Q1 2020 Earnings Call
As as Jon Raviv can anyone hear me.
And ladies and gentlemen, please go ahead and technical difficulties. If you will remain a line the conference where over there.
[noise] it was already in that area.
Thank you.
Okay and your next question is from the line of Carter Copeland with from the when its research.
First question.
Hey, Hey, guys can you hear me.
We are back sorry about that.
We got drop there for a little bit so.
I imagine there gardein and like three or four questions and you guys have already answered them. So we will catch up once we go along what would happen.
Hey, I was just John question that did but yes, I'm glad you back drove negative.
Tumbled Luchies button many times so no worries.
I wondered if you could give us a sense on the.
The.
Most up to date data you have on the the headcount levels in the yards I mean, I can imagine that is something you're monitoring day to day.
Just like we are monitoring any of these other cobot related curves and the impact of that had on your.
Estimates for what the disruption will be in productivity will not have you seen any change since the ended the quarter in the month of April.
Yeah, we bottomed out as it improves any kind of up to date color that kind of beyond the month of March that you can provide.
Yes, thanks for the question we.
We we it's pretty pretty steady.
The AD that is the initial disruption for folks to figure out.
What what sort of disruption they add in their lives rela, whether they had family members that lost their jobs or how bad kids at home.
The work their way through that they did kind of worked their way through that and I think as we said with the aggregate.
The attendance is about 75%.
The the to parse that a lot of wage, but basically were well folks who have to be present in the business inside of the shipyards that number's lower than 75%, but our spot the rest of our workforce either they're working remotely or are there what we changed the conditions that they're working on.
Site I have been able to two to support at a higher level than that so.
We've been pretty steady for the last I'd say, the last two or three weeks anyway. So.
That's the number you have as the number we've got.
Okay and try to part if you try to parse it between the two yards what's the difference.
No not pretty flat that's pretty much the same in both places.
The number one driver in attendance right now by far is the schools are closed.
And folks have to folks have to decide how they're going to take care their kids and all of the usual mechanisms for people to take care of their kids are not available either so.
That's our biggest driver in attendance.
I continue to argue that we got to find a way to get.
Schools back to where parents are going to be comfortable to send their kids to school that's got to be at the top of everybody's list if that happens.
We see this.
Moving ahead.
We're moving we're shifting our posture as well we now that we've kind of stabilize this we're starting to look now to how do we expand how do we expand our employment and Philip backend. So we're we're moving ahead and leaning forward on this.
Got it is very critical welcome to the estimates on our ships in the quarter.
And incorporate their radius of tenants on the on a schedules and the impact on the on the touch labor ownership building programs, but.
We're also assessing the opportunities CR expenses had extensive has changed right. So the most obvious one is travels essentially zero.
But less obvious is stuff like Teladoc, which is some we put in place a while ago.
Despite.
Which means our people are not an emergency rooms, and ESL much less expensive for us.
When we come through the quarter end the year. It's currently we're going to assess the risk on our ships relates to really related to reduced attendance.
Also the impact on our expenses.
More of a holistic approach than just.
Well take tenants in the yards in one what's happened the productivity on the shift.
Yes, Thanks, I'm encouraged the key milestones for our production.
Essentially meeting as the key milestones that we have to meet and.
Just oxcart delivery of the destroyer in the last couple of weeks is evidence of that 119 62 is on schedule and as seen on is on schedule.
Really comfortable with our performance should believe it's going well.
Alright, great. Thanks for the color guys.
And your next question is from the line of Myles Walton with CBS.
Hey, good morning is actually an Leon from Myles.
So on the hi, everybody.
The recent results don't forget competition on given the contract value for the ship would you have been able to sign up for that and granted the price.
And then additionally, what is on your radar now for potential awards that ingles.
And is the reason award for LPD 30 line, how does that impact ingles production line.
Well a lot of questions there and ratably recognize that every everybody in the for your competition was pricing a different ship and so almost almost impossible to do.
Apples to apples comparison of price too too.
To to what happens to so I think the Navy the Navy try to run a best value competition and they selected a winner.
We were obviously very disappointed with the way that it came out but we'll get a de Bray from the Navy on what what happened and how it could have gone better and we'll go forward from there.
