill the hole.

It will.

It will, in fact.

And I am very bullish about what Combat Systems as a group is going to do this year.

And we kind of knew it was going the soft for the first quarter.

Joseph Campbell, Lehman Brothers.

Nick, I wanted to ask about the Combat Systems 18% growth, and sort of to tie it together with this confusion about what exactly will be in the sup.

And I guess we won't know until they vote on it.

But what you have in there?

And is what's in the sup and the 18% related, or is the sup all about '06 earnings and revenues?

Joe, it's difficult to parse for you, but there's a little of all of that in there.

There is some of what's in the sup that is part of our plan.

And we feel highly confident that we will in fact get it, and it will appear this year.

There is some in the sup that is a definite upside to this year if it works out so that the numbers would be larger than what I'm forecasting.

I can't go beyond that now, though, because it's uncertain.

And some of the sup -- in fact, large parts of it -- are going to impact us in '06, for which we have not drawn a plan.

Okay?

Good.

Thank you very much.

David Strauss, UBS.

(technical difficulty) in the first quarter in terms of pricing, you had talked about strength in the fourth quarter.

Did you see a follow-on in the first quarter or did pricing back off at all?

No, we got good prices in the order book, David, if that's the question.

The pricing is fine and the market condition remains very good.

As you could tell by our book-to-bill ratio, which you can discern, you can see that the backlog grew.

George Shapiro, Citigroup.

Nick, in IS&T, if you back out what I figure is about 80 million from the couple of acquisitions in there, organic growth was pretty minimal, maybe around 1%.

What are you looking for to happen there for the rest of the year, and what caused the weakness in the first quarter?

George, I think nothing in particular other than timing.

I expect their volumes to improve and to see fairly nice growth as we proceed through the year.

They have some of the same issues as Combat Systems as they have a very large Army customer that was restructuring a lot of their activity, and we can point to Future Combat Systems, but many other things.

And we will see some of our technology for the Army being brought forward into the current force.

And I think that volumes will improve.

And the issue, George, isn't going to be, I think, the amount of work.

And I think the big challenge for IS&T is to maintain this wonderful margin start that they're off to.

You remember a year ago they had kind of saw tooth; they had a real strong second quarter and they couldn't hold it.

And while they did okay, it slipped away from them in the third and fourth quarter.

So my challenge to them, and what Gerry DeMuro certainly has the bit on this one, is now that they're off to a good start, don't let anything interrupt that, and trying hard to sustain these kinds of margin rates through the year.

That will be the trick.

They've got plenty of work, as you can tell from this growing backlog.

So what kind of revenue growth would you expect for the year?

You mean on these guys?

On IS&T, yes.

I think 8%, 7 to 8% would be pretty good.

Thanks very much.

Doug Harnett (ph), Sanford Bernstein Investments.

Following on on IS&T, could you describe a little bit about how the margin improvement and the growth looks across AIS, C4 Solutions, Network Solutions?

Are we seeing a change in mix?

Are some of these growing more strongly than others?

No, I think they have pretty good performance across the board.

I think it was particularly -- let's see.

I am taking a look at it right now.

AIS is up;

Network Systems down a little bit from a quarter a year ago;

UK up a little bit.

So I mean it's a mix, but overall it's a little bit better.

Wait a minute;

I'm looking at it the wrong way.

Excuse me.

Let me go back to that.

AIS is down a touch;

C4 Systems is up rather powerfully;

Network Systems is up significantly; and the United Kingdom is down marginally, but there wasn't anything that would be aberrational in there.

Okay great.

Thanks.

When the UK is down, it's lighter volume than the others, so not much of an issue.

Lloyd Beetman (ph), Bernstein Investment Research.

Can you tell us what the gain was on the preowned sales in the quarter, please?

I think it was $2 million on pretty light volume.

My memory says 43, but (multiple speakers) 48.

Okay, 48.

I'm off by 5 million.

And the sales number as well?

That is what I said -- 48 million of sales; 2 million of earnings.

Thank you very much.

It's only three airplanes.

By the way, on that subject, when you get our detailed financial information, you'll see that we have a modest inventory.

I think it may be six airplanes.

But none of them are available for sale right now.

Two are presold, and I think it four are on lease to customers.

So we're without inventory at the moment, used inventory, which is always kind of a happy place to be.

Thank you.

Myles Walton, CIBC World Markets.

A question for you on the mix and the backlog over at Gulfstream.

From the 10-K it looks like the Netjets backlog continues to trickle-down as those deliveries come through.

I guess there's another 12 coming in '05.

So the question is were there any fractional orders in the quarter?

I know they've been quiet on the order front for over a year now.

Just wondering if you anticipate a pickup on that side of the demand curve?

Myles, it's a question that is awkward to answer.

We have with them a very large order backlog against which they're drawing down.

And they're drawing it down faster then they did in prior years, in the slow years.

So if you are asking my observation about their business, I would say yes, their demand for our airplanes is growing.

And they continue to draw down against their order book with us.

But I can't remember how many we're going to produce for them this year.

But it's not been an issue.

I guess 12 airplanes, which is up from 10 a year ago.

Thanks.

That was up considerably from the prior year.

Byron Callan, Merrill Lynch.

Nick, I just want to go back to Joe Nadol's question earlier about the change in your guidance.

Is it really just the net of Marine Systems in the quarter versus the tax rate, or are there other underlying assumptions that you've made in taking this number up?

No, Byron, all I wanted to do was take my prior guidance and net it for the tax.

