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NEWPORT NEWS SHIPBUILDING FOURTH QUARTER AND FULL YEAR EPS UP SIGNIFICANTLY

• EPS of $0.69 for the quarter improved 38 percent over 1998; EBIT was $55 million versus $50 million in the prior year’s quarter.
• Full year EPS was $2.31 after adjustments for non-recurring items, an increase of 25 percent over the prior year; adjusted EBIT was $193 million.
• 1999’s adjusted operating margin of 10.4 percent improved from the 9.4 percent achieved last year.
• Free cash flow of $137 million in 1999 supported accelerated share repurchases and debt reduction.

NEWPORT NEWS, Va., February 3, 2000 – Newport News Shipbuilding (NYSE: NNS) today reported net earnings of $24 million, or $0.69 per diluted share, for the fourth quarter of 1999. Earnings before interest and taxes (EBIT) for the quarter were $55 million, up ten percent over last year’s fourth quarter.

For the full year, diluted earnings per share were $2.31 after adjusting for gains associated with merger break-up fees and insurance settlements. This represents a 25 percent increase over the prior year’s EPS of $1.85. Excluding the non-recurring events, EBIT advanced to $193 million on revenues of $1.86 billion versus EBIT of $175 million for 1998 on comparable revenues. Adding the positive one-time events that benefited 1999, EPS totaled $2.72 and EBIT was $218 million.

"The solid fourth quarter performance concludes another outstanding year," commented Chairman and Chief Executive Officer William P. Fricks. "We delivered consistent, strong performance throughout the year highlighted by impressive EPS growth, double digit operating margins, and significant cash flow. And importantly, we are positioned to meet our financial goals in 2000 and beyond."

Newport News posted fourth quarter revenues of $538 million, which is consistent with the volume reported in 1998. Fleet Services revenues increased $29 million from last year’s fourth quarter, reflecting a planned shift of resources from the Construction segment. The volume in Fleet Services was driven by activity on the aircraft carrier Nimitz and maintenance work on the aircraft carrier Enterprise. The growth in EBIT for the quarter to $55 million was attributable to the higher volume in Fleet Services and improved margins in the Construction segment.

For the year, revenues were $1.86 billion, consistent with the level reported in 1998. EBIT improved from $175 million in 1998 to $193 million after adjusting for the non-recurring items in 1999. Including the one-time events, 1999 EBIT increased to $218 million. Again, the volume gains in Fleet Services and the strengthened margins in Construction contributed to the EBIT increase.

Newport News’ financial performance resulted in the generation of $137 million in free cash flow during 1999. "The Company’s cash yield continues to be exceptional," said Fricks. "It allowed us to reduce debt as well as accelerate our 1999 share repurchase program and announce the new $100 million authorization. Buying back stock continues to provide an outstanding and opportunistic use of our cash."

Newport News experienced robust activity in each of its segments during 1999. In the Construction segment, work accelerated on the aircraft carrier Ronald Reagan and the Virginia-class submarine program. Reagan, the ninth in a planned class of ten Nimitz-class carriers, is nearly 60 percent complete and will be delivered to the Navy in early 2003. Construction on Virginia and Texas, the first two ships in the planned class of 30 submarines, continued to progress well under an innovative teaming arrangement. Virginia, the first ship in the class, is scheduled for delivery in 2004.

Fleet Services also experienced an active year with the $1.2 billion refueling and overhaul of the aircraft carrier Nimitz representing the most significant program in the segment. In the fourth quarter, Newport News completed the refueling phase of this complex project. Nimitz is scheduled for re-delivery to the Navy in the second quarter of 2001. Also in the quarter, the final major phase of the inactivation of the submarine USS Narwhal was completed on schedule. Other notable Fleet Services work accomplished during the year included the $50 million contract for post delivery work on the carrier Harry S. Truman and the $88 million overhaul of Enterprise.

The Engineering segment is leading the development of technological advancements planned for future aircraft carriers and submarines. Significant design work has begun on the new propulsion plant for CVN(X), the next class of carriers. The Company is also supporting design activities for emerging technologies on the Virginia-class submarine program, and continues to provide engineering services for existing classes of attack submarines.

CVN 77, the transition ship to the next class of carriers, is expected to be fully funded in the Fiscal Year 2001 Defense Budget. Newport News will use this contract to expand its role as a total ship integrator by leading the integrated warfare systems acquisition plan for CVN 77, a role previously performed by the Navy.

The outlook in Fleet Services is characterized by steady carrier refueling business. Newport News is working under a $405 million planning contract for the refueling and overhaul of the carrier Dwight D. Eisenhower. Eisenhower is scheduled to arrive at Newport News in 2001 and will remain at the Company for approximately three years.

"The outlook for Newport News is very positive," added Fricks. "With all of our major programs anticipated to be supported in the President’s 2001 budget request, we should add about $6 billion to our backlog over the next 12 to 18 months. This will bring even greater stability and visibility to the business, and allow us to continue to deliver consistent, predictable, and improving financial performance."

Newport News Shipbuilding designs and constructs nuclear powered aircraft carriers and submarines for the U.S. Navy and provides life-cycle maintenance services for ships in the Navy fleet. The company employs 17,300 people and has annual revenues of approximately $1.9 billion.