Out into other opportunities at Ingalls you know, we still have a very strong presence and production line right now in the large deck amphibs that phase two LPD program evidenced by the contract just sign for four LP 31.
We are we're building destroyers, and we're still building national security cutters, and so the ingles future.
Is is as bright as far as I can tell this is a disappointment but.
Looking at our competition as you get up off the field and you go learn your lessons and you get better. The next day in so that's that's kind of the way we're taking the.
The Navy is starting to rethink or is starting to think about what's the future hold and we're going to be we're going to be part of part of that future and so we're excited about that.
Thanks, Mike.
Your next question then the rock line of Jon Raviv with Citi.
Thanks, I'll try not to break everything this time I suppose.
As hear me, though yes, we can hear you, okay glad to confirm that.
So my question has been on have you heard it was just on margin progression through 2020, and 2021 I know this year was always going to be somewhat back loaded you talked about 9%. This year you reiterated that number.
What is the progression and you achieve that with various unknowns around cooled and 19.
And then related to that what is the potential menu of outcomes for the new Onesies carrier plan.
Well on the margin progression you can handle phase one notable change the margin progression at this point, Jonathan we have to come through Q2.
No doubt is going to be a complicated quarter, but I wouldn't change the way we're thinking about margin.
In 2020, or 2021 actually yeah, I think I think it's too early.
There's there's as Chris said earlier, there's there's certainly some risk now that's in our risk Register that we didnt have in our risk Register two months ago.
But on the other hand, there's opportunities out there that.
Our business is actually.
Transforming itself organically kind of it just doing it and so there's a theres some real opportunities for us in terms of efficiencies in and new ways of doing business and moving ahead. So it's it's way too early for us to try to back away from anything that we might have said earlier.
As far as the single phase delivery for 79.
What what the original plan was was the Navy Navy and the company had decided to to split the delivery to finish the platform and then use the post delivery time to upgrade the orange is actually install the sensors and.
Those those those state of the are things that change 345 generations, while you're building to ship.
And you want to make sure it's as current as possible. The Navy has come back and said you know if it's going to be better to do this in an integrated fashion.
Because that way, we can get a more complete ships sooner.
And be able to get to ship ready to deploy faster that way as well.
What that will do is that will change the schedule for.
If we're able to work our way through this and we and we haven't.
But if we work our way through this it will change the schedule for how to test program proceeds throughout the ship because we'll line that up with the new schedule.
It will change the way the Navy man's to ship, which is part and parcel to our test program and and delivery schedule. So it at this point there will be more scope.
It will probably move the schedule around a little bit and.
Until we get through it I'm not sure we can say exactly how much impact is going to have but.
We think it's actually the right answer for getting that shift to this to the fleet and into operation in the fastest as fast as possible.
Just a follow up on a plane on like appreciate the perspective, there is it not the case that the late 2020 improvement in margin because the 9% did somewhat rely on some of those things happening on the carriers that you. Just outline is those things don't happen then does that it was at one of the risk items for the nine.
Percent this year, perhaps yeah, I would say that's true, but thats why I say, we actually think that theres.
Again, we got to kind of work our way through the what what are we going to do contractually to account for this and then we look at what are the opportunities we're seeing in the rest of the business.
From the from the impact of this virus. So that's that's we're not we're just don't know enough right now to back away from them.
Thank you ill hand it off.
Your next question is from decline with Bernstein.
Thank you good morning, Hey, Doug.
I was.
Our news I wanted to.
Talk about Virginia class in Colombia glass because.
This year, you're going to see some significant block five work on Virginia class I know you highlighted in the release at Columbia class.
The amount of work there is starting to grow.
And can you could you talk to say first about.
What you see the impact with those two program sale growing on your margins at Newport News.
Well targets.
It's going to be the beginning of these programs and.
By now you know that when we're at the beginning of the program. We were reasonably conservative in terms of that now truth is that we know a lot about submarines.
And the arrangement on Colombia is just a little bit different than the teaming arrangement, we have on Virginia class and so.
How that works and how big how the expansion works in goes forward I think is.
We've got that factored into its part of our it's part of the the way we were thinking about the year and the next several years when we talk to you guys. In February so there's not really much change in all of that.
It's just it blends right into get us to where we want to be.