And in my mind at least, when Mike and I talk about this with the group executives, we're offsetting some of the positives we've seen with the charges that we experienced in Marine group.

We're left still with some risk, but we think enough positive opportunity that they're likely to wash.

I think somebody earlier, maybe it was Joe, made much of the fact that there was a range to my earlier guidance, and I seem to have picked the lower end of the range and added the tax benefit.

Well, again I would say that (inaudible) and really, part of my effort to get the sell side not to run away from me here.

Okay, then we just keep an eye on the supplementals.

That's probably still the upper in the 2005 plan.

Yes, keep an eye on the supplemental and watch our performance in the Marine group.

Let's see if we can't get through the balance of the year without taking another licking.

Thanks, Nick.

Alex Motamed, Thomas Weisel Partners.

I was just wondering if you could comment -- earlier in the year the Navy had talked about possible cost overruns on the tank ships and said that you were instituting cost savings initiatives.

Can you provide any additional update on that?

That was kind of interesting.

At the time the Navy made that comment we were less than 50% through the first ship and about 8% through the second ship.

We hadn't started the third and fourth, but they had cost estimates.

We're not far enough along in that program to have a meaningful discussion about this.

A first ship in any class is always a difficult ship.

And it almost always overrun, but there typically aren't charges associated with it because you're program accounting.

And I think we're going to do okay with T-AKE, but it's way too early in the program for us to have a view.

We're booking this extremely conservatively right now.

Great.

Thank you.

Jared Muroff, Prudential Equity.

Thank you.

I was just hoping you could put a little more color on the Combat Systems business and the improvement you expect to see in the back three quarters of the year.

To maintain your guidance of about 18 to 20% per cent growth, that's about 23, 24% year-on-year growth in each of the quarters.

First quarter was down slightly from a year ago.

I'm just wondering if you could give us a little better sense of what programs have moved around and where you expect to see the largest improvement on a program -by-program basis.

Program by program -- we're going to start delivering an awful lot of Strykers and an awful lot of vehicles out of the European Land Combat Systems.

You'll see it out of them in the fourth quarter.

This is going to be fourth quarter intense.

So that's really what you ought to be watching -- watch deliveries.

This is a units of delivery business, as opposed to the Marine program, which is more even.

Almost everything we have in Combat Systems -- ammo, combat vehicles, composite products, guns -- it's all units of delivery and you should expect to see deliveries increase as the year goes by.

Thank you.

Alex Chapra (ph), Oppenheimer Capital.

I just wanted to ask about acquisitions.

It's been over a year, I think, since you've made any significant acquisitions.

Nick, I think in the past you've commented that the Company makes some acquisitions and then maybe the following year absorbs them and integrates them.

So now we've probably past that.

What are you seeing in terms of pipeline?

And also, can you comment on what private market multiples look like versus public market?

Thanks.

Alex, I think every acquisition we make is significant to us one way or another.

But if you mean size, yes, we haven't made one of size for awhile.

And there is a lot of availability.

I think you hinted at one of the issues -- the public market multiples are pricey.

Most defense and aerospace companies who aren't major systems integrators or primes are trading at multiples that are higher than the primes are trading.

That creates some difficult economics.

When economics are difficult, we are patient.

The private market multiples are better, to the extent somebody can say something about private companies.

But even there the expectations are driven by growth imagination that's not real and the public market multiples.

So all in all, there is a lot of availability, and it's kind of pricey.

But we will do deals when we can make some money on them.

Thank you.

Phil Mariette (ph), ASB Advisers.

Just on the NASSCO charges, you commented that I guess there's still some risk.

And I'm sure you've talked about this in the past, but I wonder if you could help me understand the process that you go through for assessing the need for charges on these programs.

I guess we've had three quarters in a row now, and my recollection is that each time there was sort of the sense that hopefully this was the last time we would need to take charges against the program.

So just hoping for a little clarity on what that process is and where things stand.

We're doing a detailed estimated at completion quarterly under the watchful eye of KPMG.

They're all over us.

Our internal audit staff is all over it.

And the finance group itself is all over it.

But we're on a battle front there, and conditions change.

There's not more that I can say about that.

Nobody would like to say any more than I would that this is over.

And frankly, I suppose the folks at NASSCO would like me to come to you and run up a big charge and breath a sigh of relief and start reporting profits.

But that's not the way we're doing it.

We're doing it consistent with the accounting rules.

And we're going to fight this thing quarter-to-quarter.

As a follow-up, about how much of the -- I think you said -- was it was 19 again this quarter at NASSCO?

Yes.

And then you cited some very specific problems, weather and the crane.

Could you quantify about how much would you say of that 19 million was related to the specific problems in the quarter rather than other processes (multiple speakers)

No, it was events in the quarter.

Productivity declined and we attribute it to these phenomena.

You've got to think about the working days you have in a quarter, and we lost nine of them, or did desperately inefficient work those nine days and had to make up for it with overtime and a variety of workarounds.

You had water pouring through those boats, workers building lean-tos with tarps over them so that they would weld.

It was a mess.

It was a bloody mess.

And productivity declined.

This does conclude our question-and-answer session.

At this time I would like to turn the call back over to Mr. Ray Lewis for any closing remarks.

Thank you very much, Carol.

As usual, I will be available for questions, along with my colleague Carl Johnson, right after we have a quick bite to eat.

My number, if you don't have it, is 703-876-3195 and Carl is 3172.

So I hope to be talking to many of you later in the afternoon.

Have a good day.

This does conclude today's conference.

We thank you for your participation and you may now disconnect your lines.