FOR IMMEDIATE RELEASE

CONTACT:

Download this file (27k) in Adobe Acrobat format.

• Earnings per share (EPS) of $.95 for the second quarter includes $.40 per share of one-time items.
• Adjusted EPS of $.55 represents a 22% gain over EPS of $.45 in the second quarter of 1998.
• Improved margins in all major segments driven by continued strength in core programs.
• Free cash flow of $44 million for the second quarter brings year-to-date cash flow to $96 million.

NEWPORT NEWS, Va., July 16, 1999 – Newport News Shipbuilding (NYSE: NNS) today reported net earnings of $34.7 million, or $.95 per diluted share for the second quarter of 1999. Earnings before interest and taxes (EBIT) for the quarter were $72 million, up from EBIT of $42 million in last year’s second quarter. Adjusted for previously announced one-time items, the Company’s EPS was $.55 per diluted share versus $.45 per diluted share in the same period one year ago.

"This was an outstanding quarter," commented William P. Fricks, Chairman and Chief Executive Officer. "Despite the extraordinary events we encountered, most notably merger activity and the labor dispute, we have maintained our focus on key performance initiatives and delivered exceptional results. In addition, cash flow was extremely strong during the quarter driven by operational improvements, cash initiatives and one-time items."

Newport News posted second quarter revenues of $444 million versus $466 million in the same period in 1998. Increased revenues in Fleet Services were more than offset by lower Construction and Engineering activity.

EBIT in the second quarter rose sharply to $72 million, including one-time pre-tax gains of $25 million. The one-time items consisted of break-up fees associated with the Avondale transaction and the settlement of insurance claims. Excluding these items, EBIT was $47 million, an increase of 11% from the $42 million reported in 1998’s second quarter. Margin increases across all major product segments contributed to the EBIT improvement.

Free cash flow totaled $44 million for the quarter, and was driven by strong pre-tax earnings, as well as approximately $15 million after tax benefit from one-time items. This cash generation enabled the Company to pay down debt by $12 million and end the quarter with a cash balance of $30 million.

Program Update

During June Newport News delivered HMI Brenton Reef, marking the Company’s formal exit from the commercial shipbuilding business. Also in the month, the Company redelivered the U.S. Navy destroyer Caron on schedule after successfully completing the ship’s overhaul and modernization. The work performed included inspection and repair of combat systems, installation of new generators, and modernization of berthing spaces.

Subsequent to the end of the second quarter, Newport News was awarded an $89 million contract for the overhaul of the carrier Enterprise. Enterprise is expected to arrive in August 1999 and remain at Newport News through the balance of the year. The project will include enhancements to habitability spaces as well as inspection and repairs to a variety of ship systems.

Newport News’ ongoing major construction projects include Ronald Reagan, the ninth Nimitz class carrier, as well as Virginia and Texas, the first of the Virginia class attack submarines. In addition to construction projects, the Company is refueling and overhauling the carrier Nimitz under a 33-month contract and is performing post-delivery work on the carrier Truman.

"We continue to make good progress on our key contracts despite the current labor dispute," said Fricks. "And we have been able to accomplish this while maintaining our high quality standards and outstanding safety record. In the meantime we’re hopeful that we will be able to negotiate a labor agreement and have our employees return to work."

During the quarter the Company announced a formal agreement with Science Applications International Corporation (SAIC) regarding a worldwide business partnership, AMSEC LLC. The joint venture provides logistics and lifecycle services to the active U.S. Navy fleet from over 20 locations.

The NNS Board of Directors also approved a $100 million share repurchase program. This new program is expected to be implemented over the next twelve months and will be accomplished through open market transactions.

Newport News Shipbuilding designs and constructs nuclear powered aircraft carriers and submarines for the U.S. Navy and provides lifecycle services for ships in the Navy fleet. The Company employs about 18,000 people, and has revenues of approximately $1.8 billion.

(financial information attached)