Well when you when you look at Columbia class.
As we will do this we were assuming it really started to get production growth taking off kind of into 2023 timeframe.
For for Newport News, how do you see that trajectory of work how much of a contribution you expect Columbia class to be making over the next couple of years.
This is Chris we don't have a specific number for you, but it does start to ramp from here.
And then really start to.
Get some momentum and in 2021, but we don't have a specific number for you okay. Okay, well thats. Good. Thank you Alicia thanks.
Your next question is from David Strasser with Barclays.
Hey, Good morning, guys. This is actually Matt acres on for David Thanks for the dynamics going on.
So now the hydro as close as species Naylor, if you could give us sort of an update on your thoughts.
Opportunity there for unmanned ship and sort of how that business.
Well, obviously very excited that we were able to close this deal. It took us it was that it was a long process with the with Kongsberg.
Working through what would make the most sense for both of us.
But now that it's in the portfolio, which.
We can basically in the last five years, we've come from not really being present in this space to being.
As as capable as anyone in this space and work and we're excited about that.
Navy will continue as it thinks through what they want the fleet of the future look like Theyre going to continue to look through look at how do you do more more missions with less people and so we think thats a that's a critical element of what they're going to be doing and hydro it certainly gives us.
A step into that there's a range of programs at the Navy's already announced that we're actually part of.
With Boeing has the has the lead on the XL UBI program and we are working with Boeing to.
Manufacturer that product for them.
The Navy's announced the large diameter you'd be program and we're very excited about the opportunity for that.
And then hydralyte as a business before we ever got involved with them they were.
Dominant player in program smaller than that so.
This gives us now a full full range of capability in the portfolio platforms and missions and capabilities that we believe the navy is going to need in the EU the space.
It also then gives us an opportunity to expand into the unmanned surface space because a lot of the a lot of the capability that youre going to need relative to autonomy.
Or manufacturing and advanced manufacturing those kinds of things are going to be the things that you're going to need to be able to be successful in the in the unmanned surface space.
My assessment is that the unmanned surface spaces is lagging the undersea space.
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But I don't know that that last and eyes and I am excited about where this whole program is going to go it's going to be a great business for for HIV and.
Because it's going to be a critical mission for our customer and Thats, where we want to be.
Great. Thanks, that's helpful. And then I guess can you comment on.
The sale of CPI business, and just given kind of the volatility in oil markets right now that's still on track and sort of any change this year.
Yes sure Matt This is Chris.
Yes, no doubt this volatile market out there right now the good news is a new pie.
They've got some really stable long term customers, they're hanging with and then we have a strong management team.
So that process will continue we expect it to.
To complete this year.
Okay, great. Thanks.
Sure.
Your next question is from Robert Spingarn with Credit Suisse.
Hey, good morning.
Chris I got a couple for you first.
Newport News and then ingles, but following up on John's question on CVN 79, and the single phase delivery, but more from a cash perspective at delivering 24 are you able to comment at all on what the impact of that would be on 23 cash flow and kind of the slope of free cash.
You pointed to back at the Investor Day.
I think you reiterated the cumulative target of 3 billion, but just wondering if this could make it more backend weighted so thats I don't I don't think so we don't we don't know yet exactly correct, because we haven't definitize that change.
I don't think it materially changes the slope.
A little more detail on cash I think with all we know right now on free cash flow and everything moving around we are still north of $500 million. This year and then we start to ramp.
Okay, Okay, and then just switching to.
Ingles wondering if you could provide any color on the EBIT profile. The NSC program as it exists today, just so that we can get a better idea of how that.
With that program eventually ending might impact the business.
Yes, I want to hit on Mike.
I want to do an acquisition program review right now, we don't really give detail.
Estimates of margin rates.
By ship I will say from angles perspective in the quarter LPD program is performing very well pleased the 20 and 29 of the the award for 31.
Illegals has had a really good quarter.
I was just going to ask Mike if theres any customer interest in a 12, Tennessee Hall.
Sure.
There's been a lot of talk about it I think the.
The question at this point is whereas the budget go.
And I think that.
That's that's kind of the big question Mark out there for everybody but.
Coast to Coast Guard continues to operate the NFC at a high tempo with lots of mission success and lots of very positive and favorable feedback to us and so.
