NEWPORT NEWS, Va., January 28, 1998 – Newport News Shipbuilding (NYSE: NNS) today reported net earnings of $16 million, or $0.44 per share, for the fourth quarter of 1997. Earnings before interest and taxes (EBIT) for the quarter were $43 million, up significantly from EBIT of $23 million in last year’s fourth quarter. The results for the quarter reflected stronger contributions from the company’s core U.S. Navy business.

For the full year, basic earnings per share (EPS) were $1.26, or $1.23 on a diluted basis. Adjusting for one-time items recognized earlier in the year, basic EPS was $1.66. Earnings before interest and taxes for the year were $131 million on revenues of $1.79 billion, compared to EBIT of $140 million and revenues of $1.87 billion in 1996.

"Newport News significantly strengthened its core business during 1997," said William P. Fricks, Chairman and Chief Executive Officer. "In our first full year as an independent company, we solidified our position in aircraft carrier and submarine construction, extended our geographic reach in the overhaul and repair of Navy ships, and stabilized our commercial shipbuilding program. These successes contributed to our favorable fourth quarter financial performance, and should continue to drive improving results in the future."

Fourth quarter revenues of $512 million were $79 million above the level reported for the same period in 1996. Increased construction activity on Double Eagle product tankers and the aircraft carrier Ronald Reagan, along with expanded engineering work related to the New Attack Submarine (NSSN), contributed substantially to the sales growth. During the quarter work was essentially completed on the first international Double Eagle product tanker, Agathonissos, in anticipation of its delivery in early February, while activity on Reagan accelerated as it approaches next month’s keel laying ceremony.

Earnings before interest and taxes of $43 million for the quarter were up $20 million from 1996. Construction earnings grew $11 million from last year’s fourth quarter, with increased volume and the absence of one-time charges reported in the fourth quarter of 1996 contributing significantly to the improvement. Overhaul & Repair earnings matched the strong performance reported in 1996’s fourth quarter as a result of the Roosevelt overhaul and Nimitz planning work, while increased NSSN submarine engineering activity drove a $3 million gain in Engineering earnings. Related Businesses & Other earnings showed improvement for the quarter due to charges taken in 1996 for costs associated with Newport News becoming an independent company.

Revenues in 1997 of $1.79 billion reflected increased volume in aircraft carrier and commercial product tanker construction, as well as expanded Engineering activity for the New Attack Submarine and related programs. Growth in these areas was offset by the completion of the Los Angeles-class submarine construction and Sealift conversion programs, as well as reduced activity in Overhaul & Repair following the early 1997 completion of the Eisenhower overhaul.

Earnings before interest and taxes for 1997 of $131 million included improving contributions from the company’s core Navy construction business, as well as strong performance in Engineering driven by higher year-over-year volume. These favorable trends helped offset the impact of loss reserves recognized in the company’s commercial product tanker program in the third quarter of 1997. Overhaul & Repair also provided sound earnings in 1997, although performance fell below 1996 levels as last year’s results benefited from the Eisenhower overhaul and several contract close-outs.

Operating cash flow for the year was $133 million, which significantly exceeded the company’s internal plan. The favorable performance reflects improved working capital management, mostly driven by the acceleration of receipts on major programs. This cash flow enabled Newport News to initiate share repurchase programs totaling $45 million during the fourth quarter, and also allowed the company to achieve a $48 million reduction in net debt over the course of 1997.

Newport News’ core business was strengthened in 1997 as both aircraft carrier and submarine programs received solid support from Congress and the U.S. Navy. In September, Congress approved the Company’s teaming arrangement for co-production of the next class of nuclear powered attack submarines as part of the FY98 defense authorization and appropriations process. The teaming arrangement ensures Newport News’ early and ongoing participation in this important program. Design, development, and planning work will take place over the course of 1998, with Newport News initiating NSSN construction in early 1999.

In addition to their support for submarine teaming, Congress and the Navy demonstrated their commitment to developing an affordable and practical solution for funding the next aircraft carrier, CVN 77. Long lead funding for this program was originally scheduled to begin in FY00, with full funding for the construction of the carrier slated for FY02. Newport News proposed accelerated funding as a means of reducing the acquisition cost of the carrier, and Congress responded by providing $50 million in FY98 for the program. Today, the Navy is reviewing a plan to accelerate the full construction award of CVN 77 to FY01.

In December, Newport News completed the acquisition of Continental Maritime Industries, a ship repair yard in San Diego, California engaged in repair programs for the U.S. Navy’s West Coast fleet. The acquisition is a key component of Newport News’ strategy to broaden its base of services to the Navy. In addition to providing an immediate presence in San Diego, the Navy’s primary homeport on the West Coast, Continental offers Newport News an experienced management team that has a successful track record in the West Coast ship repair and fleet support markets.

Newport News ended the year with a funded backlog of $2.9 billion. The majority of this work involves the company’s core Navy business – carrier construction and carrier overhaul. In addition, the Nimitz refueling contract and the NSSN construction contract provide near term opportunities to add substantially to the existing backlog of work.

Commenting on the company’s position as it enters the new year, Mr. Fricks said "I’m proud of the progress we’ve made as an independent company over the last year. Our core business is stronger, our focus is clearer, and our expectations for the company’s future performance are higher today than they were a year ago. As we begin our second year of independence, we look forward to capitalizing on the solid foundation we established during 1997 and producing a track record of consistently improving performance."

Newport News Shipbuilding is America’s premier shipbuilding company with revenues of approximately $1.8 billion and more than 18,000 employees. The company is the leader in the design and construction of nuclear powered aircraft carriers and submarines for the U.S. Navy and produces a variety of ships for domestic and international customers.