And and it has been a program that has been funded and supported both from the coast Guard and from the Congress over the year. So.
I'd say sure.
Okay. Thank you both.
You bet.
Next question is from Pete Skibitski with anemic level.
Hey, good morning, guys Silberman is doing well.
Well.
Hey, Mike had a top level question about the Navy Marine Corps outlook for ships.
Kind of in light of the Commandant guidance and budget pressures connected and I think there's a new shipbuilding plan in the works in the building also that isn't complete yet but.
And I don't know whats connected why I think it's going to this idea of a light amphibious warship so kind of kind of the net question is do you think the requirement for amphibious lift is going to be reduced or modified over the next couple of years in anyway, and as the kind of maybe shift to smaller amphibious ships do you you can you.
Compete effectively there. So just just just kind of answered in your thoughts overall about what looks to be a lot of changes that might not impacted in the near term or maybe in the mid to long term.
Yes.
Good good question and that certainly.
Something that we're taking a lot about looking at the very top level.
There is there is always a challenge of if you want to if you want to change direction. If you want to go in a different direction. The question is how quickly can you do that.
And recognize that.
If you're going to trade off current capability.
For potential future direction, that's got lots of that's got lots of on.
Unemployed risk there that.
That hasn't really been we haven't been able to kind of break that that mold of you can't really go in a new direction by trading off current capability and I would offer that one of the things that we continue to stresses that current capability actually includes the infrastructure in industrial base that you have created we.
Hired more than 25000 people at H.I. over the last five years, we spent half a billion dollars training them and we spent $3 billion to $4 billion a year on our supply chain, where they've been doing the same thing and so we have we have a and industrial base, that's ready to support the direction that you want to go.
If you want to go in a different direction.
And be successful with that I think you got to think your way through how does how do I get the industrial base to move in that direction.
And so it's clearly the marines or thinking about.
Concept of operations that's.
Thats, a little bit different than what they've been talking about.
I don't think in the and I don't think it changes there near term requirement for heavy lifting and and this discussion is not something that's going to say here's how we're going to get there in the next two years I mean, you're really talking when you start talking about new ship building plans, you're really talking about what the ship building what is the Navy look like 10 to 15 years from now.
Because the navy that we're going to have five years from now you are building it today and if thats see today. So so the time frames have to be kind of thought their way through.
I think it theres an opportunity here for the industry and the Navy to work together to take advantage of all of the assets that we have to create a capability that would support going forward.
Now the other piece of what you said is is something that we're thinking really hard about is that there is there is a bit of a floor for us in terms of as you get smaller in ship size.
Market becomes a lot more competitive and so we got to think our way through that as a as just as a business how do we how do we improve our competitive position.
As if this is a direction that our customers going to want to go and we're looking hard at that.
Okay. Thanks, a lot for the color Mike.
That.
Hey, guys good morning.
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So I have a couple of questions and forgive me if these were obvious.
First.
Just to be clear on the coal that impact on profit accrual.
Are you, assuming I guess percentage of completion accounting right. So you accrue less revenue.
As there are fewer people, making progress on share.
But the margin rate, you're assuming as as though there is no coal that impact is that right assuming there will be some relief down the road.
The discount clothing.
It's good question in Q1, Theres really no cobot impact there was no way to estimate that impact in Q1, we're going to assess that in Q2.
As we understand the the comprehensive impact and the opportunities related to it. So it's a good question gone.
So meaning meaning in Q2 right now you are month couple of days of past in Q2, there is a colvin impact.
Fewer people showing up at the art.
So you're accruing less revenue, but you're accruing costs.
At the same margin that you otherwise would or again I'm just I want to be very clear that's right and you don't change. Your estimate is until you come through comprehensive the fees on your ships.
Which we will do in the quarter.
In Q2, and then assess that in the quarter and deal with that in Q2.
Okay, So right, but let's just say that the navy hasn't given you guidance on what form that equitable adjustment will be would you then take a negative cume catch up in Q2, and then just wait and hope that you do a controller resolution and then take a possible yet youre getting into claim accounting there I don't think issue.
Good.
From a claim accounting standpoint, you would not assume that they're going to give you an equitable adjustment.
To these costs so without opportunities you would potentially have to do a negative adjustment thats correct.
Okay.
Shifting to technical solution so.
There was a reference in the in the release too.
Lower performance on.
Hosted light oil and gas so I think.
So fleet repair work et cetera.
Elaborate on what what's happening in those.
And I think has nuclear and environmental as well there was this just again covidien ability to execute or was it something else and.
What are the plans on the oil and gas side.
So actually in the quarter the major impact was the San Diego shipyard.
As a performance issues there.
Oil and gas and nuclear.
We're okay, but compared to last quarter underperformance was a bit less nuclear is just timing very comfortable with where they are and still comfortable over 7% to 9% EBITDA.
Commented previously on oil and gas we still think.
That will get divested.
This year.
And last one negative cume catch up by segment, if you could give us than that.
Got.
Positive 61 negative 29 net 32.
And two thirds of that net is ingles.
And with Ts a negative.
It was pretty flat little negative.
Thank you very much guys I appreciate shurgard.
Your next question is from Ron Epstein with Bank of America.
Good morning.
Good morning.
Could you speak to in the 21 budget there, there's not a second Virginia class and there's been a lot of back and forth that there could be sort of Virginia class.
I think your friends or video so you're building a reactor first second Virginia class. So how do we think about because they're going to second participants or not I mean, what's what's your latest read on that.
Thanks, Ron I am look I know you've been you've been doing this as long as I have you know that the budget comes over and then there's a there's a.
Process that the Congress goes through to get the budget squared away and passed and appropriated.
There were some late moving items in the budget frankly from last year two this year.
That's the I guess my assessment is that the Congress was surprised about and so when that when that happens. It takes a lot more work from from the administration and from from all stakeholders to work their way through it.
Mark My sense of this though is that the outlook for that second Virginia is pretty bright.
You know I think.
The Congress is pretty much made us in its made its intentions pretty clear.
And so I don't know how all the pieces move around but I'd say I'm I'm pretty optimistic about it.
Okay, Great and then when do you think about but the recurrent.
Pandemic what opportunities has opened up for you in terms of where do you think about the technical solutions group.
Is there are there no potential M&A opportunities out there now that might not have been or potentially more attractive now.
One of the things you guys articulated at the Investor Day, that's an area, where you want to have some growth is this an opportunity to try to grow that business.
You know I think that the issue right now is it valuations are just.
I would almost say mythical.
You know that the to try to get on to a fair value of other business is.
I mean, that's a hard read I mean, we are we're still interested we haven't changed our our posture.
But if you let's just take a you know if if if ACMI is out there and suddenly ACMI got wiped out by the their share price got wiped out by the by this volatility.
The board of ACMI still would think that they're worth a lot more than the share prices and so trying to engage in that is really pretty challenging.
But you know we're going to keep we're going to keep looking and we're kind of leaning forward to try to find ways to to make something out of it. So.
And then finally you might addresses for just.
Maybe a little deeper how is your supply chain doing right I mean, when you think about where there could be more serious stress points.
And in particular some of your smaller suppliers, if you're dealing with.
Sole source mom and pop kind of shops, I mean, how are they handle I guess what are you doing so try to help them through the situation, particularly those that might have more exposure to industrial or aerospace markets.
You know were and thanks for the question. We're in we're in direct contact with with our entire range of suppliers.
Several thousand across the country.
I'd say at first cut.
We have reached out to everyone and said, let's talk about what impacts you're seeing and what impacts that might have to our programs.
The vast majority of our suppliers are saying at this point no impact.
Now I would say because of where we are right now I would say, yes, we put the word yet on the back end of that they say no impact we say no impact yet there's there's.
Grupo suppliers that are saying that they're seeing impact, but no impact to our programs and I would say, okay no impact to our programs yet and then there's a handful of suppliers that are saying, Hey, we've got real impact here.
And it is going to impact our programs I think what I am encouraged about Ron as it is that.
You know in the near term, we're actually supporting the key milestones that we need to support whether its ship construction activity or supporting the fleet. We have the information immaterial, we need from our supply chain to do that.
It's harder to evaluate is what's going to be the impact you know around the corner.
Not in the near term I think in the near term, we're working our way through that but I think in the medium term the stuff that needs to be going on today to support us at the end of this year or into next year, how is that going and Thats why say, we put yet next to that because I I don't know that we have I don't know that anybody has a very clear view of that.
The last thing I would say is one of the advantages that we have.
Besides having the $45 billion backlog to go work through and and support our supply chain is our supply chain is domestic we're not dealing with our suppliers in Mexico, our suppliers in India or anything like that I mean, where where where there have been some disruptions as that I've seen across the.
The industry.
You know has been as much about trying to reach across the borders as it has been about trying to reach and fall fund. These small folks so we're keenly.
Engaged in this we are working this every single day.
But at this point I'd say near term not an effect.
Medium to long term latency.
Alright, Thank you very much you bet.
Your next question is from Noah Poponak with Goldman Sachs.
Hey, good morning, everyone morning.
Hey, Chris just back to the question on.
Your your margin rates and how the a C recognition in accounting will work as you go through the year in and there's potentially disruption.
But youre your sort of telling us you're able to hold so what you thought.
Before this disruption.
My understanding from what some of the other defense companies.
Had reported already and spoke to this.
Was that.
Amongst the the handful of things that Youre customer was doing to help the industry get through this.
One of them was due to extent you were underperforming cost.
In.
In what you had contractually sign up for if you were able to display that it was attributable to the Corona virus.
Pandemic, but you would actually be me to hold back to your original assumptions is that am I correct that that is going on and that's part of your ability to hold the margins or did I totally mystery ducs and somebody else.
I think you may have misread it a bit now that being said, it's an evolving.
Situation a bit.
But I think there's a lot of news a lot of discussion out.
On between government contractors and the government on.
The appropriateness of getting equitable adjustments.
Through different legislation.
The way we read it right now based on current legislation.
You do not have the ability to recover accrual adjustments for delaying disruption on your on your contracts.
So we're not operating under that assumption that doesn't mean, it might not we might not get there and there are some some types of costs, where we think you will get adjustments in recovery for stuff like quarantining more or if the government facility shutdown you can't go into work.
I'm going to be harmed for that.
But equitable adjustments.
Delayed to delaying disruption.
We don't think that is.
Fully understood yet or for fully dealt with under legislation yet.
So I would not make that assumption now.
I would add there is intent.
But there's not coverage and so.
Well, we are from a cat from an accounting standpoint.
At the risk of a practicing accounting without a license where we already an accounting standpoint, we're just not assuming that.
We are engaged in the discussion about how do we make this happen and how do we how do we what changes need to be made.
From a from that appropriation from an authorization standpoint, but that has not happened yet and so that's a that's where our engagement is and you know wells, we'll see how goes.
So assuming that doesn't happen then.
Should I should would you would I then need to model that Youre shipbuilding margin in the second and third quarter declined sequentially from the first and then is more backend loaded to the fourth quarter or how do you. How do you hold the margin with the amount of distribution yes.
I wouldn't change anything at this point no at Hs too early.
I think it's just too early there's going to be a modest impact.
Sales for sure in Q2, but there's there's risk there we're going to have to deal with relative to reduce the tenants in the ours, but there's also opportunities because our expenses are fundamentally changing right now you need to deal with all of that when you decreases.
And whatever happens with the equitable adjustments not going to happen in second quarter.
That's that's just not going to be resolved in Q2.
Is your is your comments of.
Not changing anything.
More geared towards you don't think the numbers are going to change or more geared towards.
Nobody has enough information at this point to really forecast what the number you're correct.
Well I think more of the latter but also we're making critical milestones within our shipbuilding programs.
Right I'm worried right, we're delivering shifts.
Performing very well with the Newport news and angles. So.
So it's kind of a combination of both.
Okay, and then and then last thing on this.
As it pertains to revenue.
It's it's against similarly, a little bit hard to square, if you're at 70% to 75% staffing and its first presented a completion accounting business why that wouldn't have a larger impact on revenue I mean, I guess sort of your last answer there it sounds like.
Even if you have less of the costs. There are lots of the staffing or if you can hit the milestones back and that's a that's a bigger piece and just what the staffing levels, but I don't I'm surprised that is to surprise to 70, 75% stacking minimal change your revenue in a percentage of completion accounting.
So this how to ask where that will not no remember we're going to recover read the tenants is going to recover so we talk about 3% to 5% for the year.
So we're going to recover from a sales hopefully as we as we get our tenants back for the year theres going to be an impact in Q2 and no doubt no doubt, but we still think we're at the lower end of the.
As as of today, we still we still think we're at the lower end of the 3% to 5%. This virus goes on for a prolonged period of time that could change, but right today, it's three the lower end of the 3% to 5%.
Do you have visibility right now from sort of state and local.
No economic reopening stay at home.
Order revision as to when you'll start to be able to to Theresa or bring people back auction. So well were first at the first level. We're the largest employer in both Virginia and in Mississippi. So we're deeply engaged and connected to the Governor's office in terms of how do you go about real.
Opening to stay to what makes most sense and how do you do that and we come to that conversation from where the standpoint of we've been open the whole time. So these are the issues that you're going to as you start to open. These businesses. These are the things you need to be thinking about you need to be thinking about employee safety you need to be thing about customer safety.
I would just say the whole thing about reopening is its voluntary businesses have to volunteer to open even if the governor says to open doesn't mean that youre going to open a business has to volunteer to open a business owner is going to say.
I can open because I'm confident that I can keep my employees safe and I can keep my customer safe and I can do that at a rate that makes sense for me to open and the second voluntary per action. There is on the customers Park and they have to decide that it's safe for them to go out.
I think I think I mentioned earlier, it's the it's the winner you're going to feel safe to put your kids back in school I think is the number one question relative to.
All of this opening so we're deeply engaged in all of that conversation how that how that plays for us. It though is it affects the it effects the employees that are.
Staying at staying home because they have to take care of their kids. It does affect them, so thats, where the reopening affects them, but our view is that.
We will as I said, we're shifting our posture here too.
If open will go higher you know there's a lot of folks out there that are looking for work and there's lot of qualified people that are looking for work and so we're looking to start expanding our our attendance again to go and get get back to the business of doing what we're doing so.
That's all going to play out in the second quarter, and it's going to be as Chris says, it's just way too early to tell how that's all going to play out but.
So that's our view and that's that's somewhat independent of how the governors are going to open the states.
So really helpful and I appreciate it thanks, guys you bet event.
And your final question comes from the line of John Edwards with Citi.
Well. Thanks, Thanks, so much of the follow up.
Just a follow up in a budget question. Just also talk about the carrier side of things.
So it's kind of comes up every few years and such but secretary Aspart office seems to be looking to reduce that footprint.
So just to give a little little sense of your perspective, given the current fiscal and political backdrop.
Yes, John Thanks, I think the carrier conversation always comes up.
Because it does it turns into a conversation about can we get more capability by by changing structure are changing operations and things like that.
There are there are lots of folks who have lots of opinions on this.
I have been through this many many times.
The the bottom line as you can't get 80% of a carrier for 80% of the costs.
Volume is the cheapest thing that happens on the carrier baking it they actually making it larger is the way you capture the return on the investment that you've made and so the idea that youre going to go and do something.
Smaller maybe you have a smaller fleet, which is a different caught up for the Navy, which is something to think about but in general if you're looking for a replacement platform that hardly ever worked out well in terms of the analysis.
I do think the Navy and the Pentagon and Secretary Hasbro our thinking about.
And rightfully so they're thinking about what are the future capabilities that we need and how's the best way for us to get there and how do we fund that without sacrificing too much of our current capability and you're going to see lots of options some of them more like the like the Marine Corps discussion that we had before so we have very dynamic time in shipbuilding.
And we're going to be in the middle of that conversation as a principal partner for the Navy to help them achieve whatever it is that they want to do.
But we come into that conversation with a $45 billion backlog of work that's going to be the foundation, where that from from which that conversation will take place.
With that the the investments that we've made in terms of creating the agile workforce that we need in the agile supply chain that we made I think are going to support whatever direction. The navy in the Pentagon want to go and Murph, we're happy to be part of that.
Hey seamlessly.
Yet.
Yes.
Okay. It looks like we're we're have no more questions I just want to thank you all for your interest today and.
We want to make sure that hope you all are safe and well on your families are safe and well. Please take care of please please take care of each other.
But we do appreciate your time for joining us and now we look forward to speaking with you again, thank you very much.
Ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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